Payday lender Advance America agreed to a proposed settlement that will pay $18.75 million to more than 140,000 North Carolina consumers charged triple-digit interest rates and unlawful fees, the law firm Public Justice announced.
The settlement resolves a 2004 class-action lawsuit against Advance America, the country's largest payday lender. Although it has agreed to compensate its customers, Advance America admitted no wrongdoing under North Carolina law.
Advance America already had been forced to stopped lending in North Carolina as a result of actions by the state attorney general's Office and the North Carolina Office of the Commissioner of Banks. Advance America affiliates that signed the 2005 agreement operated 118 branch offices throughout North Carolina.
"I have been closely monitoring a lot of the consumer protection litigation against payday lenders around the country, and as far as I am aware, this is by far the largest settlement that any class of consumers has won from any payday lender in the United States," said Public Justice Senior Attorney Paul Bland, one of the plaintiffs' lawyers, in a statement. "It is the single biggest achievement on behalf of consumers against payday lenders that I have seen in any private lawsuit in the U.S."
"Payday loans" are short-term loans or cash advances – usually for 14 days – secured by a post-dated check for the full amount of the loan plus interest or other fees. Payday loans typically charge triple-digit interest rates. The class representatives in Kucan v. Advance America, the North Carolina suit, obtained loans from Advance America with annual percentage rates in excess of 450%. North Carolina law caps interest rates for those types of loans at 36%.
Class-action lawsuits to recover funds for illegally charged and overcharged borrowers are part of what Public Justice describes as a "one-two punch against illegal payday lending practices in the state." North Carolina Attorney General Roy Cooper has been active in forcing payday lenders to cease operations in North Carolina, and previously reached an agreement with three other major lenders, Check Into Cash, Check N Go and First American Cash Advance, to stop making illegal payday loans in the state.
Additional class-action lawsuits against other payday lenders in North Carolina are being planned as well.
"There are still four major payday lenders in North Carolina who took tens of millions of dollars in illegal fees from consumers who continue to drag out consumer protection cases," said Mal Maynard of the Financial Protection Law Center in Wilmington, N.C., another attorney for the plaintiffs, in a statement. The legal team will pursue litigation against the other payday lenders "until they do the right thing as well," he said.
Consumers who got a payday loan at Advance America or National Cash Advance in North Carolina on or after March 1, 2003, would receive payments as part of the settlement. They will not need to file a claim to be able to participate. If the settlement is approved, checks will be mailed to all class members who can be located, beginning the first half of 2011.
Advance America agrees to settlement over charging 450% interest