The Consumer Financial Protection Bureau has reached a settlement with FirstCash, Inc. and 19 of its subsidiaries to resolve allegations that the pawn shop chain violated the Military Lending Act, according to a stipulated final judgment filed with the court.
The settlement stems from a lawsuit the CFPB filed on Nov. 12, 2021, against FirstCash and its subsidiaries alleging violations of the Military Lending Act. The parties jointly filed the proposed settlement and stipulated final judgment, which would resolve the litigation if entered by the court.
The Military Lending Act is a federal law designed to protect active-duty servicemembers and their dependents from predatory lending practices. The law caps the annual percentage rate on certain types of consumer credit at 36% and requires specific disclosures and protections for military borrowers.
FirstCash operates a nationwide chain of pawn shops and consumer lending stores that provide short-term loans, retail services, and other financial products. The company, based in Texas, has hundreds of locations across the United States and Latin America, serving customers who often lack access to traditional banking services.
The CFPB's enforcement action against FirstCash is part of the agency's broader efforts to protect military families from financial exploitation. Servicemembers are often targeted by predatory lenders due to their steady income and unique financial circumstances, including frequent relocations and deployments.
Under the Military Lending Act, lenders must verify military status before extending covered credit and comply with specific rate caps and disclosure requirements. The law applies to payday loans, auto title loans, refund anticipation loans, and certain other types of consumer credit commonly used by military families.
The CFPB has made military lending enforcement a priority since the agency's creation. The bureau has taken action against numerous companies for violating the Military Lending Act, securing millions of dollars in relief for servicemembers and their families.
Pawn shops like those operated by FirstCash provide secured loans using personal property as collateral. Customers typically bring items such as jewelry, electronics, or tools to the store and receive a loan based on the item's value. If the loan is not repaid within the agreed timeframe, the pawn shop keeps the collateral.
The pawn industry has faced increased scrutiny from regulators in recent years over concerns about high interest rates and fees. Some states have implemented additional consumer protections for pawn transactions, while federal agencies have focused on ensuring compliance with existing laws like the Military Lending Act.
FirstCash has previously faced regulatory action related to its lending practices. The company has worked to improve its compliance programs and has made changes to its operations to address regulatory concerns.
The settlement requires court approval before taking effect. Federal district courts typically review stipulated settlements to ensure they are fair and in the public interest. The court may hold a hearing or request additional information before deciding whether to approve the agreement.
Once approved, the settlement would likely include monetary relief for affected servicemembers and requirements for FirstCash to improve its Military Lending Act compliance. Such settlements typically include provisions for monitoring and reporting to ensure ongoing compliance with federal lending laws.
The CFPB's enforcement actions often result in changes to industry practices beyond the specific companies involved. Other pawn shops and consumer lenders may review their own Military Lending Act compliance programs in response to the FirstCash settlement.
For military families, the settlement represents continued federal oversight of lending practices that can impact their financial security. The Military Lending Act remains one of the primary tools for protecting servicemembers from predatory lending, and enforcement actions help ensure the law's effectiveness.
The case also highlights the importance of proper military status verification and compliance with federal lending laws. Companies that extend credit to consumers must have systems in place to identify military borrowers and apply appropriate protections.
The FirstCash settlement is expected to be finalized in the coming months, pending court approval of the stipulated judgment. The specific terms of the settlement, including any monetary penalties or operational changes required of FirstCash, will become public when the court enters its final order.