Lender to pay $10 million

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David Minton/DRC
A customer leaves the Ace Cash Express store on University Drive in Denton on Thursday.

Feds accused Ace Cash Express of illegal debt collection practices

Ace Cash Express has agreed to pay a total of $10 million as part of a consent order obtained by the federal Consumer Financial Protection Bureau.

The bureau accused the Irving-based payday lender of using illegal debt collection practices to pressure overdue borrowers.

“Ace used false threats, intimidation and harassing calls to bully payday borrowers into a cycle of debt,” bureau director Richard Cordray said Thursday. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”

Ace Cash Express sued the city of Denton in July 2013 over its ordinance that regulates payday and title lenders locally. Ace filed after a trade group representing payday and title lenders dropped its lawsuit against the city.

Last year, Denton adopted an ordinance that requires the businesses to set up a customer’s loan repayments in no more than four installments, each of which must pay down 25 percent of the loan amount. The city also limits the renewals of those loans meant to be repaid in a lump sum to three renewals, and the proceeds from each renewal must pay down at least 25 percent of the original loan.

A Denton Record-Chronicle investigation last year found payday and title lending locations proliferating near the city’s poorest neighborhoods. Most of the storefronts had opened in the last decade, including the two Ace locations. Fourteen of the 39 businesses opened in the last five years, and half of those had been operating in the city a year or less.

In response to community concerns, the Denton City Council adopted new rules in March 2013 similar to ordinances that had been passed in Austin, El Paso, Dallas and San Antonio.

Attorneys for Ace claimed that the city exceeded its authority under the state constitution and that the ordinance likely will harm the company’s business. According to court documents, attorneys said that Ace lost so much business in Dallas after the city passed a similar ordinance that the company had to close some stores. In the petition, the attorney wrote the company expected to have to close stores in Denton, too.

Both Denton locations, one on University Drive and one on Loop 288, remain open.

A Denton district judge ruled in April that the court lacked jurisdiction in the case. Attorneys for Ace wrote the district judge a letter stating that changes the city made recently to its ordinance showed the court may well have had jurisdiction. The company and its attorneys appealed the decision to the state 2nd Court of Appeals.

Currently, 28 Texas cities have passed new ordinances for payday and title lenders either through business or land use regulations, according to the Texas Municipal League. Court cases against the Dallas, Austin and San Antonio ordinances are also pending.

The $10 million Ace has agreed to pay will consist of $5 million in borrower refunds and a $5 million fine for the violations, the bureau said.

“We are proud of our company, the value we deliver to our customers, our nearly 5,000 associates and the more than 40 million customer visits over the past 12 months,” said Ace Cash Express chief executive officer Jay B. Shipowitz. “We settled this matter in order to focus on serving our customers and providing the products and services they count on.”

The company said in response to the bureau’s concerns, it hired Deloitte Financial Advisory Services LLP to review a “statistically significant” random sample of Ace collection calls and found that more than 96 percent of the calls during the review period “met relevant collections standards.”

PEGGY HEINKEL-WOLFE can be reached at 940-566-6881 and via Twitter at @phwolfeDRC.


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