The payday loan industry is “under siege,” as Lauren Gensler writes for Forbes (“CFPB Moves Against Payday Loan Industry“). To say the payday loan industry is “under siege” is an expression a Forbes writer would use. ACE Cash Express will probably continue to do just fine, despite the $10 million the Consumer Financial Protection Bureau wrangled out of ACE over the firm’s abusive debt collection practices.
According to the CFPB, the firm “used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt. This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back.”
Payday loans are notorious. The journalist Barbara Ehrenreich’s book Nickel and Dimed detailed the everyday experiences of the working poor, including the many hidden costs associated with low income. One of those hidden costs are payday loans, which can be used to make ends meet, but come with very high interest rates.
Gensler quotes the Center for Responsible Lending: “Payday loans are designed to create a debt trap. They are marketed as a quick financial fix, but in reality leave people in a worse financial position than when they started.”
As Gensler reports, the payday loan industry is an estimated $3 billion annual market. Like we said above, ACE’s $10 million payment for abusive debt collection isn’t likely to put them out of business – but it might be cause for them to change their ways.