The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Heights Finance Holding, formerly known as Southern Management, and several of its subsidiaries, charging they have engaged in illegal loan-churning practices. The CFPB alleged that the company and its subsidiaries (collectively known as Southern) target struggling borrowers and pushes them into refinancing their loans multiple times, resulting in substantial […]
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The Consumer Financial Protection Bureau (CFPB) has filed a lawsuit against Heights Finance Holding, formerly known as Southern Management, and several of its subsidiaries, charging they have engaged in illegal loan-churning practices.
The CFPB alleged that the company and its subsidiaries (collectively known as Southern) target struggling borrowers and pushes them into refinancing their loans multiple times, resulting in substantial costs and fees, the agency said in a Tuesday (Aug. 22) press release.
Southern, a nonbank, high-cost installment lender, operates under various trade names such as Covington Credit, Southern Finance and Quick Credit, according to the release. The company is a wholly owned subsidiary of CURO Group Holdings.
CURO Group Holdings did not immediately reply to PYMNTS’ request for comment.
Southern has more than 250 brick-and-mortar storefronts in states including Texas, Oklahoma, Alabama, Georgia, Tennessee and South Carolina, according to the release. It primarily caters to borrowers with low or fixed incomes and impaired credit, with many earning less than $25,000 annually.
The CFPB’s lawsuit accused Southern of engaging in loan-churning practices, wherein the company identifies borrowers struggling to repay their existing loans and aggressively pushes them to refinance, the release said. This scheme traps borrowers in a cycle of debt, forcing them to refinance multiple times. The CFPB argued that Southern’s actions harm consumers by increasing their total borrowing costs and prolonging their financial distress.
The lawsuit highlights several coercive tactics employed by Southern, per the release. The company coerces distressed borrowers into fee-laden refinancing cycles, decreasing the amount of money borrowers can access and increasing their overall borrowing costs with each successive refinance.
Southern incentivizes its employees to push refinances, rewarding those who successfully drive payment-stressed borrowers into refinancing and penalizing those who do not. Additionally, the company targets borrowers with a history of multiple refinances, even if they cannot afford to service their debt without refinancing. Southern also falsely markets refinances as fresh starts and solutions for struggling borrowers.
With its lawsuit, the CFPB seeks to end Southern’s loan-churning practices, provide redress to harmed consumers and impose a civil money penalty on the company, according to the release.
This lawsuit comes on the heels of several other actions taken by the CFPB. These include penalizing Freedom Mortgage for engaging in illegal activities related to mortgage loan referrals, launching a crackdown on “data brokers” who collect and sell people’s personal information, and filing a lawsuit against auto-loan servicer USASF Servicing.
The post CFPB Targets Heights Finance for Alleged Illegal Loan Churning first appeared on PYMNTS.com.
