A consumer watchdog on Friday sued pawn shop operator FirstCash Inc. in Fort Worth, alleging the company and a subsidiary gouged out military families by charging up to 200% annual interest rates on pawn loans.
The Consumer Financial Protection Bureau filed the lawsuit in federal court in Fort Worth, citing violations of the Military Lending Act, which limits the annual fee for military families to 36%. The lawsuit also named Cash America West, a related business unit that operates pawn shops in Arizona, Nevada, Utah, and Washington.
The government agency alleged FirstCash violated a 2013 order against its predecessor company prohibiting future military loan violations. It calls for an injunction and a civil fine.
“FirstCash is a repeat offender and has repeatedly cheated on military families,” CFPB director Rohit Chopra said in a statement. “FirstCash and Cash America West gouged out military families and deprived them of their right to go to court.”
In a statement, FirstCash said it considered the allegations “unfounded”.
“FirstCash deeply respects the members of our military and their families,” says the company statement. “We will try to contact the CFPB and respond appropriately to the allegations.”
FirstCash operates over 2,800 pawn shops in the United States and Latin America. Just last month, the company closed with the acquisition of Dallas-based American First Finance Inc.
According to the lawsuit, FirstCash and Cash America West issued more than 3,600 pawn loans between June 2017 and May 2021 in violation of military credit law. These loans were made in the businesses of the companies in Arizona, Nevada, Utah, and Washington.
These stores make up only about 10% of FirstCash’s nationwide pawnbroking business. The lawsuit states that CFPB also believes that FirstCash stores in other states have issued loans with inflated interest rates.
In 2013, CFPB made the same allegations against Cash America International Inc., which bought FirstCash three years later. Cash America agreed to pay up to $ 14 million to military families and other consumers for robo-signing court documents in debt collection procedures. A $ 5 million fine was also imposed.
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