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Payday Cases

Delivered April 11th, 2019. Contributors: Rosemary N., Khen R. and

Part
01
of two
Part
01

Rulings on Payday Loans: Overcharging

Although we could not find comprehensive examples of legal cases around payday loans in which the lender overcharged the borrower in California or New York. We have provided some key findings.

Methodology

To provide examples of legal cases around payday loans in which the lender overcharged the borrowers, we started by searching through legal resources such as World Legal Information Institute, Casetext for possible case studies relating to payday loans. Unfortunately, these sources did not provide details regarding payday loans.

We then searched for cases studies on the Leagle website with the aim of finding some examples of legal cases around payday loans in which the lender overcharged the borrower. This source did not give the exactly required examples of lenders overcharging the borrowers. We were able to find two case studies on CashCall, Inc involving De La Torre and flowers vs ezpawn oklahoma inc. which gave insights on borrowers been overcharged but not comprehensive detail.

Finally, we tried searching through media sites such as Forbes, etc for any press release on some examples of legal cases around payday loans in which the lender overcharged the borrower in California or New York. Unfortunately, again this search provided an example of cases around lender overcharged the borrower but they were not payday loan legal cases. We have been able to provide some key findings which can give the client a clear understanding lender overcharging the borrowers.

FLOWERS v. EZPAWN OKLAHOMA, INC.

Flowers claims Ezpawn Oklahoma, inc chargers borrowers a higher interest rate. Defendants Ezpawn Oklahoma charged interest rates in excess of 505.38% on payday loans to the plaintiff class, loan transactions "whereby the lender agrees to cash the borrower's check with the understanding that the check will be delayed for presentment for a specified period.

"In the case of Flowers, she received a cash advance of $350 in exchange for defendants' delayed presentment of the loan for fourteen days and a $63.00 finance charge. Flowers contends the interest and terms of these payday loans to her and members of the putative class violate Oklahoma statutory and common law usury prohibitions and seeks actual and punitive damages, penalties under the OCCC, attorney fees and declaratory and injunctive relief."

The appeal claims that a class action is essential as the amount of losses suffered by each individual class member is small (loans of no more than $500), "and equal to double the number of unlawful finance charges paid on the payday loans as well as punitive damages under."

The case has not been decided yet as the court says it's uncertain. The case has therefore been Moot.
EZPAWN OKLAHOMA, INC; is the lender
FLOWERS; is the borrower

DE LA TORRE V. CASHCALL, INC.

CashCall, Inc. provided a loan of $2,600 to De La Torre in February 2006 and $2,525 to Kempley in May 2006. Both parties were unable to meet the agreements of the contracts and were unable to make their monthly payments since their expenses surpassed their monthly income (Source 3).
CashCall, Inc. charged an annual percentage rate of 98% and 99.07% respectively. Plaintiffs believed that their individual financial status was not assessed before their loans were approved and reported that they received credit extensions by "preauthorized electronic fund transfers. 

"The case, De La Torre vs. CashCall, is before the U.S. 9th Circuit Court of Appeals, which asked the state high court to weigh in on California lending law — specifically whether a high interest rate alone could be unconscionable and thereby void a loan."

Borrowers and Lender
The borrowers in this case were De La Torre and Kempley
The lender was CashCall, Inc.  

"On January 22, the California Department of Business Oversight (DBO) announced a $900,000 settlement with a California-based lender for allegedly steering borrowers into high-interest loans to avoid statutory interest rate caps. According to the DBO, the lender’s practice of overcharging interest and administrative fees violated the California Financing Law, which caps interest on small-dollar loans up to $2,499 at rates between 20 percent and 30 percent, but does not provide a cap for loans of $2,500 and high
Under the terms of the consent order, the lender will, among other things, provide $800,000 in refunds to qualifying borrowers, pay $105,000 in penalties and other costs, and provide accurate verbal disclosures to borrowers concerning loan amounts and interest rate caps."


Part
02
of two
Part
02

Rulings on Payday Loans: Default Payments

Two legal cases around payday loans in which the borrower defaulted on his/her payments for one reason or the other was found. The two cases are De La Torre vs. CashCall, Inc., and Lovewell vs. Stanford Federal Credit Union.

