By Aruna Viswanatha
WASHINGTON (Reuters) - Payday lender Cash America International will refund consumers $14 million and pay a $5 million fine to settle civil allegations that it improperly pursued some customers' debt and overcharged military service members, U.S. regulators said on Wednesday.
The enforcement action against Cash America International is the first against a payday lender from the Consumer Financial Protection Bureau, a new regulator created by the 2010 Dodd-Frank Wall Street reform law.
Payday lenders like Cash America provide small short-term loans at high interest rates to help a borrower get to the next paycheck. But the have come under scrutiny from U.S. authorities in recent years amid concern about lax oversight.
In addition to the company's problems with debt collection and overcharging, the CFPB also accused the company of impeding a regulatory exam by destroying certain documents and coaching employees on what to tell examiners.
Cash America, one of the largest payday lenders in the country, said in a statement it neither admitted nor denied the allegations and has already refunded around $6.4 million to customers.
"Now that we have completed the initial CFPB review process and entered into this settlement, we will continue to focus on serving our customers while working to develop additional compliance programs," chief executive Daniel Feehan said.
The CFPB accused the Fort Worth, Texas-based company of using "robo-signed" documents to pursue debt collection lawsuits in Ohio, referring to documents that are signed without appropriate review.
Cash America also charged active members of the military an annual interest rate higher than 36 percent, which is not allowed under the Military Lending Act, the bureau said.
"This action should send several clear messages to everyone under the jurisdiction of the consumer bureau," CFPB Director Richard Cordray said in remarks to reporters.
In addition to the $14 million refund and the $5 million fine, the agency ordered the company to improve its compliance with consumer financial protection laws.
The CFPB is the first federal regulator to examine payday lenders.
Earlier this year the agency said such loans often trap borrowers in a cycle of debt and warned new rules could be on the way.
(Reporting by Aruna Viswanatha; Editing by Gerald E. McCormick and Krista Hughes)