An internet payday loan company charging triple-digit interest on two-week loans has agreed to close all of its outstanding loans in Wisconsin, worth nearly $500,000, and pay $180,000 in restitution, fees and fines to settle a class-action lawsuit. The company was accused of numerous, blatant consumer law violations. The company, Kansas-based Arrowhead Investments, won’t be able to do business in the state for five years. It will rectify credit histories of the borrowers as a part of the settlement.
Suit was filed in 2007 in the name of a Verona woman, Bonnie Bernhardt, and others. The State Department of Justice, working with the University of Wisconsin School of Law’s Consumer Law Litigation Clinic and the State Department of Financial Institutions, estimated up to 1,300 state residents could get relief, both financial as well as from collection agency calls.
Arrowhead Investments used a third party to solicit borrowers over the Internet, responding to general inquiries about loan offers. The settlement, which has been approved by the court, cancels all loans made between December 21, 2001, and December 21, 2007, totaling $432,000 in loan, cost and fee forgiveness. All of the loans were payday loans with unregulated interest rates which reach triple digits.
The class-action Complaint accused Arrowhead Investments of numerous violations of fee, interest and other disclosure requirements in the Wisconsin Consumer Act and other consumer protection laws. The company had failed to register with the Department of Financial Institutions. Lara Sutherlin, an assistant Attorney General in Wisconsin, stated:
The bulk of this settlement’s relief is in the loan forgiveness. The consumers who will get cash payments are mostly those who paid more than the loan principal.
In a similar case last August, the same Plaintiffs settled with another loan company, Tremont Financial, that included $60,000 in restitution and a release from loan obligations for 137 borrowers. For those of our readers who don’t know how a payday loan works, this is the general procedure:
• The person seeking a loan fills out an application, providing the lender with items such as paycheck stubs and a photo ID;
• A loan agreement is signed and a postdated check is written to the lender;
• Money is advanced by the lender;
• The check is held until the loan payment is due – usually two weeks;
• The lender then deposits the check – unless the loan has been repaid. Normally, another check is written and another loan is made.
Payday lenders should be regulated in every state and state legislative bodies must make sure that the laws are strong and tough. In all too many states the laws are weak and do very little to protect folks who take out payday loans.
Source: Wisconsin State Journal
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