FirstCash, a national pawnshop chain, cannot use the “bona-fide error defense” in its defense of a Military Lending Act (MLA) suit filed by the CFPB against the company, a federal judge has ruled in a case of first impression.

The Act’s bona-fide error defense protects the defendants from civil liability to a person, Judge Mark Pittman of the U.S. District Court for the Northern District of Texas, wrote, in his opinion, adding that because a person cannot violate the Act with respect to a federal agency, the bona-fide-error defense does not apply to a federal agency’s claims. Second, the bona-fide-error defense protects against kinds of relief that are distinct from the relief that federal agencies are authorized to recover, the judge continued.

In its complaint, filed on November 12, 2021, the CFPB said that FirstCash and its subsidiary, CashAmerica West, made more than 3,600 pawn loans to more than 1,000 covered borrowers from stores in Arizona, Washington, Utah, and Nevada with annual percentage rates over 36%; frequently with interest rates exceeding 200%.

The CFPB is accusing the company of violating a 2013 consent order in which CashAmerica agreed to refund customers more than $14 million, pay a $5 million fine and stop alleged misconduct against military families. As part of the consent order, the company agreed to improve compliance with the Military Lending Act.

In July, the pawnshop company filed a motion for partial summary judgment.  In that motion, the company first argued that under the MLA it is entitled to assert a bona fide error defense to all MLA claims, even if the CFPB is the plaintiff, because the provision of the MLA that authorizes the bona fide error defense makes no distinction between claims brought by private parties and claims brought by the government.  Judge Pittman rejected that argument.