James R. Carnes charged with deceptive online-payday-lending scheme by the CFPB

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Yet another Mission Hills businessman has been accused by federal regulators of defrauding the public via deceptive payday loans.

This time, it’s James R. Carnes. The Consumer Financial Protection Bureau announced yesterday that it had charged Carnes and his former company, Integrity Advance, LLC, with violating a whole host of laws, including the Truth in Lending Act, the Electronic Fund Transfer Act, and various parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

If Carnes’ name sounds familiar, that’s because he sold his online-payday-lending entities — together known as Go Cash — for $50 million to EZCORP, a Texas-based, publicly traded conglomerate of pawn shops and payday-lending operations, in 2012. It was good timing for cashing out of the online payday business; the next year, the federal government began actively snuffing out operations like Go Cash, many of which were based here in Kansas City. We have occasionally seen fit to report on this industry. 

Integrity Advance was active from 2008-2012, the CFPB alleges. It was included in Go Cash’s sale to EZCORP, a purchase agreement shows. According to a release, the unlawful practices Carnes/Integrity is accused of are:

*Hiding the total cost of loans: Consumers were given contracts with disclosures based on repaying the loan in a single payment, even though the default terms of the contract called for multiple rollovers and additional finance charges. For example, under Integrity Advance’s default payment schedule, a consumer borrowing $300 would ultimately pay $765 in finance charges—$675 more than the $90 finance charge disclosed in Integrity Advance’s contract.

*Requiring repayment by pre-authorized electronic funds transfers: Integrity Advance violated federal law by requiring consumers to agree to repay their loans via pre-authorized Automated Clearing House (ACH) payments. The Electronic Fund Transfer Act says repayment of loans cannot be conditioned on consumers’ pre-authorization of recurring electronic fund transfers.

*Continuing to debit borrowers’ accounts after consumers canceled the authorization: Integrity Advance’s contracts with consumers included a provision allowing the company to use remotely created checks if a consumer successfully canceled his or her authorization for ACH withdrawals. The provision was hidden in the loan agreement, and the company used it to take consumers’ funds when consumers believed they did not owe money to Integrity Advance.

The suit is similar in some ways to the cases feds brought in 2014 against Tim Coppinger, Richard Moseley and others. Carnes’ case, though, won’t be heard in federal court. It’ll be tried by an independent judge within the CFPB’s Office of Administrative Adjudication. The judge will ultimately make a decision on the case, which can be appealed to the director of the CFPB for a final decision. 

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