UPDATED WEDNESDAY: Payday lender pins hopes on Chancery Court to avoid store closings, $1.58 million fine
By TED CARTER
Mississippi officials are forcing Madison-based payday lender All American Check Cashing to close its 70 Mississippi locations and pay a more than $1.5 million fine.
The action ordered Thursday followed a multi-year investigation by the Mississippi Department of Banking and Consumer Finance, federal court challenges and 24 days of administrative hearings that stretched from November to this past April.
Sources say the stores were closed Friday but will reopen Monday to take payments on outstanding loans.
The Department of Banking and Consumer Finance issued the order Thursday, revoking 75 licenses held by All American and ordering an immediate stop to new loans. The company must pay fines of $1.58 million and refunds to at least 700 customers.
Federal and state regulators announced in 2014 that All American Check Cashing was illegally encouraging customers to pay only interest on car title and payday loans. Such practices violated a Mississippi law against rolling over payday loans and car title loans, in effect using the proceeds of a new loan to pay off an old loan.
Regulators charged that owner Michael Gray had initiated the companywide policy of illegally rolling over the loans to build profit for the company while immersing customers into increasing debt on a single payday loan. The check casher and payday lender is the first low-dollar, short-term lender charged with running afoul of the state’s rollover law.
Regulators say their 19-month investigation found 1,600 rollover violations involving 6,500 customers. In addition, the investigation turned up 692 violations involving refusals to give customers refunds All American Check Cashing owed them, regulators say. All American, they say, took “overt” actions to keep customers from learning they had refunds coming.
The allegations over refusal to give refunds brought investigators from the U.S. Consumer Financial Protection Bureau to Mississippi. Their probe led the CFPB to sue All American in federal court, seeking to force repayment to more customers.
All American has strenuously disputed the enforcement actions, even filing a state ethics complaint against a banking regulator. However, by November All American and owner Gray decided to seek an appeal though an administrative hearing conducted by Banking Commissioner Charlotte Corley.
In their case against All American, state bank regulators presented a training document for, the company’s intranet detailing precisely how store employees were to handle the illegal rollovers.