The Consumer Financial Protection Bureau has filed a lawsuit against a national chain of pawnshops based in Texas, alleging they cheated active-duty members and families by overcharging interest on pawn loans.

The pawnshops charged military families interest rates on pawnshop loans that frequently exceeded 200% a year, in violation of the Military Lending Act, according to allegations in the lawsuit, filed Friday in a federal court in Fort Worth against defendant companies FirstCash Inc. and Cash America West Inc.

The allegations involve more than 3,600 pawn loans made to more than 1,000 military family borrowers from stores in Arizona, Nevada, Utah and Washington between June 2017 and May 2021.

Cash America West is a subsidiary of FirstCash, and operates pawnshops in those four states. Overall, FirstCash and its subsidiaries operate more than 1,000 pawnshops throughout the U.S., and the consumer bureau alleges that FirstCash, Cash America West and other subsidiaries made additional pawn loans in violation of the Military Lending Act in other states.

“FirstCash is a repeat offender and cheated military families over and over again,” said CFPB Director Rohit Chopra, in an announcement of the legal action. “FirstCash and Cash America West gouged military families and robbed them of their rights to go to court.”

The lawsuit involves allegations, and is not a final finding or ruling that the defendants have violated the law.

FirstCash “will seek to engage with the CFPB and respond to the allegations appropriately,” company officials said, in a statement to Military Times. “FirstCash deeply respects members of our military and their families. We believe the allegations by the CFPB are without merit.”

The Military Lending Act, passed in 2006, protects active-duty members and their families by, among other things, prohibiting annual percentage rates in excess of 36%. That rate, known as the Military APR, includes certain charges, costs and fees in the calculation. CFPB also alleges that FirstCash required military borrowers to sign away their ability to sue and failed to make all the necessary loan disclosures, which are also violations of the Military Lending Act.

The CFPB lawsuit asks for an injunction to stop the alleged unlawful conduct; compensation for affected customers and correction of inaccurate information submitted to their credit reports; cancellation of the consumer credit agreements; a civil monetary penalty; and other actions.

The 3,600 loans are from a limited period of time for which the bureau has data about transactions. The stores that made these loans represent only about 10% of FirstCash’s nationwide pawnshop operations, according to the lawsuit.

So, CFPB alleges that since Oct. 3, 2016, FirstCash and its subsidiaries have made additional loans that violate federal law. Department of Defense regulations implementing the law were expanded in 2015 to include pawn transactions among those covered by the Military Lending Act. Pawnshops were required to bring their operations into compliance by Oct. 3, 2016.

FirstCash announced in September 2016 that it had merged with Cash America International Inc.

In 2013, CFPB had ordered Cash America International to stop alleged misconduct against military families and, under a consent order, the company agreed to pay up to $14 million in refunds to service members and their families. Among other things, Cash America International was accused of illegally overcharging service members and their families. At that time, CFPB described Cash America International as a payday lender.

Because FirstCash is a successor to Cash America International, the company is subject to the 2013 order, according to the lawsuit, which alleges that FirstCash violated that order.

Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.

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