Seattle-based payday lender Moneytree has been hit with more than $500,000 in fines and refunds by federal regulators over deceptive ads and collection letters.
Federal regulators have ordered Seattle-based payday lender Moneytree to pay more than $500,000 in fines and refunds over allegations of deceptive advertising and collection practices.
The consumer-watchdog agency found Moneytree had violated federal law with misleading online ads about how much its branches would charge customers to cash income tax-refund checks.
Between February and March of 2015, some of Moneytree’s ads said the company would cash those checks for a fee of “1.99”. Other ads correctly listed the fees as “1.99%” of each tax refund.
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In its consent order, the agency said the ads omitting the percentage symbol could have led customers to believe the fee was a flat charge of $1.99, noting that at least one Moneytree competitor did charge such a flat fee.
Moneytree also was hit for sending debt-collection letters in 2014 and 2015 that threatened to repossess the cars and trucks of 490 customers who were delinquent on loans.
Those were baseless warnings since the customers had not pledged their vehicle titles as collateral. Still, at least 151 people made payments after receiving the letters. Upon learning of the mistake, Moneytree sent letters telling the affected customers to disregard the repossession threat.
In what was described as a paperwork error, Moneytree also was found to have withdrawn money from the bank accounts of dozens of Washington loan customers without first obtaining proper written authorization. The money was refunded.
The Consumer Financial Protection Bureau ordered Moneytree to pay a civil penalty of $250,000 for the violations, and to set aside at least $255,000 for refunds to affected customers.
“Consumers deserve honesty and transparency from the financial institutions they rely on,” said agency Director Richard Cordray, in a statement, adding Moneytree’s actions left consumers making decisions based on “false and deceptive information.”
Moneytree said the practices targeted by the consumer-watchdog agency arose from “unintended and isolated” errors. The company said it had self-reported two of the violations and corrected the third after a complaint from a customer.
“Moneytree has a 33-year history of good corporate citizenship and cooperation with state and federal regulators,” said Dennis Bassford, Moneytree’s chief executive, in the written statement. “We are very proud of that history.”
The company agreed to settle the case, he added, “without regard to a showing (of) actual harm to consumers.”
The federal action was hailed by local anti-poverty and consumer advocates, who have long criticized the payday-loan business as predatory.
“The behaviors CFPB uncovered in their investigation of Moneytree are just ugly and needed to be stopped,” said Marcy Bowers, executive director of the Statewide Poverty Action Network, in a news release.
In addition to Washington, Moneytree operates in Southern California, Colorado, Idaho, Nevada and British Columbia.
Like other payday lenders, Moneytree offers short-term loans marketed to lower-income families typically unable to secure other types of credit.
In 2009, Washington lawmakers cracked down on the industry, citing horror stories of families trapped in spirals of debt with multiple loans with high interest rates.
Since the state’s tough restrictions on the number and size of loans were passed, the payday-loan industry here has shriveled.
Total payday loans have declined from more than $1.3 billion in 2009 to $300 million last year, according to the state Department of Financial Institutions. The number of payday-lending stores has shrunk from 494 to 139 over that period.
Seeking to reverse its fortunes, Moneytree has unsuccessfully lobbied the state Legislature in recent years to authorize longer term “installment loans” that would stretch repayments out over a year.