The U.S. Consumer Financial Protection Bureau filed suit Wednesday against payday lender All American Check Cashing that charges the Madison-based company tricked and trapped check-cashing and loan customers at its 43 stores in Mississippi and a handful of other stores in Louisiana and Alabama.
The suit seeks monetary relief against All American and owner Michael Gray, injunctive relief and penalties, the Consumer Financial Protection Bureau, or CFPB, said in a press release. The Bureau filed the suit in the U.S. District Court Southern District of Mississippi Northern Division.
In a complaint filed in federal court, the CFPB alleged that All American tried to keep consumers from learning how much they would be charged to cash a check and used deceptive tactics to stop consumers from backing out of transactions. The CFPB also alleged that All American made deceptive statements about the benefits of its high-cost payday loans and also failed to provide refunds after consumers made overpayments on their loans. The CFPB’s lawsuit seeks to end All American’s unlawful practices, obtain redress for consumers, and impose penalties.
The action is separate from enforcement action the Mississippi Department of Banking and Consumer Finance has taken against All American and Gray. The banking department alleges All American violated the state’s loan rollover laws as a matter of company policy. With a rollover, the borrower pays fees on the first loan with money from a new loan.
In ordering revocation of the licenses for All American’s Mississippi stores and payment of a $3 million penalty, the Banking Department says it 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 CFPB complaint alleges, All American:
» Refused to tell consumers how much they will be charged: All American instructs its employees to hide the check-cashing fees by counting out the money over the fee disclosure on the receipt and removing the “receipt and check as quickly as possible.” All American’s policies explicitly forbid employees from disclosing the check-cashing fee to consumers, even when directly asked. A training presentation for new employees instructs them to “NEVER TELL THE CUSTOMER THE FEE.” Employees are directed to say they do not know what the fee will be, and to deflect consumers’ questions with small talk and irrelevant information so that “they are overwhelmed with info.”
» Trapped consumers who change their minds: When consumers ask to cancel or reverse a check cashing transaction after learning the fee, All American employees sometimes lie and say that the transaction cannot be canceled, even when that is not the case. All American employees also falsely tell consumers that it will take a long time to reverse a transaction. In some cases All American’s procedures actually do make it difficult or impossible for the consumer to cash the check elsewhere. For example, employees sometimes apply a stamp to the back of the check—such as “For Deposit Only: All American Check Cashing Inc”—effectively locking the consumer into the transaction.
Meanwhile, Gray’s legal appeals have helped him so far avoid payment of the $3 million state fine and a shutdown of his stores through continued legal appeals. Gray’s lawyers say the Madison businessman and his company are victims of “government thuggery” and that the “draconian” penalties proposed by regulators “are the result of a vendetta against All American, orchestrated by one or more” unidentified employees of the [Banking] Department.
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