The U.S. Consumer Financial Protection Bureau has extended its investigation of Madison-based All American Check Cashing to include questioning of former managers of the company’s check cashing and payday lending stores.
The Bureau had been reported to have sent investigators to Jackson to interview current and former executives of All American Check Cashing. But the Bureau’s interest in talking to rank-and-file workers was not known until former managers began producing interview-request letters.
A former manager of a north Mississippi store said she told a federal investigator that some managers of the company’s 43 stores “were scared we were going to jail all because of what All American made us do.”
All American has been under a state cease-and-desist order since mid-June 2014, an action the Mississippi Department of Banking and Consumer Finance took after raids on several stores turned up what investigators said was evidence the company engaged in illegal payday loan rollovers. The order forbids All American from giving borrowers a new loan to pay off previous loans and fees.
State banking investigators recently completed their nearly year-long investigation and are awaiting a response from All American on the investigation’s findings.
The Bureau, created through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, has set its sights on payday lending nationwide. It recently issued regulatory proposals that would require lenders of the short term, low-dollar loans to verify a borrower’s ability to repay the loans and set limits on the loans a borrower could receive annually.
The consumer watchdog agency has also been aggressive in penalizing payday lenders over aggressive collection practices.
It hit one company, Texas-based ACE Cash Express, a large payday lender with a franchise store in Hattiesburg, with $10 million in penalties. ACE Cash, CFPB Director Richard Cordray charged, was “relentlessly overzealous” in pursuit of overdue borrowers.
ACE Cash unlawfully called employers of tardy borrowers and threatened borrowers with lawsuits and criminal prosecutions, Cordray said.
ACE Cash and other payday lenders require borrowers to be employed, have a bank account and show proof of receiving regular paychecks. They must leave a post-dated personal bank check for the principal and fees as security.
Cordray said the intimidation used by ACE Cash Express was “part of a culture of coercion aimed at pressuring payday borrowers into debt traps.”
ACE Cash would set the trap, according to Cordray, by encouraging delinquent borrowers to pay off existing loans by taking out yet another payday loan.
Meanwhile, a former manager of an All American Check Cashing store said the Consumer Financial Protection Bureau investigator she talked to in late June focused mostly on All American’s check cashing business.
“She said they had enough on” All American’s alleged loan rollover practices, said the former manager, who declined to be identified over fear that speaking publicly could jeopardize current and future job opportunities.
The investigator also stayed away from questions on All American’s loan collection practices, according to the former store manager.
The first question asked, the former manager said, was whether the signs detailing charges cashing were plainly visible.
“Not to the naked eye,” the former manager said, noting the sign specifying a 3 percent charge for cashing government-issued checks and a 5 percent charge for all others was below the counter.
The customer would have to be looking downward toward the floor to see the sign, the ex-manager said.
Concealment was also practiced when handing the customer the receipt showing the charge for cashing the check, the former manager said. “You were taught to count out the money over the receipt to distract the customer.”
All American included this technique in a training video, the former employee said, and added manager training included a warning to never volunteer the percentage charge for cashing the check.
Managers also relied on treats as a distraction, according to the former manager. “We’d give them a Payday candy bar and say: ‘Guess what today is? It’s Payday!’”
If a borrower tried to walk out, “We’d remind them we’d just gave them all this stuff.”