Wednesday, August 2, 2006
Lockyer Sues Pay Day Loan Company Over Small Claims
By a MetNews Staff Writer
Attorney General Bill Lockyer yesterday filed a $2 million-plus lawsuit against a local pay day loan company for violating a state law that prohibits such businesses from suing for triple the amount of the check when customers’ bank accounts do not hold sufficient funds to honor post-dated checks written to secure the loan.
Fast Cash, which the attorney general said operated from locations in San Marino and Los Angeles, “extorted outrageous amounts of money from its customers,” said Lockyer. “They threatened lawsuits, tried to squeeze settlements, and, when that did not work, they deceived the court into a rendering a judgment. Fast Cash could have made a lawful living. Instead, they chose fear and deceit. We will continue ridding this industry of similar frauds.”
In a Los Angeles Superior Court complaint filed in Pasadena, the attorney general identified Christoph Hoppe, also known as Christoph Toph, as the owner of Fast Cash. A spokesperson for Lockyer said the company is believed to have gotten out of the payday loan business since the start of the state investigation.
That investigation, the spokesperson said, was sparked after a Superior Court small claims administrator notified the county Department of Consumer Affairs that the company had brought an unusually large number of bad check lawsuits, and the county took its concerns to the attorney general.
The complaint asks the court to permanently enjoin the business from further violating the law, void improperly obtained judgments, order full restitution to victims, and assess a civil penalty of not less than $2 million for unlawful business practices. Fast Cash may have accumulated improper judgments in excess of $350,000, the attorney general said in a press release.
In most cases, state law authorizes a plaintiff to seek a penalty of treble damages, or three times the amount, against a person who writes a bad check. However, California law prohibits payday loan operations from collecting such damages, instead limiting them to the amount of the check and a single $15 fee. Further damages and fees are not allowed.
Pay day loan companies, which generally charge the highest rates of interest allowed in the consumer finance business, take a borrower’s post-dated check to secure payment of the principal and interest on the loan.
Fast Cash allegedly threatened borrowers with a suit in order to obtain their agreement to pay back the loan plus treble damages. When the defendants could not secure an agreement, Hoppe pursued the action in court but would not reveal that each of these checks was written pursuant to a payday loan transaction, Lockyer alleged in the complaint.
The vast majority of borrowers, the complaint alleges, did not attend the small claims court hearings to inform the court of the nature of the transaction. Without complete information, the court ordered borrowers to pay treble damages.
The complaint says that Hoppe used “unfair, fraudulent, unconscionable and unlawful means to collect or attempt to collect consumer debts.”
Efforts to contact the company were unsuccessful.
Copyright 2006, Metropolitan News Company