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Regulators prepare rules on payday loans to shield borrowers | New …

WASHINGTON (AP)—Troubled by consumer complaints and loopholes in state laws, federal regulators are putting together the first-ever rules on payday loans aimed at helping cash-strapped borrowers avoid falling into a cycle of high-rate debt.

The Consumer Financial Protection Bureau says state laws governing the $46 billion payday lending industry often fall short, and that fuller disclosures of the interest and fees—often an annual percentage rate of 300 percent or more—may be needed.

Full details of the proposed rules, expected early this year, would mark the first time the agency has used the authority it was given under the 2010 Dodd-Frank law to regulate payday loans. In recent months, it has tried to step up enforcement, including a $10 million settlement with ACE Cash Express after accusing the payday lender of harassing borrowers to collect debts and take out multiple loans.

A payday loan, or a cash advance, is generally $500 or less. Borrowers provide a personal check dated on their next payday for the full balance or give the lender permission to debit their bank accounts. The total includes charges often ranging from $15 to $30 per $100 borrowed. Interest-only payments, sometimes referred to as “rollovers,” are common.

[…]

Federal regulators plan payday loan rules to protect borrowers

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A payday loans sign in the window of Speedy Cash, London, December 25, 2013. For the first time, the Consumer Financial Protection Bureau plans to regulate payday loans using authority it was given under the Dodd-Frank law. Photo by Suzanne Plunkett/Reuters.

WASHINGTON — Troubled by consumer complaints and loopholes in state laws, federal regulators are putting together the first-ever rules on payday loans aimed at helping cash-strapped borrowers avoid falling into a cycle of high-rate debt.

The Consumer Financial Protection Bureau says state laws governing the $46 billion payday lending industry often fall short, and that fuller disclosures of the interest and fees – often an annual percentage rate of 300 percent or more – may be needed.

Full details of the proposed rules, expected early this year, would mark the first time the agency has used the authority it was given under the 2010 Dodd-Frank law to regulate payday loans. In recent months, it has tried to step up enforcement, including a $10 million settlement with ACE Cash Express after accusing the payday lender of harassing borrowers to collect debts and take out multiple loans.

A payday loan, or a cash advance, is generally $500 or less. Borrowers provide a personal check dated on their next payday for the full balance or give the lender permission to debit their bank accounts. The total includes charges often ranging from $15 to $30 per $100 borrowed. Interest-only payments, sometimes referred to as “rollovers,” are common.

Legislators in Ohio, Louisiana and South Dakota unsuccessfully tried to broadly restrict the high-cost loans in recent months. According to the Consumer Federation of America, 32 states now permit payday loans at triple-digit interest rates, or with no rate cap at all.

The CFPB isn’t allowed under the law to cap interest rates, but it can deem industry practices unfair, deceptive or abusive to consumers.

“Our research has found that what is supposed to be a short-term emergency loan can turn into a long-term and expensive debt trap,” said David Silberman, the bureau’s associate director for research, markets and regulation. The bureau found more than 80 percent of payday loans are rolled over or followed by another loan within 14 days; half of all payday loans are in a sequence at least 10 loans long.

The agency is considering options that include establishing tighter rules to ensure a consumer has the ability to repay. That could mean requiring credit checks, placing caps on the number of times a borrower can draw credit or finding ways to encourage states or lenders to lower rates.

Payday lenders say they fill a vital need for people who hit a rough financial patch. They want a more equal playing field of rules for both nonbanks and banks, including the way the annual percentage rate is figured.

“We offer a service that, if managed correctly, can be very helpful to a diminished middle class,” said Dennis Shaul, chief executive of the Community Financial Services Association of America, which represents payday lenders.

Maranda Brooks, 40, a records coordinator at a Cleveland college, says she took out a $500 loan through her bank to help pay an electricity bill. With “no threat of loan sharks coming to my house, breaking kneecaps,” she joked, Brooks agreed to the $50 fee.

Two weeks later, Brooks says she was surprised to see the full $550 deducted from her usual $800 paycheck. To cover expenses for herself and four children, she took out another loan, in a debt cycle that lasted nearly a year.

