The CFPB announced that it has entered into a settlement with Cottonwood Financial, Ltd., to resolve alleged violations by Cottonwood of the CFPA, FCRA, and TILA  in the course of marketing, servicing, and collecting on payday, auto title, and unsecured consumer installment loans.  Cottonwood operates approximately 340 retail lending outlets in Idaho, Illinois, Michigan, New Mexico, Texas, Utah, and Wisconsin under the name Cash Store.  The consent order requires Cottonwood to pay a civil money penalty of $1.1 million and $286,675.64 in consumer redress.

According to the findings and conclusions in the Consent Order, Cottonwood engaged in the following unlawful activities:

  • Collection activities.  Cottonwood engaged in unfair practices in violation of the CFPA by: routinely calling consumers’ employers, references, and other third parties to obtain payments from the consumer rather than to locate the consumer and frequently disclosed to such third parties the existence of the consumer’s debts; calling consumers’ workplaces multiple times a day despite being told that the consumers were not allowed to receive calls at work; and calling consumers’ references or other third parties even after being asked to stop making such calls.
  • Marketing.  Cottonwood engaged in deceptive practices in violation of the CFPA by falsely representing in television advertisements and telemarketing that consumers could “save 50%” on finance charges when it did not in fact provide that discount.  Cottonwood also violated TILA by failing to provide the annual percentage rate to consumers when they inquired over the phone about the cost of credit.
  • Credit reporting.  Cottonwood violated the FCRA by failing to maintain adequate policies and procedures concerning the accuracy and integrity of the information it furnished to consumer reporting agencies.

The $286,675.64 in consumer redress is intended to provide restitution of the difference between the amount of the discount actually received by consumers who used the discount code associated with Cottonwood’s advertisements offering a 50% discount and the full amount of a 50% discount on finance charges.  The consent order also prohibits Cottonwood from engaging in the practices that were the basis for the alleged violations.