Payday lender ACE Cash Express will pay $10 million in consumers refunds and fines for illegal collection practices that allegedly pushed borrowers into a debt cycle.
The Texas-based company agreed to the payments in a settlement announced Thursday by the U.S. Consumer Financial Protection Bureau after investigators found that ACE used harassment, false threats of lawsuits or criminal prosecution to pressure overdue payday loan borrowers into taking on additional debt they couldn’t afford.
“ACE used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt,” said CFPB Director Richard Cordray. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”
Payday loans are a form of short-term borrowing that typically involves small amounts offered at high interest. They have repeatedly been criticized and targeted by consumer protection officials. ACE offers payday loans and other consumer loan products via the Internet and at stores in 36 states and Washington, D.C.
The Bureau found that ACE collectors engaged in a number of aggressive and unlawful collections practices, including:
Threatening to sue or criminally prosecute: ACE debt collectors led consumers to believe that they would be sued or subject to criminal prosecution if they did not make payments. Collectors would use legal jargon in calls to consumers, such as telling a consumer he could be subject to “immediate proceedings based on the law” even though ACE did not actually sue consumers or attempt to bring criminal charges against them for non-payment of debts.
Threatening to charge extra fees and report consumers to credit reporting agencies: As a matter of corporate policy, ACE’s debt collectors, whether in-house or third-party, cannot charge collection fees and cannot report non-payment to credit reporting agencies. The collectors, however, told consumers all of these would occur or were possible.
Harassing consumers with collection calls: Some ACE in-house and third-party collectors abused and harassed consumers by making an excessive number of collection calls. In some of these cases, ACE repeatedly called the consumers’ employers and relatives and shared the details of the debt.
Here is the CFPB’s consent order.