Seattle-based payday lender Moneytree has been hit with more than $ 500,000 in fines and reimbursements by federal regulators for deceptive ads and collection letters.
Federal regulators have ordered Seattle-based payday lender Moneytree to pay more than $ 500,000 in fines and refunds for allegations of misleading advertising and collection practices.
Sanctions for actions that the company characterized as unintentional errors were imposed as part of a consent order announced at the end of last week by the US Bureau of Consumer Financial Protection (CFPB).
The consumer watchdog found that Moneytree broke federal law with misleading online ads about how much its branches would charge customers to cash income tax refund checks.
Between February and March 2015, some Moneytree advertisements indicated that the company would cash these checks for a “1.99” fee. Other ads correctly listed the fees as “1.99%” of each tax refund.
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In its consent order, the agency said the ads omitting the percent symbol could have led customers to believe the fee was a flat fee of $ 1.99, noting that at least one competitor of Moneytree was charging a such package.
Moneytree has also been hit for sending debt collection letters in 2014 and 2015 that threatened to repossess cars and trucks from 490 customers in arrears.
These were unfounded warnings since the customers had not pledged the titles of their vehicles as collateral. Still, at least 151 people made payments after receiving the letters. After learning of the error, Moneytree sent letters telling affected customers to ignore the threat of repossession.
In what has been described as a paperwork error, Moneytree was also found to have withdrawn money from the bank accounts of dozens of Washington loan clients without first obtaining the proper written permission. The money was refunded.
The Consumer Financial Protection Bureau ordered Moneytree to pay a civil fine of $ 250,000 for the violations and set aside at least $ 255,000 for refunds to affected customers.
âConsumers deserve the honesty and transparency of the financial institutions they rely on,â agency director Richard Cordray said in a statement, adding that Moneytree’s actions let consumers make decisions on the basis “false and misleading information”.
Moneytree said the practices targeted by the consumer watchdog agency were the result of “unintentional and isolated” errors. The company said it self-reported two of the violations and corrected the third after a customer complaint.
âMoneytree has a 33-year history of good corporate citizenship and cooperation with state and federal regulators,â said Dennis Bassford, managing director of Moneytree, in the written statement. âWe are very proud of this story.
The company agreed to settle the case, he added, “without regard to the demonstration (of) real harm to consumers.”
The federal action has been hailed by local anti-poverty and consumer advocates, who have long criticized the payday lending industry as predatory.
“The behaviors that CFPB discovered in their Moneytree investigation are just plain ugly and should be stopped,” Marcy Bowers, executive director of the Statewide Poverty Action Network, said in a press release.
In addition to Washington, Moneytree has operations in southern California, Colorado, Idaho, Nevada and British Columbia.
Like other payday lenders, Moneytree offers short-term loans for low-income families who are usually unable to obtain other types of credit.
In 2009, Washington lawmakers cracked down on the industry, citing horror stories of families trapped in debt spirals with multiple high-interest loans.
Since the severe state restrictions on the number and amount of loans were enacted, the payday lending industry has shrunk.
Total payday loans grew from over $ 1.3 billion in 2009 to $ 300 million last year, according to the State Department of Financial Institutions. The number of payday loan stores increased from 494 to 139 during this period.
Seeking to turn the tide, Moneytree has lobbied in vain the state legislature in recent years to authorize longer-term âinstallment loansâ that would extend repayments over one year.