WASHINGTON–The Consumer Financial Protection Bureau has filed a lawsuit accusing payday lender ACE Cash Express of concealing free repayment plans from struggling borrowers.
“Because of ACE’s illegal practices, individual borrowers paid hundreds or thousands of dollars in reborrowing fees, when they were in fact eligible for free repayment plans,” the Bureau said in announcing the action.
According to the CFPB, these practices generated at least $240 million in fees for ACE, while keeping borrowers in debt.
The CFPB is further alleging that ACE “lied to borrowers about the number of times it would attempt to debit their bank accounts for repayment of loans and fees.”
In a 2014 CFPB enforcement action, ACE paid $10 million in penalties and borrower refunds for using illegal debt-collection tactics, and the company is still bound by the order from that case, according to the Bureau.
“Deception and misdirection allowed ACE Cash Express to pocket hundreds of millions of dollars in reborrowing fees,” said CFPB Director Rohit Chopra. “Today’s lawsuit is another example of the CFPB’s focus on holding repeat offenders accountable.”
About the Company
ACE Cash Express is headquartered in Irving, Texas. In 2019, ACE changed its corporate name to Populus Financial Group Inc., while continuing to carry the ACE Cash Express brand as one of the group’s core financial service offerings, the Bureau said. The company offers a variety of financial products, including high-cost, small-dollar payday and title loans, along with bill payment, check-cashing, and prepaid debit-card services.
“The small-dollar lending products are typically structured to be short-term, single-payment loans with triple-digit annualized interest rates,” according to the CFPB. “ACE primarily serves low-income consumers, and its borrowers frequently refinance, rollover, or otherwise extend their loans beyond the original repayment term.”
ACE has approximately 979 stores in 22 states and the District of Columbia. Since 2006, ACE has been owned by JLL Partners, a private equity firm.
‘Repeat Offender’
The Bureau called Ace a “a repeat offender of consumer financial protection laws,” noting that in 2014, the CFPB found it had used illegal debt-collection tactics to create a false sense of urgency to lure overdue borrowers into repeat borrowing.
“ACE would encourage overdue borrowers to temporarily pay off their loans and then quickly re-borrow from the company,” the CFPB said. “Even after borrowers explained to ACE that they could not afford to repay their loans, the company 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.”
Changing Tactics
Following the 2014 enforcement action, the CFPB said ACE used different tactics to make consumers re-borrow.
“Borrowers in 10 states had the contractual right to one free repayment plan per year. Under the free repayment plan, borrowers would owe their outstanding balances in four equal installments over their next four paydays, rather than owing one lump sum. They also would not need to pay any additional fees or interest,” the Bureau said. “As alleged in the complaint, ACE used tactics designed to dupe borrowers into rollovers and refinancing instead of free repayment plans. The result was that instead of just paying the outstanding balance, borrowers faced repeat charges of the same triple-digit annualized interest rate that they were charged at origination.”
The Allegations
As alleged in the complaint, the CFPB said ACE specifically harmed consumers by:
- Concealing free repayment-plan options and funneling borrowers into costly reborrowing
- Withdrawing money from borrowers’ bank accounts in violation of contracts
Relief Sought
The CFPB is seeking monetary relief for harmed consumers, disgorgement or compensation for unjust gains, injunctive relief, and civil money penalties. The complaint is not a final finding or ruling that the defendants have violated the law.
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