Payday lender to pay $10 mln over collection tactics -CFPB
WASHINGTON, July 10
WASHINGTON, July 10 (Reuters) - The U.S. consumer watchdog on Thursday said payday lender ACE Cash Express must pay $10 million to settle accusations that it had used unfair debt collection practices, such as threatening to sue borrowers, to pressure them into taking out new loans.
The U.S. Consumer Financial Protection Bureau has been probing payday lenders, which offer small loans that carry high interest rates and must be paid back quickly.
Consumer advocates say the loans trap borrowers in a cycle of debt. The CFPB has said many payday borrowers renew their loans so many times that they pay more in fees than they borrowed in the first place.
The bureau said Irving, Texas-based ACE Cash Express had harassed customers with numerous collection calls and false threats of lawsuits to create a sense of urgency over their debt. It then pressured them to take out new loans or extend the old ones.
"This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back," CFPB Director Richard Cordray said.
ACE Cash Express was ordered to pay $5 million in refunds to customers and a $5 million fine to the bureau. It also must end unfair practices, such as disclosing debts to unauthorized third parties, and stop pressuring borrowers to pay off loans and quickly take out new ones, the bureau said.
The company neither admitted nor denied wrongdoing. In a statement, ACE said it had policies to keep delinquent borrowers from taking out new loans and that it had already enhanced its compliance program voluntarily.
The company also said a review by an outside firm had found that most of its collection calls met relevant standards. The bureau said it found flaws in that study.
Congress created the CFPB in the 2010 Dodd-Frank law and charged it with overseeing consumer financial products. The bureau took its first enforcement action against a big payday lender, Cash America International, last year.
ACE offers payday products, check-cashing services and installment loans online and at stores in 36 states and the District of Columbia, the bureau said. (Reporting by Emily Stephenson; Editing by Lisa Von Ahn)