Cash America a Payday Loan Company Forced to Refund Over $13 Million to Customers

Cash America will be giving about 14,000 of its customers in Ohio refunds totaling an estimated $13.4 million after customers sued them, but now admits it made significant mistakes in its own legal documents. Cash America is the largest operator of pawn shops in the United States and operates a large network of payday loan locations throughout the country. It does business as Cashland in Ohio, and that division of the company was the subject of a court ruling Monday that said the company made payday loans attempting to exploit a loophole in state laws.

Cash America spokeswoman, Yolanda Walker said the court ruling was not the reason the company announced its plans to stop collection efforts and forgive outstanding balances for customers involved in lawsuits going back as far as 2008. According to Walker, “This is something we discovered in our own due diligence.”

Loopholes in State Laws?

The court decision says the company structured legal documents in an attempt to make the loans look like they conformed to the state’s mortgage lending laws, which allowed Cash America to charge higher interest rates when customers defaulted than they are allowed to charge for traditional payday loans. Cashland’s payday loans are governed by the Ohio’s Short Term Lending Act, which limits the annual percentage rate charged on short-term loans to 28%, but mortgages default rates are not subject to this limit.

An Industry Riddled with Questionable Practices

Payday lending has long been a practice that has come under fire by consumer protection advocates. The Better Business Bureau has received thousands of complaints from consumers across the country related to payday lenders and their questionable methods.

Estimates show that about 5.5% of American’s have used some type of payday loan service in the past five years despite warnings from advocacy groups to avoid them. These types of loans have been scrutinized by many organizations and in 2006 Congress went as far as banning lenders from offering payday loans to anyone in the military. The Federal Trade Commission issued a warning in 2008 that interest and fees on some of these loans could rack up to as much as 650% interest.

As if the interest rates weren’t bad enough, the entire payday loan industry has had a huge black eye for years for unscrupulous collection tactics and horrendous customer service. Add to this, the fact that these companies cater to customers who can least afford these high interest rate loans. Many of payday loan companies’ customers have poor, or no credit, cannot get conventional loans and are literally borrowing against paychecks they haven’t even received yet.

An Opportunistic Industry

The consumers who use payday loans are generally unfamiliar with how financial products work, as many of them don’t have bank accounts and have not built or maintained good credit. It is exactly their circumstances that allows payday loan companies prey on their need and lack of options to charge them ludicrously high interest for short term money. If it were up to many consumer advocates, the entire payday loan industry would not exist. As it is, the best most can hope for is more support from regulators and advocacy groups when they encounter problems with questionable lending practices.

  • miro posavec

    One of my “jobs” is a business consultant. I specialize in Payday loan operations. These are small, high interest loans. I’m often asked about the “morality” of these types of loans. Here’s my response to that:

    Often I’m asked to defend myself on the shoddy treatment of our victims (clients). This is the response I give:

    In regards to my morality with the payday loan biz, keep in mind that our industry was created by a few changes in banking policies and processes.

    In plain english: The banks brought together a perfect storm to screw the ordinary citizen.

    1: They started to hold checks that were deposited into clients accounts. So, your paycheck would “hold” until sometimes 10 days later (even though everything clears overnight).

    2: The processing of a check now happens instantly. You write a check at Walmart, and that money is OUT of your account by the time you pickup the last bag.

    3: Banks computers follow a special protocal to move the transactions around in order to do the most possible damage. LARGE amounts are moved to the top in the hope of bouncing as many small transactions as possible. (this is not a happy accident).

    4: The individual transactions are dipped TWICE, if a client uses a debit card, the account is reduced by the amount of the authorization, then if the account is negative, it is hit for when the merchant clears the account a day or two, or three later (this is all crap as clearing happens overnight and the software moves the transactions around to maximize impact).

    5: The amount paid to payday loan companies is DWARFED by the amount of NSF fees collected by banks. If you review Bank of America’s financial statement, they earned more from NSF fees, than on ALL credit card interest, fees, and other revenue combined.

