High-Cost Lender World Finance Target of Federal Probe
The investigation follows a ProPublica story that detailed the company’s lending practices.
by Paul Kiel ProPublica, March 13, 2014, 3:52 p.m.
World Acceptance Corp., one of the largest high-cost installment lenders in the United States, disclosed today that it is the target of an investigation by the federal Consumer Financial Protection Bureau.
World, which does business as World Finance, was the subject of an investigation by ProPublica and Marketplace last May. Our story showed how the company’s loans are deceptively expensive and often trap borrowers in a cycle of debt. World’s business hinges on convincing low-income borrowers to renew their loans over and over again, a practice that can radically increase the amount of interest they pay. The company also packages nearly useless insurance products with its loans in many states, allowing it to skirt state interest rate caps, our investigation found. World boasts more than 800,000 customers.
According to World’s disclosure, the CFPB is investigating whether the company is breaking federal laws in how it markets and offers its loans. The CFPB has made a Civil Investigative Demand that requires World to produce documents and answer a list of questions, the company said in a Securities and Exchange Commission filing.
“The Company believes its marketing and lending practices are lawful,” the statement concluded.
Last July, Sen. Ron Wyden, D-Ore., citing ProPublica’s story, pressed a top official from the CFPB during a Senate committee hearing on what the CFPB might do to address the company’s practices.
The CFPB, which was created by the 2010 financial reform bill, has broad authority over non-bank lenders like World that in the past had minimal federal oversight. Last November, the bureau took its first enforcement action against a high-cost lender, fining payday lender Cash America $5 million for robo-signing documents in debt collection lawsuits and overcharging servicemembers and their families. The company also paid $14 million in refunds to consumers.