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.