    So, do I have a moral problem with a customer paying a $45 fee to a payday loan company in order to avoid $300 in bank charges? No. I don’t have a problem with that at all. And neither do they.

  • Sara

    There needs to be more regulations this industry is like the Wild West.

  • Burn

    Damn all kinds of win in this article. From the payday company getting caught with their pants down to the payday supporters getting burned in the comments, LOL.

  • MeowMix

    I like how this article bashes payday lenders, then gives a link to another payday loan site with the anchor text “payday loans” which is meant to give that site better rankings on search engines. The site their linking to isn’t a lender and basically just sells consumer information to highest bidder.

    • Editor

      MeowMix I am the lead editor at PFhub and have the final say on what gets published. All journalist are encouraged to include links to outside sources that support the article. In this particular case I actually included the link to the website you’re referring to not John.

      The website in question is an example of another type of payday loan website which supports this story. I can assure you the only way a link gets published is if it supports the article. There is no hidden agenda here and if there were your comment would have simply been deleted.

      We believe in being totally transparent and since we are on the subject I ask that you are as well.

      By your IP Address you came from Cincinnati, Ohio which is very close to Cashland. In fact you accessed this website from a server located at Axcess Financial Services which provides services to payday loan lenders like Check n Go.

      I encourage you to share your opinion but let’s be forthright about your intentions.

  • Misty

    Awesome I hope I’m on the list to get a refund. I have been going back and forth with them because they keep trying to charge me more than I owe.

  • Jer – Trihouse

    The author of this piece, John Sanchez, should consider leaving his desk and do some real investigative reporting. This entire piece is simply a regurgitation of typical media bias. John, consider getting off your butt and actually talk to a payday loan consumer.

    This reporting is so factually wrong, I do not know where to begin. Oh, I know! How about with this, “The consumers who use payday loans are generally unfamiliar with how financial products work, as many of them don’t have bank accounts and have not built or maintained good credit.”

    John, no bank account? No payday loan! Basic requirement.

    “Borrowers don’t understand the product or rates?” The rates are plastered all over the walls of the Ohio stores in 24 point fonts!

    Why do rates appear high to you and the rest of the so-called consumer advocates who would not loan a dime to these payday loan borrowers? Because these borrowers don’t pay back their loans! Default rates are through the roof! Wells Fargo offers consumers payday loans at $10 per $100 loaned for 14 days. That’s a 400%+ APR. Why? Because their payday loan borrowers have a bank account with direct deposit of their paycheck into their Wells Fargo bank account! Dah! No defaults! No risk to Wells Fargo!!

    I could go on but then you would have to get off your butt and do some research “in the trenches.” Too hard?

    Jer – Trihouse

    • Martial Law

      Jer your comments make me laugh.

      It took me about 15 seconds on Google to search your name and find that you’re a payday loan investor and heavily involved in the micro lending industry. The only thing I found wrong with this story is that the applicant does need a bank account and that’s so you can siphon money out of it.

      Everyone knows the interest rates are absurd and the payday loan industry couldn’t be more shady. It’s very possible that you have ties with Cash America which is why you are so butt hurt. It’s funny how Cash America company admits there were mistakes in their legal documents after being found guilty.

      You can argue until your face turns blue. The fact of the matter is the micro-lending industry which includeds payday loans, car title loans, check cashing and scrap gold are bottom feeders. Anyone can do a Google search and find thousands of horror stories about you people.

      Martial Law

      • Anonymous

        Wow! 15 seconds? You type slow! Allow consumers access to every financial alternative conceiveable and watch the rates drop! And, if small dollar loans serve no need in the marketplace, they will simply disappear.

        Meanwhile Martial, can I borrow $100? 36% interest per year for your money? Seems fair, right? That’s a $1.38 per month to you. Meet you at Starbucks…

        Jer – Trihouse

        • Martial Law

          This lawsuit must really be putting your investment in the red.

          I never said there was no need for small personal loans. People turn to payday loans because they have no other option not because it’s a great option. There is a need for this type of loan it’s the interest rates and shady characters behind the businesses that they don’t need.

          You have been a perfect example of that.

          Martial Law