The CFPB has reached a settlement in its lawsuit against FirstCash, Inc. and its 19 subsidiaries alleging violations of the Military Lending Act (MLA). The parties have jointly filed a stipulated final judgment and proposed order in the U.S. District Court for the Northern District of Texas.
FirstCash, Inc., a Delaware nonbank corporation with its principal place of business is in Fort Worth, Texas, owns and operates more than 1,000 retail pawnshops, offering pawn loans through its wholly owned subsidiaries.
The MLA protects active duty servicemembers and some dependents in connection with extensions of consumer credit. Those protections include a maximum allowable interest rate of 36%, a prohibition against required arbitration and certain mandatory loan disclosures.
The CFPB had alleged that since October 3, 2016, FirstCash violated the MLA by making MLA-covered loans that exceeded the maximum allowable interest rate of 36%. The CFPB also contended that the loan agreements with covered borrowers violated the MLA by requiring arbitration of disputes and by failing to make all of the required loan disclosures. The CFPB also allegeed that the company violated a 2013 order against a predecessor entity.
If approved by the Court, the proposed order would require the defendants to:
- Set aside $5 million to ensure full redress to servicemembers and their families who were harmed in connection with thousands of unlawful pawn loans.
- Pay a $4 million fine to the CFPB's Civil Penalty Fund.
- Comply with the MLA and offer an MLA-compliant loan product to servicemembers and their families or comply with a regulatory safe harbor intended to screen for MLA- protected borrowers.
The proposed order states that "Defendants neither admit nor deny the allegations in the Amended Complaint, except Defendants admit the facts necessary to establish the Court's jurisdiction over them and the subject matter of [the] action."
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