CFPB may get $7M from 2015 $43M judgment against illegal lenders

The CFPB yesterday filed a proposed stipulated judgment and order to resolve its lawsuit against James R. Carnes and Melissa C. Carnes for fraudulent transfers to avoid paying restitution and penalties. In April 2023, the CFPB sued James and Melissa Carnes for hiding money, through multiple fraudulent transfers over two years, in an effort to avoid paying more than $40 million owed by James Carnes. Yesterday’s stipulated judgment and order, if entered by the court, would require James and Melissa Carnes to pay $7 million to the CFPB.

James Carnes was the chief executive officer of Delaware-based Integrity Advance, a short-term, online lender. James Carnes and Melissa Carnes reside in Mission Hills, Kansas, which is also the principal place of administration of their revocable trusts. The CFPB previously sued Integrity Advance and James Carnes in 2015 for lying to consumers about the cost of short-term loans. They also withdrew money from borrowers’ accounts despite not having permission from consumers to do so. The CFPB’s lawsuit resulted in an agency order requiring Integrity Advance and James Carnes to pay $38 million to make harmed consumers whole. The order also required Integrity Advance to pay a civil money penalty of $7.5 million and James Carnes to pay a civil money penalty of $5 million.

In the fraudulent transfer action filed in April 2023, the CFPB alleged that James Carnes and Melissa Carnes transferred funds to hinder, delay, or defraud the CFPB, in violation of the Federal Debt Collection Procedures Act. Between 2013 and 2015, James Carnes fraudulently transferred $12.3 million to his wife through a series of revocable trusts. James Carnes was co-trustee of the trusts, so he could access their funds for personal and business use.

Yesterday’s order, if entered by the court, would require James and Melissa Carnes to pay $7 million of an imposed $12.3 million judgment, with the remaining amount suspended due to demonstrated inability to pay more. The payment will be applied toward satisfying James Carnes’ existing $43 million judgment, which includes consumer redress and civil money penalties. The CFPB will continue its efforts to collect the remaining amount of the $43 million judgment.