“It was a nightmare of going around and around,” said Brooks, who believes that lenders could do more to help borrowers understand the fees or offer lower-cost installment payments.

Last June, the Ohio Supreme Court upheld a legal maneuver used by payday lenders to skirt a 2008 law that capped the payday loan interest rate at 28 percent annually. By comparison, annual percentage rates on credit cards can range from about 12 percent to 30 percent.

Members of Congress also are looking at payday loans.

Sen. Sherrod Brown of Ohio, the top Democrat on the Senate Banking, Housing and Urban Affairs Committee, plans legislation that would allow Americans to receive an early refund of a portion of their earned income tax credit as an alternative to a payday loan.

Sen. Elizabeth Warren, D-Mass., wants the U.S. Postal Service to offer check-cashing and low-cost small loans. The idea is opposed by many banks and seems unlikely to advance in a Republican-controlled Congress.

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Cash America Announces New Share Repurchase Authorization for up to 4 Million Shares

FORT WORTH, Texas–(BUSINESS WIRE)–

Cash America International, Inc. (CSH) announced today that its board of directors, at its regularly scheduled meeting, authorized the repurchase of up to 4.0 million shares of the Company’s outstanding common stock, par value $0.10 per share. The share repurchase authorization does not have an expiration date, and the amount and prices paid for any future share purchases under the new authorization will be based on market conditions and other factors at the time of the purchase. Repurchases under the share repurchase program will be made through open market purchases or private transactions, in accordance with applicable federal securities laws. This new authorization cancels and replaces a previous authorization to purchase up to 2.5 million shares of common stock, under which approximately 41% of the authorized shares had been repurchased as of December 31, 2014.

Repurchased shares will be held as treasury stock for general corporate purposes. As of December 31, 2014, there were approximately 29 million shares of Cash America common stock issued and outstanding; therefore, the new authorization represents approximately 14% of the currently issued and outstanding shares of common stock.

In a separate release today, the Company also announced that its board of directors increased the quarterly cash dividend to 5 cents per share from 3.5 cents per share. The dividend will be payable on February 25, 2015 to shareholders of record on February 11, 2015. See the separate press release for additional details.

About the Company

As of December 31, 2014 Cash America International, Inc. (the “Company”) operated 943 total locations offering specialty financial services to consumers, which included the following:

859 lending locations in 21 states in the United States primarily under the names “Cash America Pawn,” “SuperPawn,” “Cash America Payday Advance,” and “Cashland;” and 84 check cashing centers (all of which are unconsolidated franchised check cashing centers) operating in 12 states in the United States under the name “Mr. Payroll.”

For additional information regarding Cash America International, Inc. visit its website located at www.cashamerica.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements about the business, financial condition, operations and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation: the effect of, compliance with or changes in domestic pawn, consumer credit, tax and other laws and governmental rules and regulations applicable to the Company’s business or changes in the interpretation or enforcement thereof; the regulatory and examination authority of the Consumer Financial Protection Bureau, including the effect of and compliance with a consent order the Company entered into with the Consumer Financial Protection Bureau in November 2013; risks related to the separation of the Company and Enova International, Inc.; a claim relating to the terms of the Company’s 5.75% senior notes; the actions of third parties who provide, acquire or offer products and services to, from or for the Company; public and regulatory perception of the Company’s business, including its consumer loan business and its business practices; the effect of any current or future litigation proceedings or any judicial decisions or rule-making that affect the Company, its products or its arbitration agreements; fluctuations, including a sustained decrease, in the price of gold or deterioration in economic conditions; a prolonged interruption in the Company’s operations of its facilities, systems and business functions, including its information technology and other business systems; changes in demand for the Company’s services and changes in competition; impairment risk related to the Company’s goodwill and intangible assets; the Company’s ability to attract and retain qualified executive officers; the ability of the Company to open new locations in accordance with its plans or to successfully integrate newly acquired businesses into the Company’s operations; interest rate fluctuations; changes in the capital markets, including the debt and equity markets; changes in the Company’s ability to satisfy its debt obligations or to refinance existing debt obligations or obtain new capital to finance growth; security breaches, cyber-attacks or fraudulent activity; acts of God, war or terrorism, pandemics and other events; the effect of any of such changes on the Company’s business or the markets in which it operates; and other risks and uncertainties indicated in the Company’s filings with the Securities and Exchange Commission. These risks and uncertainties are beyond the ability of the Company to control, nor can the Company predict, in many cases, all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this release, terms such as “believes,” “estimates,” “should,” “could,” “would,” “plans,” “expects,” “anticipates,” “may,” “forecasts,” “projects” and similar expressions and variations as they relate to the Company or its management are intended to identify forward-looking statements. The Company disclaims any intention or obligation to update or revise any forward-looking statements to reflect events or circumstances occurring after the date of this release.

