State Payday Lending News Part I: New Mexico Court Finds FastBucks L...

11/06/12

A little something to chew on while you are chewing off your fingernails over tonight’s election news. The New Mexico Attorney General’s office has sued Fastbucks for providing unconscionable loans to New Mexico citizens, both under the common law unconscionability doctrine and the state’s Unfair Practices Act’s unconscionability provision. Read the short, pithy opinion
Download Fastbucks decision.

The court’s opinion, karmatically handed down on Yom Kippur 2012, found that FastBuck steered borrowers into loans that subjected them to higher interest rates and kept them locked into recurring cycles of debt, that the FastBucks entities were experts in the loan products they created, and that these experts demonstrated their superior knowledge of these alternative loan products through their explicit actions to maneuver around the regulation of payday loans.  The court also found that defendants provided incentives to their representatives for steering borrowers into the more expensive installment loan products and away from less expensive loan products, and for promoting and prolonging recurring inescapable indebtedness.

One FastBucks employee testified in court that “[w]e 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 FastBucks, and we basically talk them into making a payment and continuing to be our customer.” She said she was congratulated for her approach and used as an example for how other employees of FastBucks could conduct themselves to earn the conspicuous financial rewards.

Given that the defendants engaged in unconscionable lending by taking advantage of the lack of knowledge, ability, experience or capacity of person’s to a grossly unfair degree and extending credit that has resulted in gross disparities between the value received by persons and the price paid, the court ordered FastBucks to pay restitution and enjoined their further lending.

In another karmatic turn, the judge who decided the case won the New Mexico lottery a week later.

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