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Wallace & Graham
Pay Day Lending

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Payday Lenders Often Trap Borrowers

Over the past ten years Wallace & Graham has represented clients who have sued “payday lenders” who make loans out of stores and over the internet that have high interest rates.  These loans can often trap borrowers in a cycle of debt.

In 2004, Wallace & Graham filed lawsuits against some of North Carolina’s largest payday lenders – including Advance America, Check into Cash, and Check ’N Go.  The lawsuits claimed that the lenders exploited poor people by luring them into quick loans that carried very high interest rates of up to 500 percent.

The lawsuits were filed in New Hanover County Superior Court by Wallace & Graham along with three public interest organizations – the North Carolina Justice Center in Raleigh, NC, the Financial Protection Law Center in Wilmington, NC, and the Public Justice nonprofit law firm in Washington, D.C. In addition, the firm of Hartzell & Whiteman in Raleigh, NC and Richard Fisher in TN helped with the cases.

The complaints alleged that since 1997, these companies were targeting low- and moderate-income North Carolina families by offering a check cashing service known as “deferred-deposit” or “payday” loans. These loans were marketed as a quick, easy way to obtain cash without undergoing a credit check. For more information call800.849.5291 or email us, today!   


The way that the Plaintiffs claimed that these lenders worked was as follows:

  1. A customer wrote a check for the amount borrowed (usually between $200 and $500).
  2. The payday lender kept the check until the customer’s next pay day, two weeks later.
  3. The customer was charged a high fee for this loan.
  4. In a typical transaction involving a loan for $425, for example, a customer wrote a check for $500, which included a $75 fee.
  5. On the next payday, the customer had to pay $500 to get the check back, or pay $75 to extend the loan for another two weeks.  Otherwise the lender would deposit the check which would lead to “bounced check” fees if the customer did not have enough money in their bank to cover it.
  6. The fees for consumers reflected interest rates of over 200%, 300%, 400% or more.
  7. Many borrowers could not pay off the loan and had to choose the "roll-over” option.  This meant they were stuck in a cycle of coming and paying fees every two weeks.

 

After the cases were brought to Court, the payday lender companies claimed that an arbitration clause banned class actions. The Trial Court in the three lead cases found that the class action ban was enforceable and that the cases had to go to arbitration. We appealed the decisions and then the North Carolina Court of Appeals said the cases could go on in Court after all. 

The parties then reached a settlement that provided refunds and settlement checks to thousands of North Carolina consumers, in those three cases.

Two other payday lending cases are still going on in Court.  The lawyers for the consumers in these cases include J. Jerome Hartzell of Hartzell & Whiteman in Raleigh, NC, Mona Lisa Wallace and John Hughes of Wallace & Graham in Salisbury, NC, Mal Maynard from WilmingtonCarlene McNulty in Raleigh and Richard Fisher of Cleveland, TN. 

In 2006, the North Carolina Attorney General announced that some of the largest payday lenders in North Carolina have agreed to stop doing business in our State.   The payday lenders that had stores in North Carolina shut down their stores and left the State.

However, now payday lenders have been using the internet.  Nowadays there are hundreds of different payday lenders offering high-interest loans on the internet.  In spite of the fact that the North Carolina Attorney General has said payday loans are illegal, on the internet they are still being offered.

Our law firm is currently representing consumers who received costly payday loans over the internet.