The Consumer Financial Protection Bureau (CFPB) filed a lawsuit today 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. These practices generated at least $240 million in fees for ACE, while keeping borrowers in debt. The CFPB also alleges 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.
“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.”
ACE Cash Express is a financial services company 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 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. 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.
ACE is also a repeat offender of consumer financial protection laws. In 2014, the CFPB found that ACE 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. 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.
Following the CFPB’s 2014 enforcement action, 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. 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 CFPB alleges that since July 10, 2014, ACE has received more than $240 million in fees from hundreds of thousands of customers who were eligible for a free repayment plan. And, since January 2016, it has made at least 3,000 unauthorized debit-card withdrawals, which resulted in at least $1.3 million being illegally debited from at least 3,000 borrowers. As alleged in the complaint, ACE specifically harmed consumers by:
- Concealing free repayment-plan options and funneling borrowers into costly reborrowing: In numerous instances, since at least 2014, ACE represented to borrowers who had expressed an inability to repay their current ACE loans that the only options available to them were a short grace period or fee-based refinancing. ACE used misleading language and waterfall scripts to dupe borrowers into refinancing loans. Many borrowers did not know free repayment plans existed, did not know they would not have to pay any additional fees for free repayment plans, and did not know that enrolling in free repayment plans would possibly relieve them of having to make a payment before a loan’s regularly scheduled due date.
- Withdrawing money from borrowers’ bank accounts in violation of contracts: In many states, borrowers signed contracts allowing ACE to make three attempts to withdraw repayment funds from borrowers’ bank accounts. However, for thousands of borrowers, ACE withdrew money through a fourth withdrawal. ACE’s actions caused affected borrowers to lose funds and potentially the ability to pay other bills.
Under the Consumer Financial Protection Act, the CFPB has the authority to take action against institutions violating consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices.
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.
In April, the CFPB published a report about no-cost extended payment plans, which are required to be offered to borrowers in the majority of states that do not prohibit payday lending. The CFPB’s research suggested that deceptive industry practices can drive cycles of costly reborrowing.
Consumers who wish to submit a complaint about ACE Cash Express or about any other consumer financial product or service can submit a complaint with the CFPB online or by calling (855) 411-CFPB (2372)