The consent order with the Consumer Financial Protection Bureau, announced Thursday, comes amid a crackdown by federal and local regulators on aggressive payday lending practices.,The bureau took enforcement action in November against Fort Worth-based payday lender Cash America. In that case, Cash America agreed to pay $19 million to settle allegations of improper debt collection lawsuits and overcharges of military customers.,The bureau said Ace harassed overdue borrowers and threatened lawsuits or criminal prosecution to pressure them to take out additional loans to pay off old ones.,“Ace used false threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt,” CFPB Director Richard Cordray said in a statement. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”,In a two-page statement, Ace said its policies prevent delinquent borrowers from taking out new loans. The company did not admit or deny any wrongdoing in agreeing to the consent order. Ace agreed to pay $5 million in consumer refunds and a $5 million penalty.,Ace is one of the largest payday lenders in the country. It provides payday loans and other alternative financial products online and at 1,500 stores in Texas and 35 other states as well as the District of Columbia.
The company has an annual transaction volume of $14 billion and saw 40 million customer visits over the past year.,Payday loans are meant to address short-term cash needs. They can offer quick access to credit in small amounts that must be repaid in full in a short time.,In March, the bureau’s study found 4 of 5 payday loans were being rolled over or renewed within 14 days. It also found that a majority of payday loans were being made to borrowers who end up paying more in fees than the loan’s original amount because they renew the loan so many times.,Consumer advocates applauded the bureau’s latest action against a payday lender.,The bureau said Ace’s training manuals instructed debt collectors to “create a sense of urgency” when contacting overdue borrowers.
The bureau found a graphic illustration in a 2011 training manual that spelled out the loan process. It directs employees to offer consumers the option to refinance or extend the loan if borrowers cannot repay.,Moreover, the company analyzed data from March 2011 through February 2012 to ensure that its polices preventing a delinquent borrower from taking out new loans were working.,Irving payday lender Ace Cash Express has agreed to pay $10 million to settle what federal regulators called “appalling” predatory tactics to induce borrowers into debt traps.
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