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CFPB Takes Action against ACE Cash Express for Pushing Payday Borrowers into Cycle of Debt; One CU Helping Members Get Out of and Avoid Trap
Friday, July 11, 2014 6:30 AM

Yesterday, the Consumer Financial Protection Bureau (CFPB) took enforcement action against Texas-based ACE Cash Express, one of the largest payday lenders in the U.S., for pushing payday borrowers into a cycle of debt. The CFPB found that ACE used illegal debt collection tactics – including harassment and false threats of lawsuits or criminal prosecution – to pressure overdue borrowers into taking out additional loans they could not afford. ACE will provide $5 million in refunds and pay a $5 million penalty for these violations.

The CFPB found that ACE collectors engaged in a number of aggressive and unlawful collections practices, including:

  • Threatening to sue or criminally prosecute: ACE debt collectors led consumers to believe that they would be sued or subject to criminal prosecution if they did not make payments. Collectors would use legal jargon in calls to consumers, such as telling a consumer he could be subject to “immediate proceedings based on the law” even though ACE did not actually sue consumers or attempt to bring criminal charges against them for non-payment of debts.
  • Threatening to charge extra fees and report consumers to credit reporting agencies: As a matter of corporate policy, ACE’s debt collectors, whether in-house or third-party, cannot charge collection fees and cannot report non-payment to credit reporting agencies. The collectors, however, told consumers all of these would occur or were possible.
  • Harassing consumers with collection calls: Some ACE in-house and third-party collectors abused and harassed consumers by making an excessive number of collection calls. In some of these cases, ACE repeatedly called the consumers’ employers and relatives and shared the details of the debt.

Scott Ward, executive vice president and chief operating officer for Unity One CU, says they’ve helped a number of their members get out of the payday lending debt trap.

“It’s sad to see how much debt some of our members end up in as a result of taking out a payday loan. These predatory payday loans are structured in such a way that it makes it difficult for consumers to get out of,” notes Ward. “At Unity One CU, we offer an affordable short-term loan product that is structured to help meet the member’s immediate financial need without causing any additional financial hardships.”

The ACE cycle-of-debt training manual graphic is available online.