FinanceInvestment & Company Information Contact:

Cash America International, Inc.
Thomas A. Bessant, Jr., 817-335-1100

[…]

Loan sharks could take advantage of payday lending caps, according to CAB


Loan sharks could take advantage of payday lending caps, according to CAB

DEBT ADVICE: Darlington Citizens Advice Bureau’s Dawn Gill and Neeraj Sharma

First published in News by Joanna Morris

LOAN sharks could cash in following caps on payday lending, according to the Citizens’ Advice Bureau.

Caps limiting the interest rate and fees instated by so-called payday lenders have been introduced by the Financial Conduct Authority in a bid to protect people struggling with debt.

As of Friday, January 2, companies such as Wonga – who previously had annual interest rates higher than 5,000 per cent – must comply with regulations that will see interest and fees capped at 0.8 per cent per day.

Under the new rules, the total cost of a loan will be limited to 100 per cent of the original sum and default fees will be capped at £15.

While the move has been welcomed by the Darlington Citizens Advice Bureau (CAB), the organisation has warned the changes may cause more vulnerable people to fall prey to loan sharks.

Darlington CAB’s Dawn Gill expressed fears that loan sharks could take advantage of those now unable to access as much money as they need.

She said: “Caps are a good thing but clients will still want money from somewhere – they’re being protected from high interest rates but companies may not lend as much.

“They may not be able to get as much as they were expecting or anything at all.

“If they don’t get what they want, they are in danger of reaching out to someone like a loan shark instead of coming to us, for example.

“We haven’t seen it happen yet but the changes are still new and it’s a worry.”

Ms Gill urged payday lenders to work with CABs in order to help their clients manage their finances.

She said: “The ideal situation would be for payday lenders to refer their clients to us before they take out a loan at all and let us help them to maximise and manage their income.

“I’d advise people to come to us and let us help them find ways to manage.

“We can help with benefits, cutting energy bills or working out incomings and outgoings and priorities.

“There are a lot of people prioritising paying back intimidating people who knocked at their door with money rather than paying their rent or council tax but they could end up losing their home.”

To anonymously report a loan shark, contact the Illegal Money Lending Team by emailing reportaloanshark@stoploansharks.gov.uk or calling 0300-555-2222.

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Beware of phony loan offers

Ohio Attorney General Mike DeWine is warning Ohioans seeking extra cash following the holiday season should beware of phony loan offers.

In 2014, the Ohio Attorney General’s Office received more than 200 complaints about advance-fee loans or credit cards, including many potential scams. The average reported loss was approximately $500.

“In a typical loan scam, you find a loan for $1,000 to $5,000 but the lender says you have to pay hundreds of dollars upfront to prove that you’re trustworthy,” DeWine said. “You send your own money but you don’t receive anything in return. If you have to send money in order to get money, it’s likely a scam.”

Several Ohio consumers reported losing more than $2,000 each after trying to obtain a loan online. The consumers were told they were approved for loans but first had to pay advance fees using prepaid cards or money transfers. Although the consumers provided the payments, they never received the loans.

Scam lenders use various phony reasons to explain why consumers must make upfront payments, such as:

• To prove the consumers can make the monthly payments;
• For processing fees, taxes, or insurance;
• To compensate for a low credit score;
• For closing costs or bank fees; or
• To secure the loan.

The initial fee in a loan scam is not the same as a down payment or other cost associated with a legitimate loan. Scam lenders do not check consumers’ credit history; they just promise a loan in exchange for advance payment.

