Pennsylvania's Attorney General said Wednesday that an alleged bogus Web-based payday loan operation will shut its site and refund customers who were paying more than 600 percent interest on loans marketed as "rebates."
Ace Pays, Inc. will shutter its Internet site, pay $70,000 in fines and costs, and refund consumers the amount of interest paid above the maximum 6 percent allowed under Pennsylvania law, said Attorney General Tom Corbett and Pennsylvania Banking Secretary Bill Schenck.
According to state officials, Ace Pays advertised an "instant cash rebate" for up to $1,000 when consumers joined its membership program at acepays.com. E-mailed and print ads blared out lines like "GET THE CASH YOU NEED NOW!" and receive "UP TO $1,000 INSTANTLY."
To get the so-called "rebates," consumers had to sign up for a one-year membership supposedly offering discounts and deals on goods and services. The higher the membership level, the bigger the rebate, Corbett and Schenck said. At the highest level, the "rebate" was $1,000, but the every-other-week payments, withdrawn electronically from checking accounts, were $140. Investigators said that was the equivalent of an annual interest rate of 630 percent.
"It's clear that the web-based membership program was a ruse to engage in an illegal payday loan operation," Corbett said. "The so-called 'instant rebates' were nothing more than loans that had to be paid back, in some cases, at…exorbitant and illegal interest rates."
Consumers with gripes against Ace Pays have until Dec. 21, 2005, to file a complaint with the Pennsylvania Office of Attorney General, officials said.