Ace Cash Express, one of the nation's largest payday lenders, has agreed to pay a $10 million settlement over its collection practices.
The Consumer Financial Protection Bureau said that Ace, based in Irving, Tex., must refund $5 million to customers who fell victim to such practices from March 2011 to September 2012; it must also pay a $5 million civil penalty.
Payday loans are taken out by people who need quick cash between paychecks. Companies such as Ace Cash Express have been known to trap customers into paying for subsequent loans with high interest rates, the CFPB said.
"Ace was relentlessly overzealous in its pursuit of overdue consumers," CFPB Director Richard Cordray said in a press release. "Some collectors would press consumers with an excessive amount of calls to abuse or harass them."
The bureau found that the company often threatened delinquent borrowers, claiming it would report them to credit bureaus, add fees to their debts or have them incarcerated. A particular graphic in Ace's training manual revealed how the company told employees to lead customers into refinancing or extending their loans when they could not repay their debts.
Although Ace said it has ways to prevent struggling borrowers from taking out new loans, it agreed to settle with the CFPB "in order to focus on serving our customers and providing the products and services they count on," Ace Chief Executive Jay B. Shipowitz said in a press release.
Payday loans can be risky and should generally be avoided. If you don't want to get stuck in deeper debt, read our 4 Reasons to Avoid Payday Loans.
Also of Interest
- Silence Could Be Costly in Family Financial Planning
- Are You a Social Security Double-Dipper? Perhaps Not Much Longer
- Fight fraud and ID theft with the AARP Fraud Watch Network.
- Join AARP: Savings, resources and news for your well-being
See the AARP home page for deals, savings tips, trivia and more