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Payday Loan Program Halted

October 30, 2002|From Reuters

WASHINGTON — U.S. bank regulators on Tuesday announced a settlement, including $325,000 in penalties, with ACE Cash Express and the parent of California-based Goleta National Bank over "unsound" payday-lending practices.

ACE makes and collects payday loans for Goleta in 18 states. ACE, in a settlement with the Office of the Comptroller of the Currency, agreed to end its payday-lending business through Goleta. It also promised not to provide payday lending through any national bank without the comptroller's approval.

In a typical payday loan, a borrower writes a postdated check to the lender, to be cashed on the borrower's next payday, and walks out with cash. The loans have been highly lucrative for many of the lenders because of the rates and fees charged.

The comptroller's office said its action was prompted in part by ACE's handling of hundreds of customer loan files, which were thrown into a Portsmouth, Va., trash dumpster in August.

ACE agreed to pay $250,000 in penalties, and Goleta's parent, Community West Bancshares of Goleta, Calif., agreed to pay $75,000.

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