To protect themselves from scams, consumers should check for complaints with the Ohio Attorney General’s Office and Better Business Bureau. They also should be skeptical of lenders that ask for payment via money transfer or prepaid money card. These are preferred payment methods for scam artists, because once the money is sent, it is difficult to trace or to recover.

Consumers who believe they have been treated unfairly or who need help detecting a scam should contact the Ohio Attorney General’s Office at www.OhioAttorneyGeneral.gov or 800-282-0515.

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What are the basic requirements to qualify for a payday loan?

A:

Payday loans, also known as cash advances, are short-term, low-balance, high-interest loans typically at usury rates that are so-named because of a tendency for the funds to be borrowed on a post-dated check that is cashed on the borrower’s upcoming payday. These loans are designed to be quick and easy and generally have very limited qualification loan requirements.

Per the Consumer Financial Protection Bureau, or CFPB, most payday lenders only demand that the following conditions be met for a person to qualify for a loan: borrower must have an active checking account; borrower must provide some proof of income; borrower must have valid identification; and borrower must be at least 18. The qualification and loan application process can be as fast as 15 minutes if you can quickly show you meet all of the requirements. In most circumstances, the borrower writes a check for the loan amount plus a lending fee, and the lender holds onto the check until a predetermined due date.

Qualifying loan amounts vary depending on the borrower’s income and the payday lender, although most states have laws establishing maximum payday loan amounts. Some states even limit the ability of borrowers to have multiple outstanding payday loans in an attempt to keep consumers from borrowing large amounts at extremely high interest rates.

Loan requirements should not be the only consideration if you are thinking about a payday loan. In terms of annual percentage rates, or APR, it is not uncommon for payday loans to exceed 500% or even 1,000%. Even though business models and regulations limit the size and duration of payday loans, these types of loans are still an expensive alternative and should be undertaken with care.

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Warning over legal logbook loans

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The Citizens Advice service is warning people about taking out high-cost credit such as logbook loans, in which a vehicle is used as security.

Under current laws a logbook loan is attached to the vehicle, not the person who has taken out the credit.

Citizens Advice says the number being taken out rose by 35% between 2011 and 2013.

Even if you didn’t take out the cash yourself, you could still get into trouble for not repaying it.

Newsbeat has been given exclusive figures which show nearly two thirds of young people who called Citizens Advice “in serious debt” had turned to a form of high-cost credit.

‘I was seeing red’

Paul Brewin, 25, bought his car for £1,000.

“As soon as I saw it I fell in love instantly,” he told Newsbeat. “It was exactly what I was looking for.”

He took out a vehicle history check which can identify if there is any outstanding finance, or if the car has ever been stolen, written off or clocked.

Some include a guarantee, valuation and mileage information too.

“I did a check that cost around £3,” he said. “It said the car was clear.

“I should have taken out the £30 check because these logbook loans don’t show up on the small check you have to get the big one.”

There are different types of vehicle history checks you can make. Some are cheaper than others and don’t always pick up on all types of finance.

Paul says a few weeks after buying the car a logbook loan company got in touch.

He said: “I got a few letters come through the door saying, ‘We’ve come today looking for this vehicle or payment’.

“I was seeing red. I had steam coming out of my ears.

“I’ve gone and paid for a car and I’m now being told it’s not mine.”

The car wasn’t his because the previous owner had taken out a logbook loan, which allows drivers to borrow money against the value of their vehicle.

A logbook loan is similar to a payday loan and both are advertised online offering fast cash, with few credit checks.

A logbook loan has a typical APR of around 400%.

A Freedom of Information request to the HM Courts and Tribunals Service in 2011 by The Citizens Advice Bureau found there were 36,829 Logbook loans sold.

In 2013 this went up to 49,745.

The Bureau says it expects this to go up further in 2014.

James Plunkett is head of consumer research and campaigns for Citizens Advice.

“One of the worries about these forms of credit is you get locked into a cycle,” he said. “People are taking out more loans to pay off their old ones.

“Over time because the interest is so high on these loans they really add up.”

