Driver Program Relies on Lender Fined by Feds

_{Editor's note: This story has been updated throughout to include a more detailed response from ACE Cash Express.}

The state is steering people who want to make cash payments on traffic violation surcharges to a payday lender that last week settled with a federal agency over illegal debt collection tactics.

“You may make cash payments at any ACE Cash Express location nationwide,” says a prominent note at the top of the Driver Responsibility Program's Frequently Asked Questions page.

Irving-based ACE Cash Express, one of the nation’s largest payday lenders, agreed to pay $10 million over allegations by the Consumer Financial Protection Bureau that it harassed and intimidated borrowers, pushing them into a cycle of debt. 

ACE takes issue with the characterization that it pushes borrowers into a debt trap. The company has said its policies don't allow delinquent borrowers to take out more loans until the previous loans are paid off.

Visiting ACE is one of several ways Texans can make payments under the Driver Responsibility Program — and the vast majority of payments are made by credit card, according to the Department of Public Safety. The program, created in 2003, requires drivers to pay annual surcharges on top of fines and legal fees attached to certain traffic violations. Failure to pay results in a suspended license.

“It’s preposterous that state policy funnels anyone to any predatory lender, much less one that’s been fined $10 million for using threats and harassment to intimidate borrowers,” said state Sen. Rodney Ellis, D-Houston.

Texans have options other than ACE for using cash to pay the surcharges — via Western Union or MoneyGram. But on the Frequently Asked Questions page, the only answer to the question “How do I pay with cash?” is ACE Cash Express. The web page, adorned with the Department of Public Safety seal, is run by the Municipal Services Bureau (MSB), a vendor hired by the state to collect payments for the state’s Driver Responsibility Program. There is a link to the page on the department’s site about the program.

ACE Cash Express — a subcontractor of MSB – has accepted surcharge payments since 2011, DPS spokesman Tom Vinger said. Of 225,481 payments processed through the program last month, 200,406 were credit card payments, and 3,555 were processed by ACE, Vinger said. MoneyGram processed 627 and Western Union processed 444, he said (other payment options include checks and money orders).

“There has not been an issue reported to DPS concerning ACE Cash Express regarding taking surcharge payments” for the program, Vinger said in an email.

But Ana Yáñez-Correa, executive director of the Texas Criminal Justice Coalition, said she’s worried that people who go to ACE to make a surcharge payment could get sucked into taking out a loan.

“This is very concerning to me,” she said. “I’m skeptical of anything that sends poor people to situations where they’re going to be taken advantage of.”

ACE said Thursday that of 2,116 customers who made Driver Responsibility Program payments at its stores in June, just seven also took out loans that month. The company also provided information from a national analysis it did in 2007 showing that 1 percent of customers who paid bills at ACE became short-term loan customers on the same day. That analysis followed a National Consumer Law Center report that found that "when utilities send their customers to pay bills in the storefronts of ultra-high-cost payday lenders, those customers — typically the most financially vulnerable — become targets for predatory loans." ACE said at the time that the report "relies on innuendo, anecdotes, and casual observations to make misleading conclusions."

In Texas, critics of the Driver Responsibility Program have concerns in addition to the ACE issue. Yáñez-Correa said she thinks it's time to do away with the program entirely.

Critics say the program unfairly penalizes poor Texans and requires drivers to face double punishment for a single offense. But lawmakers have rejected proposals to end it because it sends millions of dollars each year to state hospitals and trauma centers.

Under the program, drivers who receive minor tickets for speeding or car accidents aren’t automatically levied a surcharge, but a point system is used to punish repeat offenders. A moving traffic violation is 2 points, or 3 if it results in a crash. A driver who accrues 6 points must pay $100 per year for as many years as his or her driving record has at least 6 points (points stay on a record for three years). Other surcharges are more expensive. For example, certain driving while intoxicated convictions carry an annual surcharge of $2,000 for three years.

MSB charges fees for collecting the surcharges — a “service fee” of 4 percent of the surcharge amount, an “installment plan fee” of $2.50 for each partial payment, a credit card fee of 2.25 percent of a payment plus 25 cents, and an electronic check fee of $2 per payment.

Subcontractors like ACE charge customer fees on top of MSB's fees. Vinger provided information on amounts charged by subcontractors but asked Wednesday evening that those amounts be confirmed with MSB, which was not immediately able to provide that information on Thursday.

Vinger said it was his understanding that ACE charges 75 cents to process payments of $19.99 and under and $3 for a payment of $20 or more. An ACE store in El Paso contacted on Wednesday confirmed that it charges those amounts. Vinger said it was his understanding that MoneyGram and Western Union charge more than ACE does — $9.50 or more for a transaction. A MoneyGram customer service representative on Wednesday quoted fees of $9.99 to make a $10, $20 or $100 payment to MSB. A Western Union representative on Thursday quoted a fee of $5 for a $10 or $20 payment and $9 for a $100 payment. 

Lawmakers have been working since 2009 to improve collection rates and reduce the number of licenses suspended. Since the program began, more than $3 billion in surcharges have been levied, but just 43 percent of that has been collected. As of March, the Department of Public Safety had suspended the licenses of more than 1.4 million drivers because they failed to pay.

Last year, state Rep. Larry Gonzales, R-Round Rock, and four other state lawmakers unsuccessfully filed a bill to repeal the program. State Rep. Joe Pickett, D-El Paso, chairman of the Homeland Security and Public Safety Committee, has said he doesn’t envision the program being scrapped during the next legislative session.