The Consumer Financial Protection Bureau (CFPB) sued an installment lender based in Greenville, South Carolina, for illegal loan-churning practices that harvested hundreds of millions in loan costs and fees.
The suit was filed against Heights Finance Holding Company, formerly known as Southern Management Corporation, a high-cost installment lender.
The company, according to the CFPB, identifies borrowers who are struggling to repay their existing loans, and then aggressively pushes them to refinance. Its borrowers typically earn less than $25,000 annually and have impaired credit. Many of its borrowers are either older Americans living on fixed incomes or are single-parent wage earners.
The CFPB states that borrowers become trapped in the loan churning scheme and often are forced to refinance multiple times.
“What Southern sold as a financial lifeline was, in reality, pushing customers into financial quicksand,” CFPB Director Rohit Chopra said.
Through the suit, the CFPB is seeking to end Southern’s unlawful loan-churning practices, gain redress for harmed consumers, and require Southern to pay a civil money penalty.
The company, a wholly owned subsidiary of CURO Group Holdings, operates more than 250 brick-and-mortar storefronts in Texas, Oklahoma, Alabama, Georgia, Tennessee, and South Carolina.
More than 70 percent of the roughly $250 million in loans that Southern makes each year are refinanced loans. Nearly 10 percent of its borrowers refinance their loans with the company a dozen times or more. While these borrowers make up just under 10 percent of the total borrower population, their refinances generate 40 percent of the net revenue.
The CFPB’s lawsuit alleges that the company harms consumers by coercing distressed customers into fee-laden cycles of reborrowing; incentivizing employees to push refinances; targeting customers for their likelihood to refinance; and falsely marketing refinances as fresh starts.