These logbook loans are just one of a number of different high-cost credit loans citizens advice are warning people about.

They say young people are particularly drawn to high-cost credit.

They analysed 3,000 calls they received from 17 to 24-year-olds between July and September 2013.

Each was classed as in “serious debt” because they had more than one loan.

Of these, two-thirds said they needed help after taking out high interest credit.

More than one-in-three people in this age group asking for help were in full-time work.

James Plunkett believes young people are more likely to take out high-cost credit.

“They’re very accessible,” he said. “You can even get them through your mobile phones.”

The law commission is carrying out a consultation on forms of “book debts” which include logbook loans.

Recommendations aimed at giving consumers better protection will be published in 2016.

Follow @BBCNewsbeat on Twitter and Radio1Newsbeat on YouTube

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Beware online payday loans | Money – WISN Home

Payday loans of any kind have never had a good reputation, but a new report finds that loans obtained online are even worse than their storefront counterparts.

Lenders found on the Internet often charge much higher fees, put consumers deeper in debt and are more likely to use threatening and harassing tactics, according to a survey from Pew Charitable Trusts. The nonprofit called nearly 50,000 people, identifying 252 online borrowers and 451 in-store borrowers for its survey.

Payday loans are small loans with high fees that are advertised as a way for people to make it until their next paycheck arrives. They’re available from physical payday loan stores, but they are also becoming increasingly prevalent on the Internet. And while online payday loans account for only a third of the market, nine out of 10 complaints made to the Better Business Bureau are about online lenders, according to Pew’s analysis.

Many complaints concern the abusive tactics these companies use to get their money. About 30% of online payday borrowers said they have received at least one threat. Nineteen percent of respondents who took out a loan online said they were threatened with arrest, versus only 7% of consumers who borrowed in-store. And 20% were told that the lender would contact their employer about the debt — compared to 7% of storefront borrowers.

Online lenders are also more likely to make unauthorized withdrawals from consumer’s bank accounts, with 32% of respondents saying this has happened to them. Another 46% reported that their account has been overdrawn by a payday loan withdrawal, and 22% say they have had a bank account closed as a result.

Meanwhile, 39% of consumers believe that their information — like personal details and bank account information — was sold to a third party.

On top of all that, online payday loans come with APRs ranging as high as 700%, while in-store lenders generally have rates around 300%.

Online lenders get away with these practices because, as online entities, they often claim immunity from individual state laws, says Pew. That’s why Pew and other consumer advocates are calling on federal regulators like the Consumer Financial Protection Bureau to introduce rules that apply to all payday lenders — storefront and online alike.

“Abusive practices in the online payday loan market not only exist but are widespread,” said Nick Bourke, a project director at Pew. “State and federal regulators have taken steps to rein in fraud and abuse, but they need to do considerably more to keep borrowers from being harmed or further entrenched in unaffordable debt.”

The Online Lenders Alliance defended the industry, saying that while there may be some “bad actors,” there are also many ethical companies that are trying to help consumers. The industry group said it encourages federal laws, but points out that there is a growing demand for credit that still needs to be met.

“Consumer advocates and industry should work together to encourage federal laws and rules that preserve access to short-term credit, encourage innovation, and protect consumers from the bad actors who would defraud them,” it said in a statement.

[…]

Beware Of Payday Loans – Investopedia

Sometimes people get in a severe cash crunch and desperately need to raise money quickly. It could be an emergency car repair, a check that bounced, a bill that absolutely must be paid – in a month when they’re maxed out on their credit cards. That’s when it’s easy to stumble into the not-so-hidden world of payday loans.

What is a payday loan, exactly? Payday loans are loans that are given out for relatively small amounts of money (usually less than $1,000) for short periods of time. The idea behind a payday loan (also know as a “cash advance” or a “check loan”) is that it gives you some cash to tide you over until the next payday, with the idea that you will use your future paycheck to pay it off.

Payday loans usually require access to your checking account to deposit the loan and later to access the repayment funds. They are a way for people with poor credit (or no family or friends they want to tap) to gain quick access to cash in a pinch – it usually only takes a few hours to a few days to get the loan approved.

