Protecting Your Business and the Pawn Industry Following the CFPB’s Military Lending Act Enforcement Action against First Cash/Cash America West, Inc.

Mark Campanale Government Relations, Government Relations Updates

November 16, 2021 

The NPA has reviewed the CFPB’s Military Lending Act (MLA) enforcement action against First Cash, Inc./Cash America West, Inc. that we informed you of on November 12, 2021, and is following pawnbrokers’ questions and comments on various forums. It is important for all NPA members to take these steps to protect your businesses: 

  1. A CFPB civil investigative demand (CID) may be based on just one consumer complaint. A CID is a complicated and expensive discovery tool used by some government agencies to collect information. If you get a CFPB CID, please call your local lawyer before you respond to the CFPB per their instructions. Inform the NPA at grc@nationalpawnbrokers.org. You will also need to hire an attorney experienced in the CFPB’s procedures. Except for informing the NPA, this will be expensive. 
  1. State attorneys general have the power to prosecute violations of federal laws such as the MLA. If you get a subpoena from a state AG or if your pawn regulator writes you up for violations of the MLA, please let us know at grc@nationalpawnbrokers.org.  
  1. Compliance with federal laws governing your pawn transactions is important. We urge you again to review your compliance program – particularly your MLA compliance steps – with your employees.  
  1. Pawn transactions with “covered borrowers” (that is, active-duty service members and most of their dependents) may NOT a) have APRs of more than 36%, or  b) contain arbitration clauses. 
  1. You may have your own method of determining which customers are “covered borrowers” but not all methods qualify for the “safe harbor” that the MLA regulation contains. If you fail to identify a “covered borrower” and you do a pawn with the Military Annual Percentage Rate (MAPR) exceeding 36% OR your pawn ticket includes an arbitration clause, the pawn violates the MLA. The burden to identify covered borrowers is on the pawnbroker – not the customer. If a customer checks a box saying they are not active-duty military or a dependent, when in fact they are a “covered borrower,” their statement will not protect you from violating the MLA.  
  1. Please do not speak with the media about the Military Lending Act generally, the CFPB’s action against First Cash/Cash America, or your compliance with it. If any member of the media contacts you for comment or information, please refer them to Fran Bishop at grc@nationalpawnbrokers.org

This GRC Update is not intended and should not be construed as legal advice to NPA members.  
Members should consult their own lawyers for legal advice. 
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