PORTLAND — The federal Consumer Financial Protection Bureau this week reached a $10 million settlement with payday lender ACE Cash Express over the company’s illegal debt collection methods.

People who took loans from the company and were subject to its debt collection efforts may be eligible for a refund from a pool of $5 million. ACE also will pay $5 million to a federal consumer protection fund used to compensate victims of consumer protection law violations and to support education and financial literacy programs.

The federal consumer watchdog found that ACE, which has locations in Portland and Brunswick, expected loan recipients to enter what it called a “cycle of debt,” wherein borrowers defaulting on the short-term, high-interest loans were contacted to refinance or extend the loan term.

That finding was based on a key piece of evidence presented in the federal settlement with ACE in the form of a training diagram, titled “ the loan process,” that the company used for new hires. The diagram depicted a lender taking out a loan, being unable to pay, increasing their debt through refinancing or extending the loan, which then entered collections.

At that point, the Consumer Financial Protection Bureau said ACE employees used unfair, deceptive and abusive practices to collect its debt, including threats to sue the debtor, to charge extra fees and report debts to credit reporting agencies. The firm also was accused of making inappropriate collections calls to borrowers, their employers and relatives.

The Consumer Financial Protection Bureau found in its first research report issued in March that more than 80 percent of payday loans are rolled over or followed by another loan within two weeks, the typical payback period for those types of loans.

“At the Bureau, we remain concerned that short-term payday loans can turn into long-term debt traps that leave consumers worse off,” said Richard Cordray, Consumer Financial Protection Bureau director, in a prepared statement Thursday.

ACE said in a statement that it has since changed its practices over the past two years by hiring outside legal analysts to monitor collections calls and making other changes within its collections department. It admitted no wrongdoing in the consent order.

The consent order reached between the Consumer Financial Protection Bureau and ACE sets out a 60-day timeline for the Irving, Texas-based lender to submit a compliance plan outlining how it will change its debt collection practices and stop pressuring borrowers to enter the “cycle of debt” by taking out new loans to pay off overdue debts.

According to the Consumer Federation of America, 18 states and the District of Columbia have prohibitions on high-interest payday loans. Maine is one of five states that permit loans based on future paychecks, but with a limit on the interest that may be charged. That limit is 30 percent, but the Consumer Federation of America reports tiered fees allowed in Maine can bring the annual percentage rate as high as 261 percent for short-term consumer loans.