Pawn Lenders Overcharged Military Consumers, Complaint Alleges

Loans to service members are capped at 36% but the law is often ignored

News Desk

Members of the military are protected from excessive interest rates on loans but in the real world, those protections are often ignored.

In the latest example, the Consumer Financial Protection Bureau (CFPB) today filed a lawsuit in a Texas federal district court against FirstCash, Inc. and Cash America West, Inc., alleging that they routinely charged military members interest rates exceeding 200%.

The CFPB alleges that the two companies violated the Military Lending Act (MLA) by charging higher than the allowable 36% annual percentage rate on pawn loans to active-duty service members and their dependents. The CFPB also alleges that FirstCash violated a 2013 CFPB order against its predecessor company prohibiting MLA violations.

“FirstCash is a repeat offender and cheated military families over and over again,” said CFPB Director Rohit Chopra. “FirstCash and Cash America West gouged military families and robbed them of their rights to go to court.”

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Who is FirstCash?

FirstCash, Inc. is a non-bank corporation operating out of Fort Worth, Texas. FirstCash and its subsidiaries operate more than 1,000 pawnshops throughout the U.S. It's a publicly traded firm with a current market capitalization of about $3.5 billion. Cash America West, Inc. is a wholly owned subsidiary of FirstCash that operates pawn stores in Arizona, Nevada, Utah, and Washington.

The CFPB alleges that between June 2017 and May 2021, FirstCash and Cash America West violated the MLA by making more than 3,600 pawn loans from their Arizona, Nevada, Utah, and Washington stores with an annual percentage rate above the 36% allowed by the MLA.

The unlawful loans had APRs that frequently exceeded 200%.

The CFPB also alleges that the loan contracts violated the MLA by requiring borrowers to sign away their ability to sue and by failing to make all required loan disclosures.

The CFPB said it only has data from a limited time period and the actual number of loans is likely much higher.

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Company is a repeat offender

In 2013, the Bureau ordered Cash America International, Inc. to halt its misconduct against military families, prohibiting Cash America and its successors from violating the MLA. FirstCash is a successor to Cash America and therefore subject to the 2013 order. The Bureau alleges that FirstCash’s violations of the MLA violated the Bureau’s 2013 order.

The Military Lending Act is among the few federal lending laws that includes an interest rate cap and a ban on forced arbitration. The CFPB is seeking an injunction to stop the alleged unlawful conduct, redress for affected consumers, a civil money penalty, and other relief.

What are my rights under the Military Lending Act? | Consumer Financial Protection Bureau
The Military Lending Act (MLA) says that you can’t be charged an interest rate higher than 36% on most types of consumer loans and provides other significant rights.
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