AG Wins Lawsuit Against Fastbucks Payday Loan Lender…$10,000,000 Restitution Expected
Wednesday, September 26, 2012
(SANTA FE)—Attorney General Gary King prevailed today in the three year legal battle against small loan lender FastBucks, LLC. The company, with offices around New Mexico, was ordered to pay restitution to consumers; to stop making illegal loans; and will be unable to enforce certain current loans that are not in compliance with state law.
“New Mexico law prohibits the kinds of business practices and exorbitant interest rates by which FastBucks has been victimizing consumers for years,” says Attorney General King. “The judge agreed with our contention that FastBucks’ installment loans and associated lending practices were unconscionable as a matter of New Mexico law.
The Attorney General congratulated attorneys and staff from his Consumer Protection Division who have been litigating the case against FastBucks since 2009.
In his order today, Santa Fe District Judge Michael Vigil stated, “Defendants took advantage of borrowers’ lack of knowledge, ability, experience or capacity to a grossly unfair degree…Defendants’ loan practices have resulted in some borrowers paying back more than twice the amount they borrowed.”
The AG’s lawsuit suit alleged that FastBucks’ installment loans—twelve-month loans carrying APRs of 520 to 650 percent—were unconscionable under the New Mexico Unfair Practices Act (UPA). The suit also alleged that FastBucks’ lending practices took advantage of their borrowers by encouraging them to remain indentured to the company in a never-ending cycle of debt.
The court permanently enjoined FastBucks from originating their installment loans, and also awarded New Mexico consumers restitution measured by the amount of money FastBucks’ borrowers paid on their installment loans over and above what they would have paid had they been given a state-regulated payday loan. While the exact amount of restitution has not yet been determined AG King believes the figure will be well in excess of $10,000,000.
In his opinion, Judge Vigil found that FastBucks crafted their installment loan products to circumvent the New Mexico Legislature’s efforts to rein in payday loan abuses in 2007. He flatly rejected FastBucks’s claim that, in the wake of these legislative reforms, it promoted its unregulated installment loan product over its regulated payday loan product for borrower convenience.
The court went further to recognize that FastBucks’ business model depends upon encouraging “recurring inescapable indebtedness to Defendants.” He specifically cited the example of Rose Figueroa, FastBucks’ store manager in Española, who could be heard on a FastBucks company conference call explaining: “[w]e just basically don’t let anybody pay off…[w]e tell them how their tax refund is better used at Wal-Mart” than paying off their loan with FastBucks.
Judge Vigil also declared that the plain terms of FastBucks’ installment loans create “exorbitantly expensive repayment obligations,” and thus result in gross disparities between the values received by borrowers and the prices paid, in violation of the UPA. The court thus concluded: “Except to the extent they accord with the statutorily required terms of payday loans, Defendants’ installment loan products and loan agreements by any other name that share the same or similar terms as their installment loan products” are “unenforceable as a matter of New Mexico law.”