Despite the speed of getting funds in an emergency, payday loans are not a good financial decision for many reasons.

Consider the Cost

First, the annual percentage rate (APR) on payday loans can be as high as 2100% (yes, you read that number correctly). For reference, the highest APR allowed for credit cards is 29.99%. When borrowing money, you should always borrow from the source with the lowest APR possible; this will decrease the amount you pay in interest.

Figuring out the amount of interest you are paying isn’t always so clear. For one thing, an APR is calculated on a yearly basis. A typical payday loan lasts one to four weeks, and the cost is not given to you in annual terms. In fact, payday lenders may refer to the cost of borrowing money as a “fee” rather than as interest, which makes it seem like it is something you have no control over. Comparing apples to oranges masks how much you are paying for a payday loan compared to other sources of money, such as credit cards.

How They Work

Here’s how a payday loan works: You pay a “fee” for borrowing money at a set rate. This fee is usually between $15 and $30 for every $100 loaned. This sounds reasonable – just 15% to 30% – but because it is for a short period of time it is actually much higher than a credit card charge for the same amount. If payday comes around and you can’t afford to pay off the original loan plus the fee, you can “roll over” the loan … for another fee. This can snowball expenses for the consumer. The goal of a payday loan enterprise is to keep making money – lots of it.

According to the Consumer Finance Protection Bureau, 82% of loans are rolled over within 14 days, and half of all borrowers end up paying more in fees than they originally borrowed.

To make things worse, if the borrower provided a bank account number to the lender, the lender will make an automatic withdrawal of the amount owed, sometimes in multiple withdrawals with a fee for each withdrawal. If the money isn’t in the account, you pay the rollover fee and you also pay bank overdraft fees.

Legal Dangers

There are many loopholes in the payday loan business and few protections for consumers. Many states set limits for loan rollovers, but don’t limit opening a new loan on the same day that the old loan is paid off. Some states have a 24-hour waiting period for new loans, and some states have no restrictions whatsoever.

Members of the U.S. military have some protection under the Military Lending Act. Active duty military members, their spouses and some dependents have an APR cap of 36%, and they are protected from paying more fees due to rollover charges.

While there are still many brick-and-mortar payday loan centers, many payday loan operations have moved online. This has opened up many opportunities for scams that can be difficult to recover from. If you think you are the victim of a payday loan scam, contact the Consumer Finance Protection Bureau to file a complaint.

Alternatives to Payday Loans

While the prospect of quick cash for a fee may be appealing, it is almost never worth the risk of being caught in the payday loan trap. Although some websites advertise payday loans as a way to build your credit, it is an expensive and risky route to take. Before taking out a payday loan, ask yourself: “If I can’t afford my expenses with my current paycheck, is there any reason I will be able to pay back a loan plus fees – and cover my normal expenses – when I get my next paycheck?”

If the answer is no, consider some alternatives to a payday loan:

As already mentioned, credit card interest rates are lower than you’d pay for a payday loan. If you have access to credit or credit card cash advances, choose those resources over payday loans. See if you can open a new credit card or increase your limits on current cards.See if you can get a small loan from a bank or credit union. Small and short-term loans have become more common as banks and credit unions provide alternatives to payday loans for their customers.For fast cash, try selling some of your belongings or pick up a side job (even a night of babysitting may tide you over). See Make Money Fast From The New ‘Sharing Economy’ for some other ideas.If you routinely find yourself unable to make your funds last until the next paycheck, make a budget and decrease your expenditures.To avoid getting in a pinch in emergencies, build an emergency fund so you won’t have to take out loans for unexpected expenses.If you already have a payday loan, get overdraft protection on your bank account.The Bottom Line

Payday loan borrowing can be an expensive cycle that is difficult to break. The industry is designed to take advantage of people with limited resources, and the consequences of taking out a payday loan can be many times more costly than the initial expense. If you are in debt and struggling to make ends meet, consider getting financial counseling to find a way out of your tight circumstances.

