The Consumer Financial Protection Bureau yesterday filed suit against Heights Finance Holding Co., accusing it of unfair and abusive practices by “aggressively” pushing borrowers who were struggling to repay their loans into refinancing the debts, leading the company to earn hundreds of millions of dollars in costs and fees.
A copy of the complaint, filed in the District Court for the District of South Carolina, in the case of CFPB v. Heights Finance Holding Co., f/k/a Southern Management Corp., et al., can be accessed by clicking here.
Heights Finance was acquired by CURO Group Holdings Corp. back in 2021. The alleged illegal activities took place before the company was acquired.
“The CFPB is suing the Southern lending conglomerate for illegally churning loans and harvesting fees from their customers,” said CFPB Director Rohit Chopra, in a statement. “What Southern sold as a financial lifeline was, in reality, pushing customers into financial quicksand.”
Southern makes high-cost loans to borrowers in “persistent financial distress,” according to the complaint. When a borrower becomes delinquent on a loan, the company’s practice is to present the individual with a choice — make last month’s payment and this month’s payment at the same time, or refinance the debt to become current. Borrowers who make the payments are assessed a late fee, while those who refinance are not, according to the complaint.
Between 2013 and 2020, nearly 10,000 individuals were in a constant state of refinancing their loans, according to the CFPB. While that works out to less than 10% of the company’s total population of borrowers, those 10,000 individuals accounted for 40% of the company’s revenue.
The company also refinanced individuals who could not afford to do so and even prioritized refinancing ahead of collecting the full past-due balances on loans, according to the CFPB. Employees were offered incentives to induce borrowers into refinancing: to qualify for a bonus, branches had to refinance between 10% and 15% of their loans each month.
The complaint accuses the defendants of violating the Consumer Financial Protection Act by engaging in unfair and abusive practices.
