Legal

Judge Wants Payday Loan Firm To Pay $132.5M To Victims

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A Kansas City payday loan company and its operator will be compelled to pay $132.5 million in restitution to borrowers the company duped, if a federal administrative law judge’s recommendation is implemented.

Whether victims of Integrity Advance will receive anything near that sum is unclear. The company’s assets were sold years ago, the Kansas City Star reported Friday (Sept. 4).

The legal recommendation comes after the Consumer Financial Protection Bureau (CFPB) filed a complaint against Integrity Advance. The agency’s case against the company may be affected if the CFPB director is replaced, which the U.S. Supreme Court has ruled could happen.

The lender and its and its chief executive, James Carnes, have appealed.

In her ruling against Integrity Advance and Carnes, Administrative Law Judge Christine L. Kirby concluded the lender and its chief executive engaged in three illegal practices: creating loan agreements that violated government regulations; tricking customers about the true cost of fully repaying loans; and taking funds from borrowers' bank accounts without their approval.

The case began in 2015 with charges from the CFPB, according to court documents. Other court documents indicate the company was formed in 2007 and originated loans from May 2008 through December 2012.

An investigator concluded, according to Kirby's ruling: “From May 2007 through July 2013, on 207,426 loans, Integrity Advance obtained $132,580,041.06 more from its customers than the amount disclosed in the “Total of Payments” boxes in (required disclosure) ... on 55,661 loans originated on or after July 21, 2011, Integrity Advance obtained $38,453,341.62 more from its customers than the amount disclosed ...”

The company's loans, according to case documents, ranged from $100 to $1,000.

Richard Zack, a lawyer representing Integrity Advance and Carnes, told the Star in an email: “We disagree with the Administrative Law Judge’s recommendation. We are confident that, at the end of this process, Mr. Carnes and Integrity Advance will be vindicated and found to have no liability.”

The payday loan industry has drawn fire from critics for years, and some experts think technology may offer a desirable alternative.

In the meantime, government officials put in place by President Donald Trump's administration have made changes to regulations some critics of the lenders saw as safeguards.

Nevertheless, the government continues to bring new charges against lenders.

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