[…]

Payday lender ACE Cash Express is hit with a $10M fine


Payday lender ACE Cash Express is hit with a $10M fine

28th July 2014 · 0 Comments

By Charlene Crowell
NNPA Writer

(NNPA) – For the second time in as many years, the Consumer Financial Protection Bureau (CFPB) has fined a major payday lender. On July 10, Director Richard Cordray announced that one of the nation’s largest payday lenders, ACE Cash Express, will pay $10 million in restitution and penalties for directing its employees to “create a sense of urgency” when contacting delinquent borrowers. This abusive tactic was used to perpetuate the payday loan debt trap.

CFPB has ordered ACE Cash Express to provide consumers with $5 million in refunds and the same amount in penalties for its violations. The firm operates in 36 states and in the District of Columbia with 1,500 storefronts, 5,000 associates and online loans.

“We believe that ACE’s aggressive tactics were part of a culture of coercion aimed at pressuring payday borrowers into debt traps,” said Cordray. “Our investigation uncovered a graphic in ACE’s training manual that lays out a step-by-step loan and collection process that can ensnare consumers in a cycle of debt. When borrowers could not pay back their loans, ACE would subject them to illegal debt collection threats and harassment.”

Commenting on CFPB’s actions, Mike Calhoun, president of the Center for Responsible Lending, said, “This enforcement action also confirms what our research found long ago: payday lenders depend on keeping vulnerable consumers trapped in an endless cycle of debt of 300-400 percent interest loans. . . .It’s real, it’s abusive and it’s time to stop.”

CRL research shows that payday loans drain $3.4 billion a year from consumers. Further, CRL has long held that the payday industry preys on customers who cannot repay their loans.

Now, with CFPB releasing an item from ACE Cash Express’ training manual, that contention is proven to be true. The ACE graphic shows how the business model intends to create a debt cycle that becomes increasingly difficult to break and urges its associates to be aggressive.

Across the country, the South has the highest concentration of payday loan stores and accounts for 60 percent of total payday lending fees. Missouri is the only state outside of the South with a comparable concentration of payday stores.

Last year, another large payday lender, the Fort Worth-based Cash America International, faced similar enforcement actions when CFPB ordered it to pay $5 million in fines for robo-signing court documents submitted in debt collection lawsuits. Cash America also paid $14 million to consumers through one of its more than 900 locations throughout the United States, Mexico and the United Kingdom.

On the same day that the CFPB’s enforcement action occurred, another key payday- related development occurred.

Missouri Gov. “Jay” Nixon vetoed a bill that purported to be payday reform. In part, Gov. Nixon’s veto letter states, “allowing payday lenders to charge 912.5 percent for a 14-day loan is not true reform. . . Supporters point to the prohibition of loan rollovers; but missing from the legislation is anything to address the unfortunately all-too-common situation where someone living paycheck-to-paycheck is offered multiple loans by multiple lenders at the same time or is encouraged to take out back-to-back loans from the same lender. . . .This bill cannot be called meaningful reform and does not receive my approval.”

Speaking in support of Gov. Nixon’s veto, Pastor Lloyd Fields of Kansas City added, “The faith community applauds Governor Nixon’s moral leadership in holding lawmakers to a higher standard on payday lending reform. Missourians deserve nothing less.”

On the following day, July 11, the Federal Trade Commission (FTC) fined a Florida-based payday loan ‘broker’ $6.2 million in ill-gotten gains. According to FTC, the firm falsely promised to help consumers get payday loans. After promising consumers to assist them in securing a loan in as little as an hour, consumers shared their personal financial data. However that information was instead used to take money from consumers’ bank accounts and without their consent.

Speaking on behalf of the FTC, Jessica Rich, director of FTC’s Bureau of Consumer Protection, said, “These defendants deceived consumers to get their sensitive financial data and used it to take their money. The FTC will continue putting a stop to these kinds of illegal practices.”

Looking forward, CFPB’s Cordray also sees a need to remain watchful of payday developments.

“Debt collection tactics such as harassment and bullying take a profound toll on people – both financially and emotionally”, said Cordray. “The Consumer Bureau bears an important responsibility to stand up for those who are being wronged in this process.”

This article originally published in the July 28, 2014 print edition of The Louisiana Weekly newspaper.

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