Methodology

We started the search by looking through legal sources such as the World Legal Information Institute and Casetext, but none of these sources offered a viable case study for the research. We were able to find a case from CashCall in FindLaw, but the case was out of the given date range. Another information we found was once again from Cashcall, regarding issues about the company being as "true lenders" and trying to avoid usury and licensing laws. From the information detailed about Cashcall, we decided to further our search on the company and found information about a case involving a client named De la Torre. We used this as one of the case studies in our research. We then decided to do another search for the second case study of the research. We were able to find the case about Lovewell and the Standford Federal Credit Union in Leagle, and used it as the second case study for our research.

General Information of Payday Loans in the US

Borrowers consider payday loans to be worse than standard loans. This is because, in many instances, borrowers have to make higher payments to acquire a payday loan. These payday loans also have higher interest rates and give the loaner access to the borrower’s checking accounts. Payday loans may also incentivize frequent borrowing.

Usually, those who borrow payday loans have a credit score in the low 500s, and this is because payday lenders tend to be desperate, usually targeting low-income borrowers with little to no credit. Borrowers may feel overwhelmed because in some instances the borrowers of payday loans have difficulty with the annual percentage rate (APR) that the loaner charges them. This is on top of fees and insurance premiums. Moreover, later on, borrowers find that the all-in APR they were charged with was higher than the percentage that the lender started initially. Additionally, in some cases, one or more credit insurance was added to the borrowers' already growing loan, and this results in higher payments. Overall, the shady practices of payday loans certainly have a big effect on consumers’ overview of the product. However, those with little to no credit cannot see through this because they are most likely desperate for a loan.

Case 1 - De La Torre vs. Cashcall Inc, California

In 2017, the Cashcall Inc received a lawsuit from two clients, De La Torre and Kempley, because the loan issued to them surpassed their monthly income, leading to certain situations in where they cannot pay.

The company gave a loan of $2,600 to De La Torre in February 2006 and a loan of $2,525 to Kempley in May 2006. The loans had an annual percentage rate of 98% and 99.07% respectively. Both of the clients did not have the money to pay the loans, and the plaintiffs believed that Cashcall did not go through the financial status of each of the clients. Additionally, they reported that each of the clients received credit extensions by "preauthorized electronic fund transfers (EFTs)," and this was against the 15 U.S.C. § 1693k.

The plaintiffs issued a case against the company in 2008, and this was already two years and four months after the loans of the clients. The claim that was made was that the clients could not pay the loan because it was higher than their estimated monthly income, and this would have been avoided if the company only did their due diligence to assess each of their client’s financial status. This resulted in the borrowers defaulting their payments to the company because their monthly income was not enough to cover their expenses and monthly payments.

In November 2011, the court had certified two classes of class certification, namely, a conditioning class, and a loan unconscionability class. The former is for clients who were made to pay a "Nonsufficient Fund Fee (NSF)" by Cashcall, and the latter was for those issued an interest rate of 90% by the company.

In September 2015, a bench trial was held, and in March 2016, Cashcall was made to pay $500,000 for its EFTA violation against its clients, and all the parties in the case were required to file a supplemental status report about the notice plan that was proposed. A settlement was then agreed upon, in where Cashcall was made to pay $1.5 million to a settlement fund, $830,000 of which was chosen to pay members who had paid the NSF fees. It was also added that Cashcall could not issue claims of liability from members who have paid the NSF fees. Plaintiffs and defendants agreed not to pursue further legal actions when it came to the conditioning claim.

Additionally, Cashcall Inc had been known to use partner banks as lenders, and this is to avoid usury and licensing laws, and this has led to previous cases before the De La Torre lawsuit.

Case 2 - Lovewell vs. Stanford Federal Credit Union

Mark Lovewell was the Chief Financial Officer (CFO) and Chief Investment Officer (CIO) for the Stanford Federal Credit Union. He held the two positions for 11 years until he was terminated because of the lack of performance in his job. This led to him filing a lawsuit on various grounds, including an overpayment on his mortgage loan. He also claimed that the company had applied the amount on his mortgage loan to another loan balance without his consent. Additional grounds for the lawsuit he filed included, “breach of contract, age discrimination, tortuous discharge in violation of public policy, breach of the covenant of good faith and fair dealing, conversion, intentional infliction of emotional distress, defamation, and intentional interference with contractual relations.”

It was found that Lovewell had applied for two loans in the company. One is a mortgage loan in 2004, in which he had received a benefit from SFCU’s employee program, giving him an interest rate lower than the market value, because he was an employee at the time. The document of the program explicitly stated that if he was terminated, he would pay the interest at normal market value. The second loan was made in 2009. He was reported to be delinquent at the time, and he also had patterns of advancing his bonuses before the end of the year. These cases were reported to the CEO. Given the right evidence, the payments have defaulted on the grounds that Lovewell did not make timely monthly payments, he was a delinquent employee, and he had other loan obligations, which included a loan he had from another employee. In addition to this, he also misused his power by advancing his bonuses before the end of the year.

