ACE Cash settles for $10 million

Payday lender’s tactics ‘overzealous’

ACE Cash Express, a leading payday lender, has agreed to pay $10 million to settle federal allegations that it used false threats of lawsuits and other illegal tactics to pressure customers with overdue loans to borrow more to pay them off.

The Irving, Texas, firm, which has 1,500 locations in 36 states, including throughout Louisiana, will pay a $5 million fine and $5 million in refunds to tens of thousands of borrowers, the Consumer Financial Protection Bureau, which oversees payday lenders, said Thursday.

“ACE used false threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt,” said bureau Director Richard Cordray. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”

The agency, created by the 2010 financial reform law, has complained that the short-term loans — typically two-week advances on a paycheck — can trap borrowers in a cycle of debt.

The company did not admit or deny the allegations in a consent order in which it agreed to pay the fine and refunds.

As part of the settlement, ACE will hire a third-party firm to contact eligible customers and issue refunds, the bureau said. In March, the bureau said an analysis of the industry found four out of five people who took out payday loans either rolled them over or took out more loans within two weeks.

The case against ACE is the first time bureau officials have accused a payday lender of intentionally pushing people into a debt cycle.

The allegations came after an investigation triggered by a routine examination of the company’s operations as part of the bureau’s oversight.

The investigation found that ACE’s in-house and third-party debt collectors used illegal tactics, such as harassing phone calls and false threats to report borrowers to credit reporting companies, to try to force customers to take out new loans to pay off the old ones, the bureau said.

“ACE was relentlessly overzealous in its pursuit of overdue customers,” Cordray said.

The bureau provided a graphic from an ACE training manual, used from September 2010 to September 2011, which showed a circular loan process of customers being contacted to take out new loans after being unable to pay off old ones.

The company’s website shows it has locations in Baton Rouge, New Orleans, Lafayette, Metairie, Harvey, Kenner, Gretna, Jefferson, Chalmette, Marrero, Terrytown, Laplace, West Slidell, Houma, New Iberia, Lake Charles, Alexandria, Shreveport, Bossier City, Monroe, West Monroe and Ruston.