By Edwin Folven, 9/20/2012
Borrowers have until Oct. 1 to file a claim
Borrowers who took out payday advance loans from Money Mart and Loan Mart branches between January 2005 and March 2007 may be entitled to restitution between $20 and $1,800, but must act quickly before the Oct. 1 deadline to file a claim.
Los Angeles City Councilman Eric Garcetti, 13th District, and San Francisco City Attorney Dennis Herrera came together outside the Money Mart branch at 6547 Sunset Blvd. in Hollywood Tuesday to urge borrowers to make a claim. Approximately $7.5 million is available through a settlement made between Money Mart and Loan Mart with the San Francisco City Attorney’s Office, which sued the lenders because they were illegally charging borrowers rates higher than the 36 percent annual percentage rate (APR) fees that are allowed under California state law. Some loans had APR fees of up to 400 percent. Herrera said many of the borrowers are low-income residents who turn to payday advance loans because they have no other options.
“For folks down on their luck or struggling paycheck to paycheck, $1,800 could mean a lot to their bottom line,” Herrera said. “I want this money to go to the people that are entitled to it.”
Herrera filed the lawsuit in 2007 against Money Mart and its affiliates, which include Loan Mart branches. Money Mart was affiliated with the now-defunct First Bank of Delaware, and claimed it was not illegal to offer loans with high APRs because it was using a bank outside of California. After five years of litigation, a settlement was reached in which Money Mart agreed to provide restitution of $7.5 million, and to forgive $8 million in additional loans. The lenders also agreed to stop offering loans with more than 36 percent APR.
The settlement stipulated that people would have 90 days from the beginning of July to make a claim for the money. Herrera said he understands the period to file a claim is very short, but it is what was approved in court. Herrera and his staff have been holding press conferences throughout Northern and Central California to raise awareness about the restitution program, and is now targeting borrowers in Southern California. Money Mart and its affiliates have more than 100 branches in California, with approximately 20 branches in the greater Los Angeles area. In the local area, there is a Money Mart branch on Sunset Boulevard, and a second branch at 4481 Hollywood Blvd. Herrera said the number of people who may qualify for a claim could be in the thousands.
“We don’t know how many people may be eligible, but we expect that it would be thousands, or even tens of thousands of people, especially in hi-density areas,” Herrera added.
Garcetti said he has joined the effort to get the word out about the settlement because a lot of people in the local area may be eligible. He likened the practice of charging excessively high APRs to “loan sharking”.
“Loan sharking is not a legitimate business. Businesses should not be in the business of defrauding customers, and that is what businesses like Loan Mart and Money Mart are doing,” Garcetti added. “There is money out there for Angelenos, and we want to make sure they get it.”
The settlement specifically applies to customers who received a “CustomCash” loan or “Cash ‘til Payday” loans offered by Loan Mart or Money Mart between 2005 and 2007. The restitution amounts will differ based on the amount of money borrowed and the fees and interest rates that were charged. Herrera added that his office is in a similar litigation with another lender, Check “n Go, but no settlement has yet been reached.
“With payday lending, some play by the rules, but we want to get the message out that if you are not playing by the rules, you will be subject to prosecution under the law,” Herrera added.
People seeking information about filing a claim are urged to call (866)497-5494, or visit www.sfgov.org.