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Payday lender must refund $5 million for illegal practices
WASHINGTON (7/11/14)--One of the largest payday lenders in the country is the subject of an enforcement action announced Thursday by the Consumer Financial Protection Bureau, forcing it to provide $5 million in refunds and a $5 million penalty.

The CFPB found that Irving, Texas-based ACE Cash Express has been using illegal debt collection tactics, including harassment and false threats of lawsuits and criminal prosecution to pressure overdue borrowers into taking out additional loans.

"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. The CFPB was created to stand up for consumers, and today we are taking action to put an end to this illegal, predatory behavior."

ACE offers payday loans, check-cashing services, title loans, installment loans and other consumer financial products and services online and at many of its 1,500 retail storefronts in 36 states and the District of Columbia.

The CFPB found that ACE used the following "aggressive and unlawful" collections practices:
  • ACE debt collectors led consumers to believe they would be sued or subject to criminal prosecution if they did not make payments, even though ACE did not actually sue consumers or attempt to bring criminal charges against them for non-payment of debts;

  • Debt collectors told consumers in-house and third-party collection fees would be collected, despite corporate policy that states collectors cannot charge collection fees and cannot report non-payment to credit reporting agencies; and

  • Some ACE in-house and third-party collectors abused and harassed consumers by making an excessive number of collection calls, and in some cases, ACE repeatedly called the consumers' employers and relatives and shared the details of the debt.
These tactics were used to create a false sense of urgency to lure overdue borrowers into payday debt traps, according to the CFPB. ACE would encourage overdue borrowers to temporarily pay off their loans and then quickly re-borrow from ACE.

Even after consumers explained to ACE that they could not afford to repay the loan, ACE would continue to pressure them into taking on more debt. Borrowers would pay new fees each time they took out another payday loan from ACE.

The $5 million in consumer refunds will go to overdue borrowers harmed by the illegal debt collection tactics during the period covered by the order. These borrowers will receive a refund of their payments to ACE, including fees and finance charges.

The $5 million fine will be made to the CFPB's Civil Penalty Fund.

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