An Early Christmas Gift From the CFPB: 130K Borrowers’ Loans Are Forgiven

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A short-term, high-cost lender that tried to collect debts by in-person visits at borrowers’ homes and workplaces has ceased dealing in payday loans, and about 200,000 consumers will get refunds or debt collection relief, federal regulators said Wednesday.

Austin-based EZCORP is accused of potentially revealing details about consumers’ debts to third parties during home or workplace collection attempts, a violation of federal law. The firm is also accused of simultaneously initiating electronic transfers valued at 50%, 30%, and 20% of a consumers’ outstanding debt balance, causing overdrafts and other problems for borrowers.

EZCORP operates a collector of pawn shops in and around Texas, and until recently, 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,” the CFPB said.

In a consent order, 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.

“People struggling to pay their bills should not also fear harassment, humiliation, or negative employment consequences because of debt collectors,” CFPB director Richard Cordray said in a statement. “Borrowers should be treated with common decency. This action and this bulletin are a reminder that we will not tolerate illegal debt collection practices.”

In July, after the CFPB announced its investigation of the firm, EZCORP announced that it would cease offering payday, installment, and auto-title loans in the United States. The public firm, which trades on the NASDAQ stock exchange, continues to operate pawn shops.

EZCORP did not admit or deny the CFPB’s consent order, but said it had settled with the bureau as a way to put legacy issues behind it.

“Given our decision in July 2015 to exit all payday, installment and auto title lending activities in the United States, we believe it is in the interests of all stakeholders to bring this issue to an amicable close,” EZCORP Chief Executive Officer Stuart Grimshaw said in a written statement. “Our focus will continue to be on responsibly and respectfully meeting our customers’ need for access to cash when they want it through our pawn business lines. We will also continue to enhance our policies, processes and procedures to improve our business performance and profitability.”

Describing in-person visits in the consent order, the CFPB says that EZCORP representatives involved third parties in their collection efforts. “If a consumer was not present or not available to speak during an in-person collection visit, then Respondent’s employee would attempt to leave a letter for the consumer with a third party, such as the consumer’s supervisor, co-worker, parent, child or roommate,” the order says.

“Third parties at consumers’ workplaces at times refused to accept these letters because the consumer could not engage in personal business matters at work. In addition, at times, Respondent’s employees were turned away from a consumer’s workplace by a third party, such as a supervisor, co-worker, receptionist or security officer, because the consumer was not permitted to have personal visitors at work,” the order said.

In a press release, the CFPB also alleged that the firm:

  • Visited consumers’ homes and workplaces to collect debt in an unlawful way: Until at least October 2013, EZCORP made in-person collection visits that disclosed or risked disclosing consumers’ debt to third parties, and caused or risked causing adverse employment consequences to consumers such as disciplinary actions or firing.
  • Illegally contacted third parties about consumers’ debts and called consumers at their workplaces despite being told to stop: Debt collectors called credit references, supervisors and landlords, and disclosed or risked disclosing debts to third parties, potentially jeopardizing  consumers’ jobs or reputations. It also ignored consumers’ requests to stop calls to their workplaces.
  • Deceived consumers with threats of legal action: In many instances, EZCORP threatened consumers with legal action. But in practice, EZCORP did not refer these accounts to any law firm or legal department and did not take legal action against consumers on those accounts.
  • Lied about not conducting credit checks on loan applicants: From November 2011 to May 2012, EZCORP claimed in some advertisements it would not conduct a credit check on loan applicants. But EZCORP routinely ran credit checks on applicants targeted by those ads.
  • Required debt repayment by pre-authorized checking account withdrawals: Until January 2013, EZCORP required many consumers to repay installment loans through electronic withdrawals from their bank accounts. By law, consumers’ loans cannot be conditioned on pre-authorizing repayment through electronic fund transfers.
  • Exposed consumers to fees through electronic withdrawal attempts:  EZCORP would often make three simultaneous attempts to electronically withdraw money from a consumer’s bank account for a loan payment: for 50%, 30%, and 20% of the total due. The company also often made withdrawals earlier than promised. As a result, tens of thousands of consumers incurred fees from their banks, making it even harder to climb out of debt when behind on payment.
  • Lied to consumers that they could not stop electronic withdrawals or collection calls or repay loans early: EZCORP told consumers the only way to stop electronic withdrawals or collection calls was to make a payment or set up a payment plan. In fact, EZCORP’s consumers could revoke their authorization for electronic withdrawals and demand that EZCORP’s debt collectors stop calling. Also, EZCORP falsely told consumers in Colorado that they could not pay off a loan at any point during the loan term or could not do so without penalty. Consumers could in fact repay the loan early, which would save them money.

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The Vast Majority of Millennials Are Saving Their Money

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The Internet is rife with research on young Americans, aka millennials, though it sometimes draws conflicting conclusions. It’s easy to find papers saying millennials are financially irresponsible while plenty of others say just the opposite. Perhaps that’s why no one can agree on who millennials are. Some define them as adults in their 20s, adults between the ages 18 and 29, those born after 1982 or, more broadly, those who came of age at the turn of the century.

However you define them, companies have reason to figure out this large group of consumers, as they’ll be driving the economy for decades. The latest paper to join this stack is Navient’s “Money Under 35” survey, in which the student loan servicer explores the finances of those between ages 22 and 35. (The report is based on a survey conducted between July 16 and August 5 on more than 3,000 consumers.) Here’s a look at some of its most interesting findings.

Millennials Are on Top of Their Finances:

Student Loans Are a Common Burden:

  • 57% who attended some college have student loans; 46% are in debt.

But They Aren’t Quite Holding Them Back:

  • Those who borrowed for college are just as likely to have a mortgage as those who didn’t, with one exception. Those who borrowed but didn’t get their degree, and especially those still in debt, are much less likely to have a mortgage than those who didn’t obtain a degree or borrow (or are debt-free).

Education Impacts Their Ability to Pay Bills:

  • The median income for those without a college degree is $42,500. It’s $51,080 for those with associate’s degrees, $62,500 for those with bachelor’s degrees and $95,000 for those who earned advanced degrees.
  • Most (57%) student loan borrowers with outstanding balances who didn’t receive degrees or earned associate’s degrees report having trouble making their payments. Only 34% of debtors with bachelor’s degrees report such struggles, while 40% of adults with student loan debt for an advanced degree struggle to make payments.

Gender Plays a Big Role in Earnings & Debt:

  • Men earn between 5% to 53% more than women, depending on their field of study.
  • Women are more likely to have auto, mortgage and credit card debt.
  • Men are more likely to have student loan debt, as 36% of men are borrowers compared to 32% of women.

Overall, Millennials Are Doing OK:

  • Using a custom financial health index, which considers 15 aspects of a person’s finances, the assessment found that 20% of young adults have excellent financial health, 63% have good financial health and 17% have poor financial health.
  • Education level significantly impacts where a person falls on the index, with more education increasing the likelihood of excellent financial health.
  • The most common goals for young people are to spend time with family (29%), be happy (28%), become debt-free (24%) and own a home (12%).

Even within one report, it’s easy to see there are mixed reviews of millennials’ financial well-being. They’re saving but struggle to make bill payments. They’re considered financially healthy but dealing with debt. Navient’s report is by no means definitive, but it’s interesting to see how young people respond to these surveys, especially given concerns about student loan debt and how it affects their role in the economy.

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