The court ruled in favor of SFCU and decided to disregard Lovewell’s previous lawsuit against the company. Additionally, the court added that Lovewell could be sued for defamation and “deliberate interference with contractual agreements,” and this led to Lovewell not being able to fight back in the case.
Sources
Sources
From Part 01

Can consumer loans ever be so expensive they break the law? The California Supreme Court says yes

latimes.com
Publication Year: 2018
Quotes
  • "Sturdevant said that he intends to argue at trial that CashCall’s loans were unconscionable because of both the interest rates and other loan terms — including repayment plans that stretch on for years and high default rates. A CashCall executive said in a court filing that 40% to 45% of CashCall borrowers default on their loans. Sturdevant’s clients sued CashCall under California’s unfair competition law, which has a four-year statute of limitations. That could mean that any borrower who has taken out a high-interest loan in the last four years could try to sue their lender claiming an unconscionable interest rate."
  • "Brad Seiling, a partner at law firm Manatt Phelps & Phillips who is representing CashCall, told justices in June that, under current law, lenders can charge whatever the market will bear. Associate Justice Leondra Kruger asked if that would include interest rates of millions of percent. Seiling said it would."
w

case study on Cashcall Inc.

wiki.harvard.edu

DE LA TORRE v. CASHCALL, | Case No. 08-cv-03174-MEJ. | 20170622a66 | Leagle.com

leagle.com
Publication Year: 2017
Quotes
  • "Plaintiffs allege CashCall made loans to De La Torre and Kempley that were beyond their financial abilities to repay in the time and manner set forth in the CashCall Promissory Note and Disclosure Statement. Id. ¶¶ 25, 29. They contend CashCall did not assess De La Torre's or Kempley's earning capacities, monthly expenses, or outstanding debts when it approved them for their loans. Id. ¶¶ 27, 31. Plaintiffs further allege CashCall conditioned the extension of credit on the consumer's repayment by means of preauthorized electronic fund transfers"
  • "On November 15, 2011, the Court certified two classes. Class Cert. Order, Dkt. No. 100. It certified a Conditioning Class, which was later limited to "[a]ll individuals who, while residing in California, borrowed money from CashCall, Inc. for personal, family, or household use on or after March 13, 2006 through July 10, 2011 and were charged an [nonsufficient fund (2017NSF')] fee." Order Approving Class Notice Plan, Dkt. No. 130.4 The Court also certified a Loan Unconscionability Class of "[a]ll individuals who while residing in California borrowed from $2,500 to $2,600 at an interest rate of 90% or higher from CashCall for personal family or household use at any time from June 30, 2004 through July 10, 2011." Class Cert. Order at 38. The Court later appointed James Sturdevant, Arthur Levy, and Whitney Stark as class counsel. Dkt. No. 127 at 6-7; Dkt. No. 130."

FLOWERS v. EZPAWN OKLAHOM | 307 F.Supp.2d 1191 (2004) | 2d119111381 | Leagle.com

leagle.com
Quotes
  • "One standard requires the defendant to show to a legal certainty that the amount in controversy actually exceeds $75,000. Another standard found in some opinions, including a number of recent ones, demands that the defendant prove by a preponderance of evidence that the amount involved in the litigation exceeds the statutory jurisdictional threshold. A third standard requires defendant to show some reasonable probability that the damages will exceed $75,000. "

InfoBytes

buckleyfirm.com
From Part 02

State Laws Put Installment Loan Borrowers at Risk

pew.org
Publication Year: 2018
w

HLS Case Study - Asset Securitization after Madden - August 2017.pdf 1

wiki.harvard.edu
Publication Year: 2017

DE LA TORRE v. CASHCALL, | Case No. 08-cv-03174-MEJ. | 20170622a66 | Leagle.com

leagle.com
Publication Year: 2017
c

PLAINTIFFS’ NOTICE OF MOTION AND MOTION FOR FINAL APPROVAL OF CLASS ACTION SETTLEMENT

cashcallconditioningclasssettlement.com
Publication Year: 2017

LOVEWELL v. STANFORD FEDE | No. H043768. | 20190311024 | Leagle.com

leagle.com
Publication Year: 2019