CFPB Reaches Settlement with FirstCash, Inc. and Its Subsidiaries for Military Lending Act Violations
Washington, D.C. – Today, in the Consumer Financial Protection Bureau’s (CFPB) November 12, 2021 lawsuit against FirstCash, Inc., and nineteen subsidiaries alleging violations of the Military Lending Act (MLA), the parties reached a settlement and jointly filed a stipulated final judgment and proposed order, which if entered by the court, would resolve the lawsuit. The MLA puts in place protections for active duty servicemembers and certain dependents in connection with extensions of consumer credit. These protections include a maximum allowable annual percentage rate of 36%, a prohibition against required arbitration, and certain mandatory loan disclosures.
FirstCash, Inc. is a Delaware nonbank corporation, with its principal place of business in Fort Worth, Texas. FirstCash owns and operates over 1,000 retail pawnshops in the United States, offering pawn loans through its wholly owned corporate subsidiaries.
The CFPB alleges that since October 3, 2016, the defendants violated the MLA by making pawn loans to borrowers covered under the MLA with rates that exceeded the MLA’s maximum allowable annual percentage rate of 36%. The CFPB also alleges that the loan agreements with covered borrowers violated the MLA by requiring arbitration in the case of a dispute and by failing to make all required loan disclosures. The Bureau also alleges that the alleged violations of the MLA were violations of a 2013 Bureau order against a predecessor entity.
If entered by the court, the proposed order would require the defendants to:
- Set aside $5 million to ensure full redress to harmed servicemembers and their family members in connection with thousands of unlawful pawn loans.
- Pay a $4 million fine to the CFPB’s victims relief fund.
- Comply with the MLA and either offer an MLA-compliant loan product to servicemembers and their families or comply with a regulatory safe harbor meant to screen for MLA-protected borrowers.