- FirstCash to pay $9 million in refunds and penalties for illegal pawn loans to servicemembers
CFPB lawsuit alleged loans exceeded 36% APR cap and imposed illegal arbitration terms
Settlement mandates compliance reforms and restitution for affected military families
The Consumer Financial Protection Bureau (CFPB) has reached a settlement with FirstCash, Inc., and its nineteen subsidiaries over allegations that the company violated the Military Lending Act (MLA) by issuing high-interest pawn loans to active duty servicemembers and their families.
The parties jointly filed a stipulated final judgment and proposed order to resolve the CFPB’s November 2021 lawsuit, which is awaiting court approval.
FirstCash, a Delaware-based nonbank corporation headquartered in Fort Worth, Texas, operates more than 1,000 pawnshops across the United States through its wholly owned subsidiaries. The CFPB alleged that since at least October 3, 2016, FirstCash and its subsidiaries charged borrowers covered under the MLA annual percentage rates exceeding the legal 36% cap.
Additionally, the agency claimed that FirstCash’s loan agreements unlawfully required arbitration clauses and failed to provide mandatory loan disclosures, further violating protections granted under the MLA.
The alleged misconduct also constituted violations of a 2013 CFPB order against a predecessor entity of FirstCash, heightening regulatory concerns over the company’s lending practices.
Servicemembers to be compensated
Under the proposed settlement terms, FirstCash would be required to set aside $5 million to compensate harmed servicemembers and their dependents for thousands of unlawful pawn loans.
The company must also pay a $4 million civil penalty to the CFPB’s victims relief fund. Beyond financial penalties, FirstCash is obligated to ensure strict compliance with the MLA going forward, either by offering MLA-compliant loan products or implementing regulatory safeguards to prevent lending to protected military borrowers where prohibited.
The CFPB said ©the settlement underscores its commitment to protecting military families from predatory lending practices. The proposed order awaits final approval from the court.