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Home 9 Debt Management 9 Seventh Circuit: Claims against payday loan provider can continue

Seventh Circuit: Claims against payday loan provider can continue

by | Sep 17, 2014 | Debt Management

Recently, the Seventh Circuit Court of Appeals, which includes the states of Wisconsin, Illinois and Indiana, overturned a lower court’s ruling when it decided to allow a class action lawsuit against an online payday loans provider to continue.

The suit involves three plaintiffs who each borrowed $2,525 from Western Sky Financial LLC, one of several online payday loan businesses operated by the defendant. The plaintiffs charged that the loans violated federal and state lending laws.

The defendant, who is a member of the Cheyenne River tribe, argued that the lawsuits should be dismissed out of federal court because of an arbitration provision in the loan agreements providing that Cheyenne River tribal courts should have jurisdiction over any disputes.

The lower court judge initially agreed and dismissed the claims in 2012, but the Seventh Circuit decided last month that the claims can continue after determining that the arbitration clause in the loan agreements was “unreasonable” and “unconscionable” to the borrowers.

What that means is the suit will be able to continue and a federal court will decide whether the loans — which charged interest rates of up to 139 percent — were violated federal and state lending laws.

The same defendant is also facing a federal racketeering class action lawsuit. He also agreed to pay fines close to $1 million to the Federal Trade Commission after being accused of engaging in “unfair and deceptive tactics to collect on payday loans.”

As you can see, there are many payday loan providers throughout the country who run questionable, if not criminal, operations. That’s why it’s important to seek out options such as credit counseling or debt negotiation in effort to find a solution to your debt problem instead of making your financial situation worse.

Additionally, it’s vital to work with a service that is trustworthy and professional — one that has your best interests at heart and won’t take advantage of your situation.

Source: The Cook County Record, “Seventh Circuit revives class action suit over payday loans; calls arbitration clause “unconscionable” and process “a sham,” Jonathan Bilyk, Aug. 25, 2014