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California Sues Payday Loan Business

August 2, 2006

Payday Lenders • Congress Moving Toward National Cap On Payday Loans • West Virginia Sues Online Payday Lenders • Senate Bill Would Rein in Payday Lenders • Virginia Considers Measure Aimed At Payday Lenders • Cash Today Hit with FTC Complaint • Payday Loans Can Lead to Bankruptcy • Pennsylvania to Require Licenses For Internet Payday Lenders • Bill Would Set National Limits on Predatory Lending • Payday Loan Lead Generators Settle FTC Charges • Tiny Virginia Town Stands Up To Payday Lenders • Payday Lenders Targeting Seniors • Payday Lenders Trumpet False Claims, Critics Charge • Pentagon's Predatory Lending Rules Faulted • Last Payday Lender Leaves West Virginia • Pennsylvania Class Action Challenges Payday Lender • Payday Lenders Fight Back in State Legislatures • Payday Lenders Fleece Consumers for $4.2 Billion A Year • Soldiers Pinned Down by Predatory Payday Loans • California Sues Payday Loan Business • North Carolina Declares Victory In War On Payday Lending • H&R Block To Settle More Payday Loan Suits • DOD: Payday Loans Affecting Military Readiness • States Want FDIC Crackdown on Payday Lenders • No Payday for Payday Lenders in Texas, New York • Payday Lenders Prey on African-American Neighborhoods • Payday Loan Report: Reform Needed • Illinois Warns of Payday Loans • Fast Cash Loans Charged with Illegal Practices • Cashback Payday Loans Banned in NY --- • Video: What is a Payday Loan? • Consumer Complaints

California Attorney General Bill Lockyer has filed a $2 million-plus lawsuit against Los Angeles County-based Fast Cash for violating a state law that prohibits payday loan businesses from suing for triple the amount of the check when customers' bank accounts do not hold sufficient funds to honor post-dated checks written to secure the loan.

"Fast Cash extorted outrageous amounts of money from its customers," said Lockyer. "They threatened lawsuits, tried to squeeze settlements, and, when that did not work, they deceived the court into a rendering a judgment. Fast Cash could have made a lawful living. Instead, they chose fear and deceit. We will continue ridding this industry of similar frauds."

The complaint, filed in Los Angeles County Superior Court, asks the court to permanently enjoin the business from further violating the law, void improperly obtained judgments, order full restitution to victims, and assess a civil penalty of not less than $2 million for unlawful business practices. Fast Cash may have accumulated improper judgments in excess of $350,000.

In most cases, state law authorizes a plaintiff to seek a penalty of treble damages, or three times the amount, against a person who writes a bad check. However, California law prohibits payday loan operations from collecting such damages, instead limiting them to the amount of the check and a single $15 fee. Further damages and fees are not allowed.

payday lenders are not entitled to treble damages because, unlike checks for goods or services, at the time a payday loan is written both parties understand the borrower's bank account often will not contain sufficient funds to honor the check. Therefore, the law only allows lenders a single late fee of $15 rather than the punitive treble damages award.

The complaint contends that Fast Cash, run by defendant Christoph Hoppe, illegally sued more than 400 individuals from the Los Angeles area in Los Angeles County Small Claims Court for treble damages for checks passed on insufficient funds.

Defendants threatened borrowers with a suit in order to obtain their agreement to pay back the loan plus treble damages, according to the complaint. When the defendants could not secure an agreement, Hoppe pursued the action in court but would not reveal that each of these checks was written pursuant to a payday loan transaction, the complaint states.

The vast majority of borrowers, the complaint claims, did not attend the small claims court hearings to inform the court of the nature of the transaction. Without complete information, the court ordered borrowers to pay treble damages, according to court records.

The complaint states that Hoppe used "unfair, fraudulent, unconscionable and unlawful means to collect or attempt to collect consumer debts."

Since being investigated the company appears to have stopped making payday loans.

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