A major payday lender has agreed to pay as much as $170,000 to settle a consumer fraud lawsuit filed by the Arizona Attorney General in 2009.
The settlement announced Tuesday by Attorney General Tom Horne will reimburse Quik Cash borrowers who defaulted on their loans but were sued in an Arizona county where they did not live. That made it difficult for them to defend against the suits and easier for Quik Cash to obtain a default judgment and seize a borrowers’ wages to repay the loan.
The suit alleged that Quik Cash and its parent company, Overland Park, Kan.-based QC Holdings Inc., filed hundreds of suits in Pima County. That lowered collections costs for the company.
The company has 30 days to mail checks to customers sued in Pima County but who lived elsewhere. It also must pay Arizona nearly $68,000 in costs and attorney fees.
Quik Cash didn’t do anything illegal but stopped the practice more than a year ago, a company spokesman said in a statement.
“Quik Cash has spent the past year working with the state on a reasonable resolution to any of the state’s concerns over this ligation approach,” spokesman Tom Linafelt wrote. “Today marks the end of that collaborative effort, and Quik Cash will begin working with affected Arizona customers on possible refunds.”
The suit said Quik Cash’s collection practices raised “a difficult and onerous burden” for rural customers.
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.
Former Arizona Attorney General Terry Goddard said at the time that the company’s practices set up “a veritable assembly line of default judgments” that made a mockery of the court system.
Payday lending was outlawed in Arizona last July after a 10-year-old law expired. Lending companies failed to persuade voters or the Legislature to extend the provision allowing the high rates.
Quik Cash stopped offering the short-term, high-interest and fee payday loans but still has 25 stores providing title loans, check cashing, wire transfers and prepaid debit cards.
The lawsuit originally sought up to $5 million in restitution and asked the court to set aside hundreds of court judgments and to block the company from doing business in the state.
In addition to the payments, Quik Cash must file releases for any default judgments it obtained for the affected customers. If customers owed money can’t be found, the cash will go to the Attorney General’s Office.