CFPB Sues Payday Lender for Hiding Repayment Options

The Consumer Financial Protection Bureau yesterday filed a lawsuit against Populus Financial Group, which does business as ACE Cash Express, accusing the payday lender of hiding fee repayment plans from borrowers, allegedly inducing those consumers to pay $240 million in reborrowing fees.

A copy of the complaint, filed in District Court for the Northern District of Texas, can be accessed by clicking here.

In keeping with its mandate of going after repeat offenders, this is not the first time that ACE has run afoul of the CFPB. Back in 2014, ACE paid $10 million in fines and refunds to borrowers after it was accused of engaging in illegal debt collection tactics, an enforcement order that is still in effect today, the CFPB noted.

ACE operates nearly 1,000 stores in 22 states. In 10 of those states, borrowers have a contractual right to one free repayment plan a year, which allows borrowers to repay their outstanding balance in four equal installments over their next four paydays, instead of being required to repay the balance in one lump sum. The problem, according to the CFPB, is that ACE used tactics to “dupe” customers into rolling over their balances into new loans instead of using the repayment plan. Since 2014, “hundreds of thousands” of customers who were eligible for a repayment plan have paid $240 million in fees to ACE, according to the complaint. The company is also accused of making 3,000 unauthorized withdrawals from consumers’ bank accounts, withdrawing $1.3 million illegally.

Customers in Louisiana and Idaho were entitled to one free repayment under state law. Customers in Arizona, Georgia, Minnesota, Missouri, New Mexico, Ohio, Tennessee, and Texas were offered the free repayment plan as a condition of ACE’s membership in a trade association, Financial Service Centers of America. ACE allegedly informed consumers of the free repayment plan only when they rejected the first two options they were presented — a three-day grace period to repay the loan in full or to roll over the balance by refinancing the debt into a new loan.

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