The Consumer Financial Protection Bureau (CFPB) announced a lawsuit on Tuesday against ACE Cash Express. The federal agency alleges that the payday lender has generated $240 million or more in reborrowing fees from borrowers who were eligible for free repayment plans and also lied about the number of times it would attempt to debit payments from borrower bank accounts.
- The CFPB has sued payday lender ACE Cash Express for charging illegal fees and making illegal debits from borrowers' bank accounts.
- The federal agency says that the lender is a repeat offender, citing a 2014 enforcement action that resulted in $10 million in penalties and borrower refunds.
- The CFPB is seeking monetary relief for consumers, injunctive relief, civil penalties, and disgorgement or compensation for unjust gains.
The CFPB's Lawsuit Against ACE Cash Express
ACE Cash Express is a payday lender that also offers title loans, check cashing, bill pay and a number of other financial services.
But its handling of payday loans is what brought on a lawsuit filed by the CFPB. The federal agency alleges that the lender has broken federal laws. More specifically:
- Concealing free repayment plans: In 10 states, borrowers have the right to one free repayment plan each year, allowing them to make four equal installments instead of a lump sum, with no additional fees or interest. Instead of making borrowers aware of this option, ACE Cash Express told them their only options were a short grace period or a fee-based refinance. The CFPB says the lender has generated at least $240 million in fees from these borrowers since 2014.
- Withdrawing money illegally: In many states, payday loan contracts state that the lender can attempt to withdraw repayment up to three times. However, the CFPB alleges that ACE Cash Express has made an unauthorized fourth withdrawal at least 3,000 times since 2016, resulting in $1.3 million in money that was debited illegally.
The CFPB also notes an enforcement action that it took against ACE Cash Express in 2014, which ordered the payday lender to stop pressuring borrowers into cycles of debt, among other illegal debt collection practices.
The lender wrote in a press release that the lawsuit is baseless, arguing that the improper withdrawals affected just 0.028% of borrowers and that more than 140,000 borrowers have used the payment plan option, arguing this as evidence that customers are aware of the option.