CFPB Sues ACE Cash Express, Alleging It Funneled Customers Into Costly Reborrowing

Payday lender ACE Cash Express has been accused by the Consumer Financial Protection Bureau (CFPB) of hiding free repayment alternatives from its customers.

Due to ACE’s activities, reborrowing fees of hundreds or thousands of dollars were allegedly charged to borrowers who were eligible for free repayment plans. It is estimated that the fees associated with these practices produced by ACE totaled at least $240 million.

According to a statement put out by the CFPB Tuesday (July 12), ACE allegedly misled customers about how many times their bank accounts would be debited for loan repayments and fees. In turn, the CFPB has filed a lawsuit against ACE in the U.S. District Court for the Northern District of Texas.

In a statement, ACE denied the allegations, saying it “has spent more than 50 years serving its customers fairly and transparently” and was “disappointed” that the agency filed a “baseless lawsuit.”

The company’s statement also said:

“ACE vehemently disagrees with the CFPB’s claims of deception, unfairness and abuse. Over 140,000 ACE customers have availed themselves of ACE’s payment plan option since 2013, which clearly indicates borrowers were aware of this option.

The CFPB claim regarding alleged improper withdrawals only relates to approximately 0.028% of ACE’s loan transactions during the applicable time period and the CFPB misinterpreted the relevant language in the loan agreement.  Furthermore, despite no consumer harm, ACE has refunded over $670,000 to loan customers they will never be required to pay back.”

The CFPB said it discovered in 2014 that ACE employed improper debt collection practices to entice delinquent consumers to take out new loans. Even after the borrower stated that they couldn’t afford to pay back their loans, ACE would still pressure them to take on more debt, according to the CFPB. Each time a borrower took out another payday loan from ACE, they would have to pay extra costs.

ACE also denied that it was a “repeat offender.”

A different strategy was allegedly employed following the CFPB’s 2014 enforcement action. At that point, it was contractually agreed upon by borrowers in 10 states that they were entitled to one free repayment plan per year.

Paying back the debt in four equal installments over the next four paydays was the only requirement of the free repayment plan, which allowed borrowers to avoid having to make a single large payment. In addition, there would be no further charges or interest for them to bear.

Read more: CFPB Warns Debt Collectors About Fees

According to the complaint, ACE used techniques to trick consumers into refinancing and rollovers instead of free repayment options. As a result, borrowers were charged interest at the same triple-digit annualized rate that they were charged at the time of the loan’s origination.

The CFPB said at least $1.3 million has been fraudulently charged from at least 3,000 debtors’ debit cards since January of this year.

“Deception and misdirection allowed ACE Cash Express to pocket hundreds of millions of dollars in reborrowing fees,” CFPB Director Rohit Chopra said in the release.

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