JACKSON, Miss. — A federal agency wants more penalties against a Mississippi payday lender and has asked a judge to order the company and its owner to pay back $8.3 million in profits and revenues.
In court papers filed Friday, the Consumer Financial Protection Bureau alleged All American Check Cashing Inc. and sole owner Michael Gray hid check-cashing fee schedules, misled people into taking out costlier loans, and wrongly kept consumer overpayments.
The company said it disagrees “with most, if not all, of what” the CFPB is claiming, All American’s lawyer, Michael Cory, wrote in an email Monday. “But until we have a chance to review the filing closely, we can’t comment further except to say that we will file an appropriate response.”
The bureau asks U.S. Magistrate Judge John C. Gargiulo to rule before trial, saying no facts are in dispute. It also wants Gargiulo to ban Gray from ever working in financial services again and to assess additional “significant” fines, beyond repayments. Federal officials say Gray collected $13.5 million in income from 2011 to 2017, in addition to putting his wife and young children on the payroll.
Mississippi officials in May revoked All American’s licenses, fining it nearly $900,000 and ordering refunds of $135,000 to 700 customers. Gray sold most of All American’s assets to Ohio-based Community Choice Financial in June.
The bureau says former employees testified that Gray or managers trained them to “never tell the customer the fee,” for cashing a check.
The bureau describes ways of hiding the fee, including counting out cash atop a receipt to hide the fee amount. The bureau also says that employees were trained to take a check quickly, endorse the check before presenting the receipt, and drag their feet if a customer wanted to void the transaction.
The bureau wants All American to repay $5.4 million in check-cashing fees collected from 2011 to 2017.
Federal regulators also say All American steered people who got once-monthly income into 14-day loans, even though 30-day loans would have been cheaper.
For example, a customer who wanted $400 might get $200 at first, paying $40 in fees and interest. Then the customer would return for another $200, paying $40 and rolling over the first loan, paying back $480 at the end of the month. That customer paid $120 in fees, compared to the maximum $87.80 that could be charged by a competitor for a monthly loan.
Former employees told the bureau that the practice was “disgusting” and “unethical,” but “a huge income booster.” The bureau wants All American to repay $2.8 million in fees from more than 7,500 customers with loans structured this way. The bureau also seeks $133,000 in undisbursed refunds.
Sometimes, borrowers would make in-person cash payments as All American deducted money from their checking accounts. The bureau alleges All American failed to tell borrowers it owed them a refund, and would make it hard for borrowers to collect. Beginning in 2011, the company began keeping the money as income.