On October 24, the Bureau of Consumer Financial Protection entered into a Consent Order with Cash Express, LLC relating to allegations it engaged in deceptive and abusive acts or practices in violation of the Consumer Financial Protection Act, codified at 12 U.S.C. §§ 5531, 5536(a)(1)(B).  Pursuant to the Consent Order, Cash Express agreed to a $200,000 penalty and to pay $32,000 in restitution to resolve allegations it engaged in deceptive and abusive practices.

Specifically, the BCFP alleged that Cash Express engaged in deceptive activity by allegedly sending collection letters on time-barred debts while representing it would take legal action with respect to those debts, even though it was not its practice to do so, and that it would further provide information to credit reporting agencies, when it in fact did not do so.  The BCFP further alleged the company instructed its employees not to disclose at any time during a check cashing transaction that it would deduct previously owed amounts from the check proceeds.  Notably, the company’s complained-of set-off practices were disclosed to consumers, with the consumers being required to sign a written acknowledgment.  However, the BCFP nonetheless alleged the set-off practices were deceptive because the disclosures sometimes occurred long after the consumer presented a check to be cashed and because Cash Express instructed its employees subsequently not to inform consumers that their check proceeds might be set off against any outstanding debt.  The BCFP essentially took the position that these practices nullified the effect of the disclosure and took unreasonable advantage of a consumer’s lack of understanding of the material risks and costs of using the company’s check cashing service.

The action by the BCFP is surprising given that director Mulvaney recently gave a speech noting that abusiveness is not a well-defined legal concept and noting that the Bureau may consider rulemaking to provide further clarity.  The Consent Order suggests that – the BCFP’s current leadership notwithstanding – companies should remain careful to avoid potentially misleading representations or affirmative acts that may be perceived as negating prior disclosures to consumers.

We will continue to monitor this issue and further actions by the BCFP, and will report on any developments.