Montana Consumers Win Fight Against Online Payday Lender, Loan Debt Will Be Forgiven

Montana consumers fill the winner’s column after winning a long-standing fight with the online payday lending industry. After three years of litigation, hundreds of hundreds of affected borrowers in the state will have their loans forgiven and receive their share of a $233,000 settlement.

Geneva Roth Ventures, Inc., which does business under the name LoanPoint USA, settled a class-action lawsuit that alleged it provided short-term payday loans with exorbitant interest rates to consumers without being registered in Montana, the Billings Gazette reports.

While the exact amount of debt being forgiven wasn’t provided, officials with the Montana attorney general’s office say it amounts to several hundred thousands of dollars.

Under the settlement, 406 consumers who took out loans with LoanPoint USA since August 31, 2009 will have their loan debt forgiven. Additionally, the 335 borrowers who paid their loans back will receive checks ranging from $27.30 to $2,947.

More than $60,000 of the settlement will go to pay attorney fees and the cost of locating the borrowers and mailing checks, the Gazette reports.

Geneva has also agreed to stop doing business in Montana unless it registers with the state and to not harm borrowers’ credit ratings or try to collect debt through third-party agencies.

The case, which almost made its way to the U.S. Supreme Court, began in 2011 when a Billings woman sued over a $500 internet loan in which she was paying 800% to 1,000% interest. Montana caps interest rates for small-dollar loans at 36%.

Over a six-month period, the woman paid LoanPoint USA more than $2,100, but still owed the original principle.

In a separate action, Geneva, which is based in Mission, Kans., sued to force the woman’s case to be settled in arbitration. However, Yellowstone County Judge Russell Fagg ruled in the woman’s favor and so did the Montana Supreme Court.

The company petitioned the U.S. Supreme Court. A settlement was reached before the high court could decide whether to hear the case.

Officials say other states, including West Virginia, have settled similar cases with LoanPoint, but for about one-eighth as much money.

Online payday lending has been a focus of consumer advocates for some time. The lenders are known to provide short-term, high-interest loans to consumers in state that have enacted rate caps to essentially prohibit brick-and-mortar payday lenders.

Earlier this month, the federal Consumer Financial Protection Bureau announced that MoneyMutual, a service that connects borrowers with payday lenders, was being investigated related to their lead-generation process.

Last November, New York State sent cease and desist orders to dozens of online payday lenders to make them stop pursuing residents through advertisements in the state.

The online lenders are affiliated with Native American Tribes and claim they do not have to follow state regulations that prohibit payday lending in New York.

Just yesterday, however, the FTC received a significant ruling confirming the agency has authority to regulate certain companies associated with Indian tribes, along with those companies’ employees and contractors.

Internet Payday loan company settles Montana lawsuit [Billings Gazette]

by Ashlee Kieler via Consumerist