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State accuses payday loan company of deception

Arizona authorities are accusing a major payday loan company of engaging in deceptive practices by filing collections lawsuits in courts far from where debtors live or took out the loans.

Quik Cash and its parent company, QC Holdings Inc. of Overland Park, Kan., are defendants in a lawsuit filed Dec. 4 in Pima County Superior Court in Tucson by the Attorney General’s Office.

The lawsuit contends Quik Cash promised lenders in the past three years that it would follow Arizona law.

However, the company filed hundreds of collections suits in Pima County against nonresidents even though state law requires that the small-claims suits to be filed either where a defendant lives or took out a loan, the lawsuit said.

That reduced collections costs for the company while making it easier for the company to obtain default judgments and wage garnishments because it’s harder for defendants who live elsewhere to contest the suits, the state’s lawsuit said.

“For rural customers, this is a difficult and onerous burden,” the suit said.

Quik Cash even sued Nevada customers in Pima County, which is located in southern Arizona, though the customers obtained their loans some 300 miles away in Bullhead City, near the Nevada border in Arizona’s Mohave County, the suit said.

Arizona Attorney General Terry Goddard said the company’s practices set up “a veritable assembly line of default judgments” that made a mockery of the court system.

QC Holdings spokesman Tom Linafelt responded to the suit by saying Quik Cash tries to comply with Arizona law and was unaware of the “administrative issue.” He said the company will cooperate with the state and was investigating the matter.

In Tucson, with the acquiescence of lawyers for QC Holdings, a judge on Dec. 4 granted the attorney general’s request for a preliminary injunction barring the company from filing lawsuits in the wrong courts or pressing cases already filed in the wrong courts.

The lawsuit seeks up to $5 million in restitution, asks the court to set aside hundreds of court judgments against Arizona payday loan borrowers and seeks to stop the company from doing business in Arizona.

QC Holdings said on its Web site that it operates 563 branches in 24 states, lending nearly $1.4 billion to customers.

3 comments

  1. There is no question that payday loan companies are needed by desperate people in an emergency situation; and that is exactly why these companies need to be regulated and kept on a short leash.

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