CFPB Opposes Payday Loan Industry, Orders ACE Cash Express To Pay $ 10 Million


Another sign that the payday lending industry is increasingly under siege, the CFPB on Thursday struck a deal with one of the nation’s largest payday lenders for $ 10 million over its illegal debt collection tactics.

The lender,

Cash Express, “has used false threats, intimidation and harassing calls to intimidate payday borrowers in 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.”

For example, the CFPB says consumers were threatened with additional charges, reporting to credit bureaus and criminal prosecution if they did not make payments. Some collectors have repeatedly called consumers, their offices and even relatives, disclosing information about their loans.

An ACE Cash Express storefront in North Carolina. (Sonny Hedgecock / AP)

A graphic from the ACE Cash Express training manual shows how new employees learned to contact the customer after he or she “ran out of money and not able to pay.” Employees have been instructed to “create a sense of urgency” when calling delinquent borrowers.

Of the total of $ 10 million that is owed, $ 5 million will be paid to consumers in the form of refunds and $ 5 million will be paid as a penalty to the CFPB. ACE Cash Express has also been ordered to end illegal threats and harassment in debt collection and to stop pressuring borrowers to take repeat loans.

The payday loan industry is estimated to bring in over $ 3 billion annually.

A statement from ACE Cash Express indicates that the allegations relate to practices prior to March 2012 and that they have cooperated with the CFPB to implement the recommended changes. They offer payday loans online and in storefronts in 36 states and DC.

Payday loans, which provide borrowers with quick access to cash, are widely criticized for their ultra-high interest rates, short repayment terms, and predatory practices.

“Payday loans are designed to create a debt trap,” says Diane Standaert, senior policy advisor at the Center for Responsible Lending. “They’re marketed as a quick financial fix, but actually leave people worse off financially than when they started.”

The CFPB, which was the first federal regulator to oversee the payday lending industry in 2012, began collecting consumer complaints about payday loans last fall and is in the “final stages.” the development of the rules of the sector. This is the second enforcement action it has taken against a major payday lender, and the first time it has used the Dodd-Frank clause against abusive practices that “unreasonably benefit” consumers.

States like Illinois have recently taken action against payday lenders, and a federal investigation dubbed “Operation Choke Point” has also prosecuted them. A recent report from KPMG’s financial services regulatory practice warns that payday lenders will face “increased regulatory control” at the state and federal levels.

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