Payday lender ACE Cash Express must pay $10 million to make up for its use of illegal debt collection practices, the Consumer Financial Protection Bureau said Thursday, July 10.
According to the CFPB, ACE harassed consumers with collections calls; falsely threatened to sue or criminally prosecute borrowers who did not make payments and falsely threatened to charge extra fees and report consumers to credit reporting agencies, even though corporate policy prohibits its collectors from doing so.
The bureau also found ACE used these and other tactics to push borrowers into taking out more loans they couldn't afford.
"When borrowers could not pay back their loans, ACE would subject them to illegal debt collection threats and harassment," CFPB Director Richard Cordray said during prepared remarks. "ACE would then relieve the pressure by encouraging these overdue borrowers to pay off their original loan only temporarily while getting them to take out yet another payday loan. Each time, ACE would collect another round of expensive fees, and the borrower would sink even deeper into debt."
This cycle of debt was outlined in a 2011 ACE training manual (see above).
In order to settle the CFPB's charges of misconduct, ACE has agreed to stop unfair and deceptive collections practices. It has also agreed to stop pressuring delinquent borrowers to pay off loans and take out new ones. The monetary restitution includes $5 million in consumer refunds and a $5 million fine paid to the CFPB's Civil Penalty Fund.
ACE said in a separate press release the CFPB's allegations relate exclusively to some of its collections practices prior to March 2012.
"We settled this matter in order to focus on serving our customers and providing the products and services they count on," said Jay B. Shipowitz, ACE's chief executive officer.
During his remarks, Cordray pledged to continue to shield customers from the potential risks associated with payday loans.
"Debt collection tactics such as harassment and bullying take a profound toll on people -- both financially and emotionally," he said. "The Consumer Bureau bears an important responsibility to stand up for those who are being wronged in this process. We will continue to do that by identifying and rooting out unfair and abusive practices in financial markets."
Thanks to the Fair Debt Collection Practices Act, or FDCPA, consumers do have certain rights when a debt collector comes calling. Collectors, among other things, can't use abusive or obscene language, harass you with repeated calls or call you at work if you have asked them to stop. If you are being harassed by aggressive debt collectors, here are tips on how to deal with them.
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