For the second time in as many years, the Consumer Financial Protection Bureau has fined a major payday lender. On July 10, Richard Cordray, CFPB’s Director announced that one of the nation’s largest payday lenders, ACE Cash Express, will pay $10 million in restitution and penalties for directing its employees to “create a sense of urgency” when contacting delinquent borrowers. This abusive tactic was used to perpetuate the payday loan debt trap.
CFPB has ordered ACE Cash Express to provide consumers with $5 million in refunds and the same amount in penalties for its violations. The firm operates in 36 states and in the District of Columbia with 1,500 storefronts, 5,000 associates and online loans.
“We believe that ACE’s aggressive tactics were part of a culture of coercion aimed at pressuring payday borrowers into debt traps,” said Cordray. “Our investigation uncovered a graphic in ACE’s training manual that lays out a step-by-step loan and collection process that can ensnare consumers in a cycle of debt. When borrowers could not pay back their loans, ACE would subject them to illegal debt collection threats and harassment.”
Commenting on CFPB’s actions, Mike Calhoun, president of the Center for Responsible Lending said, “This enforcement action also confirms what our research found long ago: payday lenders depend on keeping vulnerable consumers trapped in an endless cycle of debt of 300-400 percent interest loans…It’s real, it’s abusive and it’s time to stop.”
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