Assistant Attorney General Vince Rabago filed suit against payday lender Quik Cash Friday. The company is one of the largest publicly traded payday lenders in the country. If anyone harbors illusions about payday lenders acting in a consumer-friendly way, this suit should put those fantasies to rest.
When Quik Cash went after customers from all over the state who couldn't repay their loans, it often sued them in the Pima County Justice Court. There are two big problems with that.
First, from an ethical standpoint, when you sue people hundreds of miles from where they live (some even lived in Nevada and got their loans in Bullhead City, AZ), that makes it almost impossible for them to attend the court date and defend themselves. According to Rabago, there were over 100 default judgments for Quik Cash in 2008 alone, many simply because the people being sued had no way to get to court.
The second problem is -- and this is the one the A.G. is going after -- it's illegal. Quik Cash promised to abide by Arizona law, which requires that lawsuits under $10,000 be filed near where the defendant lives or where the loan was granted. (The term for this violation is "distant forum abuse.")
Arizona has about 38 Quik Cash stores and accounts for about 8% of the company's revenues. The suit could add up to $5 million dollars in penalties for Quik Cash, which doesn't seem to me to be nearly enough to pay for their outrageous, deceptive practices. It would also wipe out the judgments against hundreds of people Quik Cash took to court and shut down its businesses in the state.
Rabago filed a temporary restraining order against Quik Cash to stop it from suing any more defendants far away from their homes until the suit is decided. According to Rabago, a company will often do what it can to stall an order like that from taking effect, but when it saw the witnesses Rabago had, it went along with the restraining order without much of a fuss. The company was trying to fight the restraining order, according to Rabago, but he convinced the company to back down. [Note: I originally reported the events incorrectly and have corrected it. I regret the error.]
Rabago related two interesting side stories to me. One was, in Wisconsin, the company was found to have engaged in "outrageous conduct" when it cashed the check of a debtor when he was in bankruptcy. You can't do that.
The other was, the President of the company was the head of the payday lenders' trade association during 2008 when the "distant forum abuse" problems were happening in Arizona. He was the smiling face of the industry, assuring people that payday loans are a fair and reasonable way for individuals and families to get small loans to carry them through hard times.
By me, we can't get rid of these scoundrels soon enough. Unless the Republicans figure out a way to block the sunset law that is scheduled to shut the state's payday lenders down, we should be rid of all of them sometime in 2010. Meanwhile, if the suit chases one payday lender out early and gets some money back into the hands of people it ripped off, that's icing on the cake.
UPDATE: Howard Fischer has written an article with more details.
Terrific work Vince. These predatory lenders need to be stopped.
Posted by: Carolyn Classen | December 05, 2009 at 06:00 AM
It is amazing to me to note the contradictory positions of our "conservative" and "fundamental religious" friends. If you are religious and read my bible, the Five Books of Moses, there are frequent mentions of the evils of usury and pay day lending can only be defined as usury! There should be a law against usury and in many places there is/are laws prohibiting interest rates that are punitive. I would suggest that if we are truly interested in helping people who are down on their luck and need help, the model of the Hebrew Free Loan would be worth emulating in our communities! Google it and learn how those truly interested in helping their fellow citizens found a system that worked!
Posted by: www.facebook.com/profile.php?id=650716868 | December 06, 2009 at 01:59 PM