Since the beginning of the year, powerful financial firms that provide high-cost, short-term loans to poor Americans have blocked at least five federal investigations into their business practices, as part of a broad and aggressive campaign by payday lenders to weaken or eliminate their chief watchdog agency in Washington.
The investigations have mostly stopped due to an industry-led lawsuit against the Consumer Financial Protection Bureau, which is now before the Supreme Court – even as low-income borrowers ask regulators to crack down on alleged predatory lending.
Short-term lenders, which provide a wide range of loans to low-income Americans with poor credit, urgent financial needs, and few other options, are at the center of the dispute. The loans frequently have punishing payback terms and yearly interest rates in the triple digits, leaving some of the most vulnerable customers with sky-high bills they cannot afford.
The CFPB has received complaints regarding such methods for many years. However, companies that provide short-term or payday loans, such as Ace Cash Express, Advance America, Advance Financial, and Check ‘n Go, have been staunchly opposed to government regulation. Some of the same companies have also backed a lawsuit challenging the CFPB’s future, which might result in the nation’s highest court ruling that the agency’s funding system is illegal.
The legal uncertainty has proven especially useful to lenders facing government action. According to a Washington Post study of federal court records and interviews with government and business executives, several companies have effectively referenced the pending Supreme Court decision to slow down current CFPB investigations or fight off the agency’s recent fines. Meanwhile, top loan executives have given handsomely this year to Republican politicians and presidential candidates who have previously said they would limit, if not destroy, the agency.
For example, in July 2022, the CFPB sued Populus Financial Group, the operator of Ace Cash Express, charging that it misled consumers about its lending practices. The government stated in the complaint that the Irving, Texas-based corporation concealed possibilities for free repayment plans from customers trying to meet enormous monthly expenses, while Ace allegedly pocketed at least $240 million in fees.
The CFPB tried to penalize Ace for the second time, after ordering it in 2014 to cease directing customers toward new loans to pay off earlier obligations. However, Populus Financial Group’s lawyers rejected the most recent charges in court: Citing the industry’s lawsuit against the CFPB, the company urged a judge to dismiss the case last September, claiming that “the days of the bureau’s unchecked administrative agency power… are, hopefully, over.”
Three months later, the lawsuit was halted by a judge, who issued a stay until the Supreme Court could rule on the agency’s future.
“They are moving in several ways at once to eliminate the cop on the beat — or the effectiveness of the cop on the beat — to keep people from being trapped in unaffordable debt,” said Ellen Harnick, executive vice president of the Center for Responsible Lending, a nonprofit that has advocated for the agency.
Many of the corporations linked to recent government investigations or engaged with CFPB action did not reply to requests for comment or declined to comment. Populus Financial’s counsel referred to a previous statement in which the company criticized the government for filing a “baseless lawsuit.” At the time, the firm emphasized the popularity of its loan products, adding, “Unfortunately, the CFPB has left ACE with no choice but to litigate and defend itself against these unjustified claims.”
Advance Financial’s chairman, Michael Hodges, said he couldn’t comment on an ongoing litigation. CNG Holdings executives, Check ‘n Go’s parent business, did not reply to calls for comment.
Jessica Rustin, CEO of Purpose Financial, Advance America’s parent business, said clients “generally appreciate what we have to offer,” adding that the case against the CFPB is “about holding the bureau accountable.”