When Ace Cash Express announced it would stop doing business in Maine on July 11, reactions were mixed.
Consumers who depended on payday loans from the firm wondered where else they might get needed cash. The Maine People’s Alliance cheered, charging Ace was just like all other payday lenders, keeping needy people in a circle of debt. Regulators were unsure whether the unknown that lies ahead might be more troubling than the present we know.
Ace, which had stores in Portland and Brunswick, is shrinking its presence nationwide. This follows a $10 million settlement last July with the federal Consumer Financial Protection Bureau, or CFPB. The bureau had found evidence the company used harassment and false threats of prosecution or imprisonment, among other illegal tactics, to pressure overdue borrowers to take out more loans.
When they’re approved for the loan, borrowers usually hand over a check for the loan plus interest; the lender holds it until the borrower’s next payday. If the borrower can’t repay, the loan can be rolled over with another interest charge tacked on.
In Maine, Ace was charging $15 to borrow $150 and $25 to borrow $250 for up to one month. The average annual interest rate of payday lending in Maine is 217 percent, according to a study by the Pew Charitable Trust. Rates in other states can go much higher, so Maine is not a prime target for payday lenders.
William Lund, superintendent of Maine’s Bureau of Consumer Credit Protection or BCCP, said Ace operated within the law. He said the company is allowing consumers with outstanding loans to set up installment payments to settle their debts. Lund says, when the state had questions, Ace was reachable and responsive.
In 2014, the CFPB did a study of the payday loan industry. Among its findings: the majority of borrowers renew their loans so many times that they end up paying more in interest than the amount of the original loan.
CFPB plans to release new rules this fall affecting payday lenders, regulation that has until now been left largely to the states. The Maine People’s Alliance, which organized a small rally last Thursday in Portland, wants CFPB to pass strong rules covering car title loans, installment payday loans and online loans as well as traditional payday loans.
Jamie Fulmer is a spokesman for Advance America, the largest U.S. payday lender. He wrote in a recent op-ed that federal officials “do little to understand why millions of Americans choose these loans over other similar products, or what would happen if that choice was taken away.” Fulmer argued that if the new rule affects only payday lenders and ignores other sources of short-term credit, “people will be forced into higher-priced and lower-quality services.”
Lund says his staff would much sooner deal with the storefront lenders who have a brick-and-mortar presence; the online lenders who offer contact only by email are much tougher to regulate.
“Every single day we hear from Maine consumers who are being threatened with illegal collection tactics,” Lund told me.
Since neither consumers nor regulators can readily locate the tough talkers, many of them keep gouging the people they had promised to help.
The CFPB says its rules will require lenders to take steps to make sure consumers can pay back their loans. CFPB Director Richard Cordray said, “These common-sense protections are aimed at ensuring that consumers have access to credit that helps, not harms them.”
After a review panel looks over the rules, they could take effect sometime this fall. In Maine the maximum fee for a payday loan of $500 or more is $25. Unlicensed, unscrupulous lenders may charge much more. Find a list of licensed lenders at the BCCP website at Credit.Maine.gov, click “list of license types” and select the payday lender list, or call 1-800-332-DEBT-LAW (1-800-332-8529).
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email firstname.lastname@example.org.