On April 5, 2023, the Consumer Financial Protection Bureau (CFPB) brought an action against James R. Carnes and Melissa C. Carnes, both individually and as co-trustees of the James R. Carnes Revocable Trust and the Melissa C. Carnes Revocable Trust, for allegedly hiding money through a series of fraudulent transfers in order to avoid paying more than $40 million in restitution and penalties for illegal payday lending activities. The CFPB seeks injunctive relief as well as a monetary judgment for the value of the funds alleged to have been fraudulently transferred.
In September 2022, in Integrity Advance LLC v. Consumer Financial Protection Bureau, a panel of U.S. Court of Appeals for the Tenth Circuit affirmed a CFPB Order requiring Integrity Advance, a lender making short-term loans, and its CEO, James Carnes, to pay $38.4 million in legal and equitable restitution and imposing civil penalties against Integrity ($7.5 million) and Carnes ($5 million), for alleged violations of the Consumer Financial Protection Act, the Truth in Lending Act, and the Electronic Fund Transfer Act.
The original lawsuit was brought by the CFPB in November 2015 against Integrity Advance and James Carnes for deceiving customers about the cost of short-term loans and for using remotely created checks to debit consumers’ bank accounts even after the consumers revoked authorization for automatic withdrawals. Carnes sold his payday lending business and had already received over $20 million in proceeds from that sale by the end of 2015. The CFPB’s lawsuit ultimately resulted in the CFPB Order described above that was affirmed by the Tenth Circuit. To date, neither Integrity nor Carnes has made any payments to satisfy the judgment.
In the new lawsuit, the CFPB alleges that through their actions, James Carnes and Melissa Carnes transferred funds to hinder, delay, or defraud the CFPB, in violation of the Federal Debt Collection Procedures Act. (The FDCPA establishes procedures for the collection of debts owed to the federal government.) Specifically, the complaint alleges that between 2013 and 2015, James Carnes fraudulently transferred $12.3 million to his wife, via their revocable trusts. James Carnes was co-trustee of the Melissa C. Carnes Trust and was able to use its funds for personal and business use.