Payday Lenders Pay Up!

Aug 27, 2012 by

No to payday loansIf you’ve been following Money Counselor, you know how I feel about payday lenders. (See Reverse Bank Robbery, Banks Now Payday Lenders, and 3 Diamonds and a Dog #6.) So I found gratifying recent news from California where consumers have won a battle in the war against abusive lending practices.

If you’re a California resident and borrowed money from Money Mart or Loan Mart in the state during 2005-2007, you may have restitution of between $20 and $1,800 coming to you.

Consumer Protection Lawsuit

In 2007 San Francisco City Attorney Dennis Herrera’s office filed a lawsuit against payday lenders Money Mart and Loan Mart (and an affiliated out-of-state bank). The lawsuit alleged “wrongdoing stemm[ing] from the lenders’ marketing of short-term installment loans and oversized payday loans, usually targeted to low-income borrowers, at exorbitant and illegal interest rates.”

The Settlement

Though the suit originated with a municipal attorney’s office, the settlement that resolves the suit includes all residents of California. From a press release regarding the settlement:

California consumers who obtained short-term installment loans from Money Mart and Loan Mart from 2005 through 2007, and oversized payday loans from Money Mart and Loan Mart in 2005, may be eligible for restitution of most of interest, fees and finance charges they paid.

Also under terms of the settlement agreement, Money Mart and Loan Mart are required to forgive $8 million in other debt owed by California consumers.  In addition, the company will pay the City and County of San Francisco $875,000.

 Tracking Down Victims

Terms of the settlement require the payday lenders to hire an independent administrator to make “reasonable efforts” to contact all eligible claimants. But the City Attorney’s office is also working to spread the word before an October 01 deadline.

To file a claim or learn more, you may:

Good for San Francisco

I’m pleased to learn that San Francisco Treasurer Jose Cisneros has created three model programs to combat the sort of abusive, predatory lending practiced by many payday lenders. The typical defense offered by payday lenders is that they’re only filling a niche, that their services are needed by people banks decline to serve. In response, Cisneros’ Office of Financial Empowerment has sought to dry up demand for conventional payday loans by creating Payday Plus SF, Bank of San Francisco, and CurrenC SF:

Payday Plus SF is a City partnership with a number of San Francisco Credit Unions that offers borrowers alternative short term, small-dollar loans of between $50 and $500 at 18 percent APR or below, which are repayable over six to 12 months.  Loans are available to borrowers with low or no credit, and can help build a positive credit score.  Bank on San Francisco is a comprehensive partnership between the City, the Federal Reserve Bank of San Francisco, the nonprofit EARN, and more than a dozen financial institutions to offer accessible, entry-level checking account products and mainstream banking services for the estimated 15 percent of San Franciscans who lack a mainstream banking relationship.  CurrenC SF is a citywide initiative with the goal of achieving a fully electronic, paperless payday, helping to bring thousands of San Francisco households into the financial mainstream and reducing reliance on high-cost check cashing services.

Check out the Office of Financial Empowerment’s website to learn more about these services.

What About You?

Are any of you readers possibly eligible for restitution under this settlement? If you don’t live in California, have you heard of similar efforts underway in your state?

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