WASHINGTON—The CFPB said it has taken action against James R. Carnes and Melissa C. Carnes, both individually and as co-trustees of the James R. Carnes Revocable Trust and the Melissa C. Carnes Revocable Trust, for hiding money through a series of fraudulent transfers in order to avoid paying more than $40 million in restitution and penalties for illegal payday lending activities.
According to the Bureau, James Carnes attempted to evade a CFPB order requiring him and his company, Integrity Advance, to make harmed consumers whole and pay penalties to the CFPB’s victims relief fund. The CFPB is seeking injunctive relief, as well as asking the court to award a money judgment for the value of the fraudulently transferred funds.
James Carnes was the chief executive officer of Delaware-based Integrity Advance, a short-term, online lender, the CFPB said, adding that both James Carnes and Melissa Carnes reside in Mission Hills, Kan., which is also the principal place of administration of their revocable trusts.
‘Deceiving Consumers’
“In November 2015, the CFPB sued Integrity Advance and James Carnes for deceiving 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 CFPB explained. “Carnes sold his 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.”
As the CFPB noted, Integrity Advance and Carnes appealed the decision to the Tenth Circuit Court of Appeals, which affirmed the CFPB order in September 2022.
“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. 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,” the CFPB said. “To date, they have made no payments to satisfy the judgment.”
Violation of FDCPA
The CFPB is now alleging that through their actions, James Carnes and Melissa Carnes transferred funds to hinder, delay, or defraud the CFPB, in violation of the Federal Debt Collection Procedures Act.
“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 CFPB said.
Specifically, the complaint alleges 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.
Enforcement Action
The CFPB is requesting the court grant all necessary action to reclaim the fraudulently transferred money and assets. The CFPB is also requesting the court to enter a money judgement for the value of the fraudulent conveyances.
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