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Op-Ed: New Jersey Must Cut Links to Unscrupulous Payday-Loan Company

State’s public pension fund has $50 million stake in high-interest lending firm that’s banned in NJ

adam deutsch
Adam Deutsch

New Jersey maintains a statute that prohibits payday-lending companies from operating within the state. Despite this prohibition, a recent article published by Fortune.com revealed that New Jersey’s public pension fund has invested $50 million in a private equity fund that owns Ace Cash Express Inc., a company that is prohibited from conducting business in New Jersey.

It is unethical for the state to fund its pensions from the profits of an unscrupulous company that is prohibited from conducting business within the state. The Division of Investments should immediately divest from the private fund managed by JLL Partners and instead invest in companies that reflect the social and moral landscape of the state.

By virtue of the investment, the New Jersey State Investment Counsel is part owner of Ace, the second-largest payday lending company in the United States.

Lenders in New Jersey are prohibited from charging an APR in excess of 30 percent. According to Fortune, Ace’s loans typically carry an APR ranging from 65.35 percent to 1,409.36 percent, in addition to an origination fee.

The company operates in 36 states, choosing not to do business in states that impose interest rate caps below 50 percentage points. The high interest rate leads to profits for investors, but a cost for the public and consumers doing business with companies like ACE.

The Consumer Financial Protection Bureau (CFPB) investigated Ace’s lending practices. In July 2014, Ace entered into a consent order acknowledging that it had acted in violation of the Consumer Financial Protection Act of 2010.

According to the settlement, loans issued by Ace have a two-week repayment period and consumers are typically forced into a cycle of refinancing loans to avoid default.

Ace also acknowledged using inappropriate collection techniques including repeated calls to non-debtors demanding payments, calling third-party references and disclosing information about debtors, and encouraging its collectors to make illegal threats if debtors did not pay immediately.

Ace also admitted training its collectors to push borrowers into a debt spiral by convincing borrowers to refinance existing debt and pay new fees instead of paying off existing loans.

It is inappropriate for the state to own an equity share of a company that is prohibited from doing business in New Jersey and has acknowledged violating federal law. New Jersey’s return on investment of approximately 11 percent does not justify profiting from a company that the state views as morally irresponsible.

The state should immediately withdraw its investment from the JLL Partners fund that owns Ace.

The money should instead be invested in funds that exclude interests in companies that are prohibited from doing business in New Jersey. This move is essential to show that New Jersey believes in its own future enough to invest in companies that flourish within the state.

Adam Deutsch is a senior associate attorney with Denbeaux & Denbeaux, Westwood. Deutsch is currently concentrating on consumer-rights litigation.

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