The Consumer Financial Protection Bureau yesterday announced a significant victory in its ongoing battle against James and Melissa Carnes, a couple the Bureau has been attempting to collect from for nearly 10 years. The two sides have reached an agreement where James and Melissa Carnes, who were accused of making fraudulent transfers to avoid paying restitution and penalties, will pay $7 million to the CFPB.
James Carnes, the former CEO of Delaware-based Integrity Advance, and his wife Melissa, were sued by the CFPB in April 2023. The Bureau alleged that between 2013 and 2015, James Carnes fraudulently transferred $12.3 million to Melissa Carnes through a series of revocable trusts. This move was seen as an effort to avoid paying more than $40 million owed by James Carnes due to a prior enforcement action. In 2015, the CFPB sued Integrity Advance and James Carnes for misleading consumers about the cost of payday loans and for unauthorized withdrawals from borrowers’ accounts. The result was an order for Integrity Advance and Carnes to pay $38 million in restitution and civil penalties totaling $12.5 million.
The recent legal action focused on the Carneses’ attempts to hinder, delay, or defraud the CFPB by transferring funds in violation of the Federal Debt Collection Procedures Act. The CFPB’s complaint detailed the transfer of millions of dollars into revocable trusts and other assets, including five high-value vehicles, $800,000 in jewelry, and $1.4 million in artwork, to evade financial obligations.
A Kansas District Court judge has played a critical role in this case. The judge quashed a motion to dismiss the garnishment of assets by James Carnes, emphasizing the CFPB’s right to pursue the $43 million judgment. Despite arguments from the Carneses, the court found substantial grounds to deny their motions, reinforcing the CFPB’s stance on fraudulent transfers.
The stipulated judgment requires the Carneses to pay $7 million to the CFPB, with the remaining amount of the $12.3 million judgment suspended due to their demonstrated inability to pay more. This payment will be applied towards satisfying the existing $43 million judgment against James Carnes, including consumer redress and civil money penalties. The court order also mandates the liquidation and transfer of specific assets held in various financial accounts to the CFPB.
“James and Melissa Carnes concocted a scheme to hide money to avoid paying victims of an illegal lending scam,” stated CFPB Director Rohit Chopra. “The CFPB’s action today makes clear that the agency will not allow lawbreaking companies and individuals to escape the consequences of their misdeeds.”
