CFPB Reaches Settlement with Couple Over Fraudulent Transfers

Consumer Financial Protection Bureau

WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has taken significant steps to hold James R. Carnes and Melissa C. Carnes accountable for their attempt to avoid paying restitution and penalties. In a stipulated judgment and order filed on June 17, 2024, the CFPB seeks court approval for the couple to pay $7 million.

Background of the Case

In April 2023, the CFPB filed a lawsuit against the Carneses, accusing them of fraudulent transfers meant to evade more than $40 million owed by James Carnes. The lawsuit alleged that over two years, the couple hid funds through multiple transactions to obstruct the CFPB’s enforcement efforts.

James Carnes was the chief executive officer of Integrity Advance, an online lender based in Delaware. Both he and his wife reside in Mission Hills, Kansas, managing their finances through revocable trusts.

Previous Actions Against Integrity Advance

This is not the first time the CFPB targeted James Carnes. In 2015, the agency sued Integrity Advance and its CEO for misleading consumers about the costs of short-term loans and for unauthorized withdrawals from borrowers’ accounts. An agency order mandated that Integrity Advance and Carnes pay $38 million in restitution to affected consumers. Additionally, Integrity Advance was fined $7.5 million, and James Carnes was personally fined $5 million.

Fraudulent Transfer Allegations

Between 2013 and 2015, James Carnes transferred $12.3 million to his wife via a series of revocable trusts. Despite being co-trustee and having access to these funds, the transfers were intended to hinder CFPB’s collection efforts. The CFPB argued that these actions violated the Federal Debt Collection Procedures Act.

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Proposed Settlement Terms

If the court approves the June 17 order, James and Melissa Carnes will pay $7 million towards the imposed $12.3 million judgment. The remaining amount is suspended due to their demonstrated inability to pay more. This payment will help satisfy the existing $43 million judgment against James Carnes, which includes consumer redress and civil money penalties.

CFPB Director Warns Scammers

CFPB Director Rohit Chopra emphasized the significance of the settlement. “James and Melissa Carnes concocted a scheme to hide money to avoid paying victims of an illegal lending scam,” Chopra said. The case serves as a warning that the CFPB will pursue those who attempt to escape legal consequences.

The settlement highlights the CFPB’s commitment to enforcing financial regulations and protecting consumers from deceptive practices. It reinforces the message that attempts to evade restitution and penalties will not be tolerated.

Upholding Accountability

Ensuring that punitive measures are enforced is crucial for maintaining trust in regulatory bodies. The CFPB’s actions demonstrate its dedication to holding individuals and companies accountable for their actions. Such enforcement deters future misconduct and ensures that victims receive due compensation.

In conclusion, the CFPB’s settlement with James and Melissa Carnes marks a significant step in its ongoing efforts to protect consumers and enforce compliance with financial laws. The case underscores the importance of accountability and transparency in the financial sector, ensuring that justice is served.

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