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CFPB Orders EZCORP to Pay $10M for Illegal Debt Collection Tactics
Thursday, December 17, 2015 6:40 AM

Bureau Issues Industry-Wide Warning On Home, Workplace Debt Collection Risks

The Consumer Financial Protection Bureau on Wednesday took action against EZCORP, Inc., a small-dollar lender, for illegal debt collection practices. These tactics included illegal visits to consumers at their homes and workplaces, empty threats of legal action, lying about consumers’ rights, and exposing consumers to bank fees through unlawful electronic withdrawals.

The Bureau ordered EZCORP to refund $7.5 million to 93,000 consumers, pay $3 million in penalties, and stop collection of remaining payday and installment loan debts owed by roughly 130,000 consumers. It also bars EZCORP from future in-person debt collection. In addition, the Bureau issued an industry-wide warning about collecting debt at homes or workplaces.

Until recently, EZCORP, headquartered in Austin, Texas, and its related entities provided high-cost, short-term, unsecured loans, including payday and installment loans, in 15 states and from more than 500 storefronts. It did this under names including “EZMONEY Payday Loans,” “EZ Loan Services,” “EZ Payday Advance,” and “EZPAWN Payday Loans.” On July 29, 2015, after the Bureau launched its investigation, EZCORP announced that it would cease offering payday, installment, and auto-title loans in the United States.

The CFPB found that EZCORP collected debts from consumers through unlawful in-person collection visits at their homes or workplaces, risked exposing consumers’ debts to third parties, falsely threatened consumers with litigation for non-payment of debts, and unfairly made multiple electronic withdrawal attempts from consumer accounts, causing mounting bank fees.

The CFPB alleges that EZCORP violated the Electronic Fund Transfer Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibition against unfair and deceptive acts or practices. Specifically, the CFPB’s investigation found that EZCORP:

  • Visited consumers’ homes and workplaces to collect debt in an unlawful way.
  • Illegally contacted third parties about consumers’ debts and called consumers at their workplaces despite being told to stop.
  • Deceived consumers with threats of legal action.
  • Lied about not conducting credit checks on loan applicants.
  • Required debt repayment by pre-authorized checking account withdrawals.
  • Exposed consumers to fees through electronic withdrawal attempts.
  • Lied to consumers that they could not stop electronic withdrawals or collection calls or repay loans early.

Enforcement Action

Under the Dodd-Frank Act, the CFPB is authorized to take action against institutions or individuals engaged in unfair, deceptive or abusive acts or practices, or that otherwise violate federal consumer financial laws. Under the consent order, EZCORP must:

  • Pay $7.5 million to 93,000 consumers.
  • Stop collection of its remaining payday and installment debt.
  • Stop illegal debt collection practices.
  • Pay a civil penalty of $3 million.

Review the full text of the CFPB’s consent order.

Warning Against Illegal Debt Collection Tactics

The CFPB also issued a bulletin warning the financial services industry, and in particular lenders and debt collectors, about potentially unlawful conduct during in-person collections. Lenders and debt collectors risk engaging in unfair or deceptive acts and practices that violate the Dodd-Frank Act and the Fair Debt Collection Practices Act when going to consumers’ homes and workplaces to collect debt.

The bulletin highlights that in-person collection visits may be harassment and may result in third parties, such as consumers’ co-workers, supervisors, roommates, landlords, or neighbors, learning that the consumer has debts in collection. Revealing such information to third parties could harm the consumer’s reputation and result in negative employment consequences. The bulletin also highlights that it is illegal for those subject to the law to engage in practices such as contacting consumers to collect on debt at times or places known to be inconvenient to the consumer, except in very limited circumstances.

Review the bulletin offering guidance on debt collection practices.