On September 6, 2001 a class action lawsuit was filed against Ace Cash Express in the United States District Court for the Northern District of Texas. The Complaint alleged that Ace Cash Express exploited low income consumers by charging outrageous and illegal interest rates on payday loans and used unfair, deceptive, and abusive practices to make and collect on those loans. The complaint called Ace Cash Express an illegal enterprise which amounted to a “massive loan-sharking operation.
The Plaintiff’s claimed that the company’s loan and collection practices violated several federal laws, including the Truth in Lending Act (TILA), the Fair Debt Collection Practices Act (FDCPA), and the Electronic Funds Transfer Act (EFTA), as well as anti-usury and consumer protection laws in more than 30 states where it does business.
According to the Complaint, Ace Cash Express, in violation of the TILA, falsely claims that its payday loans are made by Goleta National Bank, which allows it to evade state caps on interest rates and charge a rate that is over 440% per year. The deceptive claim allows it to do this, because nationally chartered banks, such as Goleta National Bank, are not subject to state interest rate laws. The cash advance company then markets its loan services to economically disadvantaged consumers it knows will not be able to repay the loans. The Complaint alleges that the company does this in order to force those consumers to continuously extend or renew the loans, causing them to incur additional interest charges, oftentimes resulting in the consumer paying interest that is several times the amount of the original loan. This type of predatory lending, says the Plaintiff, nets Ace Cash Express and its collaborators tens of millions of dollars a year in “ill-gotten” profits, and violates state laws against unjust enrichment.
The company’s disregard for the law does not stop there, however. The Complaint further alleges that borrowers who are unable to pay their loan by the due date, and choose not to reinstate or extend the loan, and are then subject to abusive collection practices, such as being told they will be arrested and have criminal charges filed against them if they do not pay, having their personal information disclosed to third parties, and being contacted at their place of employment. These collection tactics are all specifically prohibited by the FDCPA. Ace Cash Express was also alleged to have violated the EFTA, by requiring consumers to authorize automatic debits of their checking account as a condition of obtaining a payday loan, and the FDCPA, by then repeatedly attempting to debit the accounts, causing consumers to incur unwarranted bank fees.
In October of 2002, the parties reached a Settlement Agreement and on December 11, 2003 the Court approved the Agreement. Ace Cash Express agreed to establish an $11 million settlement fund, make at least $2.5 million in cash payments to members of the class action suit who had repaid their loans, and forgive $52 million of class members’ debt who had not repaid their loans. It also agreed to refrain from associating with other banks in order to skirt state interest rate caps, stop some of its abusive collection practices, such as repeatedly attempting to debit borrower’s bank accounts, and provide consumers with specific disclosures about its debiting practices and bank fees they might incur as a result of any debits.
It appears as if the Settlement did not deterred Ace Cash Express from using predatory lending or deceptive and abusive collection practices, however. In July of 2014 the company was ordered by the Consumer Financial Protection Bureau (CFPB), a federal agency in charge of overseeing companies in the financial industry, to pay $10 million for abusive practices it called “predatory behavior that forced consumers into a cycle of debt”. The CFPB found that Ace Cash Express attempted to create a false sense of urgency in loan repayment by repeatedly calling defaulted borrowers, discussing their debt with third parties, and threatening arrest and criminal charges if they did not pay. The agency said that the company did this to convince borrowers who were unable to repay their payday loan to temporarily pay it off and then quickly take out a new loan, which caused the borrowers to incur new fees and more debt they would likely be unable to repay. Sound a bit familiar?
Sadly, a look at the almost 700 complaints filed against Ace Cash Express with the Better Business Bureau (BBB) and CFPB since the class action settlement and CFPB order to pay $10 million seems to indicate that the payday loan company still has no intention of ceasing its unlawful lending and collection practices.
If Ace Cash Express has harassed, abused or misled you in an attempt to collect on a debt, contact our office at 1-800-219-3577, for a free, no obligation consultation.