Bureau sues couple for avoiding payment north of $40 million in restitution, penalties for illegal payday lending activities

Hiding money through fraudulent transfers to avoid paying more than $40 million in restitution and penalties for illegal payday lending activities was charged against the former chief of a Delaware-based firm, and his wife, by the federal consumer financial protection agency Wednesday.

In a release, the Consumer Financial Protection Bureau (CFPB) said it had filed suit against James R. Carnes and Melissa C. Carnes individually and as co-trustees of the James R. Carnes Revocable Trust and the Melissa C. Carnes Revocable Trust. The bureau alleged that the pair transferred funds to hinder, delay, or defraud the CFPB, in violation of the Federal Debt Collection Procedures Act (FDCPA).

“The defendants committed multiple fraudulent transfers to allow James Carnes to hide the proceeds of the sale of his illegal payday lending business in order to avoid paying the CFPB owed restitution and penalties,” the bureau claimed in its complaint. The agency alleged that between 2013 and 2015, James Carnes fraudulently transferred $12.3 million to his wife, via their revocable trusts. James Carnes was co-trustee of the Melissa C. Carnes Trust and was able to use its funds for personal and business use, the bureau alleged.

Carnes and his firm, Integrity Advance, were the targets of a 2015 lawsuit by the bureau. The suit asserted that Carnes and his firm deceived consumers about the cost of short-term loans and for using remotely created checks to debit consumers’ bank accounts even after the consumers revoked authorization for automatic withdrawals.

The bureau said Carnes sold the allegedly illegal payday lending business and had already received over $20 million in proceeds from that sale by the end of 2015. The CFPB’s lawsuit resulted in an agency order requiring Integrity Advance and James Carnes to pay restitution of over $38 million, Integrity Advance to pay a civil money penalty of $7.5 million, and Carnes to pay a civil money penalty of $5 million.

Carnes appealed the decision, and lost, in the Tenth U.S. Circuit Court of Appeals last September. “The defendants did not comply with the CFPB’s order, nor did they obtain a stay of that order, while that unsuccessful appeal was pending,” the CFPB said. “In July 2021, at the CFPB’s request, a federal judge entered a judgment and order requiring Carnes and Integrity Advance to comply with the CFPB order. To date, they have made no payments to satisfy the judgment.”

CFPB Sues James Carnes and Melissa Carnes for Hiding Money to Avoid Paying for Illegal Payday Lending Business