Court blocks class action lawsuit against payday lender Cash Biz

Cash Biz in Humble, Texas. Forrest Wilder.

The San Antonio Fourth Court of Appeals derailed a class action lawsuit aimed at preventing payday lenders from using the state’s criminal justice system as de facto collection agencies.

The lawsuit filed by 1,400 plaintiffs argued that Cash Biz, a payday lender, illegally used the district attorney’s offices to lay criminal charges against debtors. Under the ruling, plaintiffs will now have to settle their disputes with the firm through individual arbitration.

“It is a devastating opinion,” said Daniel Dutko, lawyer for the plaintiffs, in an interview with the Observer. “[It] essentially means that the payday loan companies can do whatever they want and send the cases to individual arbitration where nothing bad will happen except maybe a slap on the wrist.

In 2013, the Observer was the first to report that Cash Biz and other payday lenders, in violation of state law, were using courts and prosecutors to extract payment from their clients by falsely filing criminal charges against them for having written “hot checks (illegal)”.

Under Texas law, writing a post-dated check to a bad lender is not the same as writing an illegal check. When post-dated checks are bounced, lenders are expected to negotiate payment with customers. In fact, state laws prohibit payday loan companies from even threatening pursue criminal proceedings against their clients, except in exceptional circumstances.

But the Observer The investigation revealed at least 1,700 cases in which Texas payday loan companies have filed criminal complaints against customers in San Antonio, Houston and Amarillo. In at least a few cases, people have ended up in jail because they owed money to a payday loan company.

In the case before the court of appeals this week, the prosecution argued that Cash Biz engaged in malicious prosecution and fraud and violated both the Texas Deceptive Marketing Practices Act and the Code. state finances. An earlier decision by a Bexar County district court had paved the way for a lawsuit by dismissing Cash Biz’s petition to force arbitration. But the appeals court overturned the ruling on the grounds that Cash Biz includes a provision in its lender contracts that protects the company from such lawsuits. Under this provision, which is included in the contracts of most payday lenders, clients agree to waive their rights to a jury trial, class action suit and even class arbitration (i.e. – say group).

Dutko argued that Cash Biz, by bringing criminal proceedings against its clients, had waived its right to enforce its arbitration clause. The company, he argued, rescinded its own deal by “substantially invoking legal process.”

Although this argument convinced the trial judge in the first decision, the panel of three judges of the court of appeal rejected it. In the majority opinion of the panel, Cash Biz did not “substantially invoke the legal process” because he simply informed the district attorney of potential criminal behavior. The DA, they argued, had full autonomy to decide whether or not to act on the basis of the information. Further, they found that “Cash Biz’s actions, while presumably vindictive, do not reflect a desire to obtain repayment of loans through criminal proceedings. “

Judge Rebeca Martinez wrote the dissenting opinion. She rejected the idea that Cash Biz was selflessly reporting its clients to prosecutors. “Considering the number and geographic scope of the complaints,” she wrote, “it is misleading to claim, as Cash Biz does, that he was simply acting as a concerned citizen who was aware of ‘potentially criminal behavior, without any desire for restitution.of one of its borrowers.

Frustrated with the decision, Dutko said, “I finally get a case where I think the law is on my side. I have a trial judge accompanying me. So just when I think I have the law on my side, the Court of Appeals, two Republicans come out and say “no.”

He said that individual arbitration is both expensive and time consuming. The client often has to pay more than $ 1,000 to hire an arbitrator. He said that while lawyers can technically seek punitive damages for their clients, they are not awarded in practice. Ultimately, he said, the settlement could be less than the cost of arbitration.

The Consumer Financial Protection Bureau has proposed a ban on arbitration provisions like the one used by Cash Biz, but the change is not expected to take effect until next year.

The Observer attempted to reach Cash Biz for comment, but the phone number listed on its business website reached an Indian restaurant, which said it receives about ten calls per day for the business. A second issue appearing in the “snippet” of Google’s Cash Biz results hit a voice recording that attempts to sell callers a series of unrelated products. An email request through the company’s website went unanswered.

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