Consumer complaint received 2019-01-30
Product: Payday loan, title loan, or personal loan — Payday loan
Issue: Problem with the payoff process at the end of the loan — 
Company: Cottonwood Financial Ltd. (TX)

On XX/XX/XXXX I defaulted on a loan due to Cottonwood Financial / Cash Store ( XXXX, Tx ). I was contacted by my local Cash Store ( XXXX, Tx ) a few days later and was offered a refinance loan that would lower my monthly payment and get me back on track. 

I visited my local Cash Store on Wednesday XX/XX/XXXX to accept this offer. The representative ( I believe his name was XXXX ) took the {$140.00} Dollar fee and began printing paperwork for me to sign. I informed him that I did not wish to grant permission to Cottonwood to directly debit my bank account. He told me that I must grant the permission to receive the loan. I pointed out to him that I thought this was illegal under federal law. He contacted his DM who told him I must sign the authorization form but could later mail a retraction letter to Cottonwood. I commented that this simply didnt make sense - why not just not sign the authorization form to begin with? He then contacted someone at Cottonwood and was told that I must sign but could attach a retraction letter with the signed authorization form again, nonsense. I took my money back and sought legal advice. 

The federal Electronic Funds Transfer Act ( at 1005.10 e I believe ) specifically forbids a lender from denying a consumer a loan solely because the consumer refuses to allow the lender to debit their bank account directly. 

Cottonwoods own Payment Authorization Form ( XXXX ) states the following : You understand that your election to provide us with an authorization to debit your bank account is voluntary and is not a factor in whether we will offer our services or a loan to you The fact of the matter is that the only reason I was denied a loan on the XXXX was because I would not provide the authorization. 

I understand that several companies have attempted to bypass the EFTA by claiming that various schemes to provide retraction mechanisms with the signed authorization forms met the EFTAs requirement. I also understand that the courts have seen through these and found such schemes are a violation of the EFTA. 

One of the FAQ listed under existing customers on the Cash Store website is the following : Why was a payment taken from my account? 

For your convenience, if you are not able to make it into the store, the scheduled loan payment will be drafted from your account. This will ensure that your loan remains on schedule without the need to visit a store location to make a payment Please note that nothing is said about the consumer needing to give permission to Cottonwood to do this it is assumed. Why? Apparently because you can not be an existing customer without having taken a loan, and Cottonwood ( in violation of the EFTA ) apparently wont give you a loan unless you grant them permission to debit your bank account.

How many consumers have been victimized by Cottonwood Financial / Cash Store in this way? Does Cottonwood make a point of informing the consumer that they do NOT have to authorize Cottonwood to debit their bank account directly in order to receive the financial relief they seek? Obviously not. How much does Cottonwood make at {$30.00} a month per direct debit failure? Not to mention the additional damage to the consumer by what their bank might charge ( {$29.00} per incident in my case ).

Additionally, why did at least four Cottonwood employees in positions of responsibility not know that an apparent common daily practice of the Cash Store is a direct violation of the EFTA? 

In an attempt to open a dialog with Cottonwood about this matter, I contacted their General Counsels office via a certified letter delivered on XX/XX/XXXX. As of the time of this writing ( XX/XX/XXXX ) I have not heard back from them although I am easy to reach. 

However, I have heard from their Collections Department and responded promptly. Since mailing my letter I have received 3 collection calls from two different Cottonwood agents. XXXX ( ext XXXX ) ridiculed my legitimate concern that I brought to the attention of Cottonwoods General Counsel and  XXXX ( ext XXXX ) even denied that what Cottonwood did was against the law ( she didnt deny it happened, just that it wasnt against the law ). Both agents terminated all three calls by rudely hanging up on me once I mentioned having contacted their General Counsels office. 

Cottonwood invited me to resolve my loan default issue with them via a refinance of the loan. I accepted the offer but was subsequently illegally denied the loan. As a result I am still listed with them as in default and am harassed by collection calls. 

Since Cottonwood has failed to accept my invitation to discuss this matter amicably and persists in rude collection attempts, I have elected to take this matter to the next level and seek assistance from the Consumer Financial Protection Bureau.