On August 22, 2023, the CFPB sued Heights Finance Holding Company, formerly known as Southern Management Corporation, a high-cost installment lender, as well as several of Heights’s subsidiaries (collectively, Southern), for illegal loan-churning practices that harvested hundreds of millions in loan costs and fees. The CFPB alleges that the company, which operates under a variety of trade names, identifies borrowers who are struggling to repay their existing loans, and then aggressively pushes them to refinance. The CFPB is seeking to end Southern’s unlawful loan-churning practices, to gain redress for harmed consumers, and to require Southern to pay a civil money penalty.
Southern is a nonbank, high-cost installment lender with its principal place of business in Greenville, South Carolina. It is a wholly owned subsidiary of CURO Group Holdings Corporation. According to the CFPB’s press release, Southern’s borrowers typically have low or fixed incomes, earning less than $25,000 annually, and impaired credit. In addition, many of its borrowers are either older Americans living on fixed incomes or are single-parent wage earners. The CFPB stated that struggling customers become trapped in Southern’s loan churning scheme and often are forced to refinance multiple times. The CFPB found that refinanced loans comprise the bulk of Southern’s loan origination volume every year. In particular, more than 70 percent of the roughly $250 million in loans that Southern makes each year are refinanced loans with the company.
The CFPB’s lawsuit alleges that the company harms consumers by:
Coercing distressed customers into fee-laden cycles of reborrowing. The CFPB found that Southern uses an array of coercive practices to drive delinquent borrowers into fee-laden refinancing cycles.
Incentivizing employees to push refinances. Southern rewards employees who are the most successful in driving payment-stressed borrowers into refinancing and punishing those employees who do not.
Targeting customers for their likelihood to refinance. The company routinely lends to borrowers who have refinanced multiple times even if they clearly cannot afford to service their debt to Southern without refinancing.
Falsely marketing refinances as fresh starts. Southern markets refinances as solutions and best options for customers who are struggling to repay. However, for many of these customers, refinancing serves only to prolong indebtedness, to increase total borrowing costs, and to offer no long-term solution to financial distress.
The CFPB said that it is seeking to end Southern’s unlawful loan-churning practices, to gain redress for harmed consumers, and to require Southern to pay a civil money penalty.
Read the CFPB’s press release here.
The complaint can be found here.