Federal agency orders Mission Hills payday lender to pay restitution, penalties
The director of a federal consumer watchdog agency concluded that a payday lending operation run by a Mission Hills businessman broke the law and ordered that it pay $38.5 million in restitution.
Kathleen Kraninger, director of the Consumer Financial Protection Bureau, ruled this month that Integrity Advance also has to pay a $7.5 million civil penalty and that the lender’s founder, Jim Carnes, pay a $5 million civil penalty.
Barring an appeal, Kraninger’s decision wraps up a long-running case by the CFPB into Integrity Advance, which the agency accused of deceiving its borrowers. An attorney for Carnes could not immediately be reached for comment.
The order marks another sanction, and the second in January, for Kansas City-area payday lenders.
Last week, Del Kimball, also of Mission Hills, waived indictment and pleaded guilty to one charge of bankruptcy fraud that was related to his payday lending activities.
Over the last four years, varying agencies ranging from the Federal Trade Commission, the FBI and CFPB have taken aim at a swath of Kansas City payday lenders because their loans were either deceptive, charged too much interest, took money from accounts of people who hadn’t authorized the loans or operated through front companies on American Indian reservations.
The CFPB, an agency born from the aftermath of the 2008 economic crisis to protect consumers from financial scams, filed its initial complaint against Integrity Advance in 2015.
Integrity Advance offered payday loans — so called because they’re supposed to hold borrowers over until their next paycheck — in amounts between $100 and $1,000. Borrowers gave Integrity Advance electronic access to their bank accounts, letting the company put money in — and take money out.
If borrowers did not repay their loan in full by their next paycheck, the loans automatically renewed and incurred new finance charges. The CFPB believed the loan disclosures deceived borrowers into thinking the loans would be paid back in a single payment when they tended to put borrowers on a track to renew their loans several times.
Federal law requires lenders to explain loan terms clearly and without deception to borrowers so they know how much the loan will cost to repay.
The CFPB also said that when borrowers revoked Integrity Advance’s access to their bank accounts, the lender would create what’s known as “remotely created checks” to draw funds from the accounts.
The CFPB director’s order of $38.5 million in restitution is down significantly from an administrative judge’s recommendation that Integrity Advance and Carnes pay $132.5 million. But the director did adopt the judge’s suggestion of $7.5 million and $5 million civil penalties for Integrity Advance and Carnes, respectively.
