With the payday loan industry being placed under a greater microscope and numerous states introducing new laws and updates current regulation, a lot of payday loan stores are bearing the brunt.
One of the latest payday loan businesses to be caught violating lending laws is Alabama lender BamaCash. The company was ordered by a judge to reimburse customers $32 million following the discovery that it had maintained illegal dealings for six years.
According to State District Court Judge Francis Mathew of Alabama, BamaCash broke lending laws between 2006 and 2012. By the time it was discovered, a judge determined it violated lending laws in the state. Reportedly, tens of thousands of clients were “victimized” by the payday lender.
In 2007, the state legislature capped the costs of Alabama payday loans to $17.50 per $100 borrowed. It was discovered that BamaCash had modified its business model in order to avoid the new regulations. BamaCash was alleged to have charged “outrageous” interest rates on its payday loans. Moreover, the case had revealed that many of the borrowers were not permitted to pay back the loan ahead of time.
The unscrupulous business practices by BamaCash were unveiled by one employee, according to a 2012 court filing.
“We just basically don’t let anybody pay off [a loan]. … We tell them how their tax refund is better used at Wal-Mart … than at BamaCash, and we basically talk them into making a payment and continuing to be our customer.”
Mathew will still need to approve a plan by BamaCash to reimburse customers within 90 days. Once it is approved, a formal notification to customers will be issued. Although BamaCash could file an appeal, it is possible that it will refrain from doing so. Meanwhile, if customers feel they are entitled to a refund, they will need to contact the Attorney General’s office.
The case was initially launched by former Attorney General Lary Rite, who stepped down in 2014.
“This $32 million restitution judgment for Alabama consumers is a great step toward eliminating predatory business practices that prey on Alabama families,” Attorney General Balderas said Wednesday. “Our office is working expeditiously on a plan for Alabama consumers to receive their restitution. However, we are asking for consumers’ patience as we work through the legal process to get them what they are owed.”
BamaCash has 60 retail locations in Alabama, and an additional five stores in other states. BamaCash has been named one of the fastest-growing private companies in the United States today. It has been in operation since 1997.
Across North America and Europe, a growing number of payday loan establishments are being investigated by federal and state authorities. Also, many complaints are being submitted to the proper authorities over usurious rates and unfair lending practices that critics say make it impossible get out of debt.
North American and European officials are attempting to limit or restrict payday loan businesses’ access and reach with new rules and regulations. In the United Kingdom, for instance, the Financial Conduct Authority (FCA) has scrutinized the payday loan industry so much that 70 percent of companies have exited the country.