The CFPB’s Consent Order with ACE Cash Express, Inc.: The CFPB continued its focus on payday lending and, in the process, signaled a much broader expansion of its authority.
In the past year, the CFPB announced its intentions to focus on the payday lending industry, including its Spring 2014 Report
on the industry. The CFPB also has hinted at its willingness to use the UDAAP cloud of rights to enforce consumer finance laws beyond those laws’ express boundaries. The CFPB’s Consent Order
with ACE Cash Express, Inc. reflects the CFPB’s action on both of those intentions.
Generally speaking, the Consent Order alleges that ACE harassed debtors into agreeing to serial payday loans, resulting in “cycles of debt.” More specifically, the CFPB alleged that ACE used unfair, deceptive, and abusive practices (all of the arrows in the UDAAP quiver) when collecting ACE’s own debts and when employing third parties to collect debts. The Consent Order reflects allegations that ACE and its debt collectors falsely threatened to sue debtors or seek criminal charges against them if they failed to pay, falsely told debtors that ACE would charge extra fees and report non-payment to credit reporting agencies when ACE knew it did not do those things, and abused and harassed customers with excessive telephone calls to the debtor’s home, employers, and relatives. The CFPB specifically referenced an ACE training manual graphic that described how ACE could repeatedly enroll customers in short-term loans.
The Consent Order imposed a $5 million restitution remedy, to be refunded to affected consumers, and a $5 million civil penalty.
Lost in those numbers, however, is the fact that the CFPB charges (couched as UDAAP violations) essentially flow from the Fair Debt Collection Practices Act (FDCPA). That transformation is significant because the FDCPA itself would not apply to ACE as a creditor collecting debts on its own loans (with limited exceptions). The FDCPA has thus been expanded beyond its express statutory limits. The CFPB has similarly indicated its intention to use UDAAP authority to indirectly regulate auto dealers (who otherwise are beyond the Bureau’s reach) by charging indirect auto lenders with Equal Credit Opportunity Act (ECOA) violations based on the dealer’s
alleged interactions with customers.
The absence of clear limits on the Bureau’s UDAAP authority has been a source of contention since the Consumer Financial Protection Act was enacted. These issues bear close monitoring because it is becoming increasingly difficult to predict the limits of UDAAP exposure.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.