Texas Payday Lenders Ace Cash Express and Cash America International Use Loophole in Texas Law To Facilitate Alleged Abusive Lending Practices

Dallas, TX (PRWEB) August 10, 2011

Payday loan stores advertising “quick cash”, “no credit check” or “guaranteed approval” can be found on nearly every street corner in Texas with industry research finding more payday loan stores in the state than McDonalds® and Whataburger® franchises combined. Payday lenders provide a quick cash advance to consumers in need, in the form of a short term loan, which must be repaid in full by the borrower when the next payday comes around. The terms and contract for payday loans almost always includes inflated fees and rates and this amount could double each time a borrower is unable to pay back the original amount according to a recent Federal Trade Commission consumer alert. If the borrower cannot pay off the loan by next payday under the original contract, he or she could end up responsible for paying the original amount plus outrageous rates and fees that may be as high as 1200%, alleges a class action complaint filed by national consumer protection law firm Weisberg and Meyers, LLC, Attorneys for Consumers.

Recent class action lawsuits filed by Weisberg and Meyers, LLC, for alleged payday lending abuse include Higginbotham v. Ace Cash Express Inc., Ace Credit Services, LLC and Safeco Insurance Company of America (Case# D-1-GN-11-001142) filed in Travis County, Texas district court and Krystle Wilson v. Cash America International Inc.; Cash America Net Holdings, LLC; Cash America Net Of Texas, LLC; Cash America Net Of Illinois, LLC and Enova Financial Holdings, LLC ( Cause # 236-242191-09), filed in Tarrant County, Texas district court. Both cases include alleged violations of the Fair Debt Collection Practices Act, Texas Finance Code and the Texas Credit Services Organizations Act.

Payday lending companies register in Texas as a credit services organization (CSO) and can then operate as loan brokers, lending short term money that is actually provided by unlicensed and unregistered independent third party lending partners, located in any state. The Texas Credit Services Organization Act defines a credit services organization (CSO) as a business that improves a consumer’s credit history or rating, obtains an extension of consumer credit for the consumer, provides advice, or offers assistance regarding the consumer’s credit history or rating. This short term lending by payday lending companies loosely qualifies under the act as an “improvement of credit” for the borrower. Payday lenders unconditionally guarantee the repayment of these loans to third party lenders to encourage their partnership in making these high risk loans to desperate borrowers.

Using the credit services organization business model, payday lenders are able to avoid the rate and fee caps that govern traditional consumer loans under stricter Texas Finance Code which caps short term loans at 10% interest and fees. In addition, CSO’s are not subject to enforcement by the Texas Office of the Consumer Credit Commissioner, which regulates traditional consumer lenders including banks. Due to this loophole, payday lenders are able to sidestep stronger Texas consumer protection laws and charge exorbitant, uncapped rates and fees back to the borrower.

The Texas Credit Services Organization business model is so accepted and widely recognized, that an internet search for “Texas CSO business model” returns results with training materials and manuals available for sale, providing instructions for businesses to effectively operate and profit using this model. Profitability comes at a high price for the consumer in Texas, as CSO fees are required to be disclosed as Annual Percentage Rates(APR) under the federal Truth In Lending Act(TILA) and rates as high as 1200% have been charged back to borrowers by payday lenders, according to court documents.

Plaintiffs in both class action complaints seek to recover actual, statutory and punitive damages as well as any pre or post judgment interest on behalf of class members similarly situated. Attorneys Marshall Meyers, Noah Radbil and Dennis Kurz of Weisberg and Meyers LLC, Attorneys for Consumers are representing the plaintiffs.

Background Information

About Ace Cash Express
ACE Cash Express, Inc. is a leading retailer of financial services, including short-term consumer loans, check cashing, and bill payment and prepaid debit card services, and the largest owner and operator of check cashing stores in the United States and the second largest owner and operator of short-term consumer loan stores in the United States. As of May 2010, ACE had a network of 1,751 stores in 37 states and the District of Columbia, consisting of 1,683 company-owned stores and 68 franchised stores. ACE focuses on serving consumers, many of whom seek alternatives to traditional banking relationships in order to gain convenient and immediate access to financial services. ACE Cash Express is held by private equity firm JLL Partners.

About Cash America International
Cash America International, Inc. is a company serving the under banked segment of the population. They consider their company to be the market leader in secured non-recourse lending, providing short-term capital to customers in the United States and, recently, in the United Kingdom, Australia and Canada.

About Weisberg & Meyers, LLC, Attorneys for Consumers
Weisberg & Meyers LLC, Attorneys for Consumers, is a nationally recognized consumer law firm, has attorneys licensed to practice in Arizona, Colorado, Florida, Georgia, Illinois, New Jersey, New Mexico, New York, North Carolina, Oklahoma, South Carolina, Tennessee, Texas and Washington, and works with attorneys throughout the country to protect the rights of aggrieved consumers. The Firm’s diverse practice includes claims under the Fair Debt Collection Practices Act (FDCPA) and Fair Credit Reporting Act (FCRA), as well as violations of the Telephone Consumer Protection Act (TCPA), Truth In Lending Act (TILA), the Electronic Fund Transfer Act (EFTA), Fair Credit Billing Act (FCBA), Equal Credit Opportunity Act (ECOA), Consumer Leasing Act(CLA), Credit Repair Organizations Act, (CROA) and State Unfair and Deceptive Practices Acts (UDAP). The Firm also offers Debt Settlement services, prosecutes Class Action Lawsuits, and handles Breach of Warranty, Lemon Law and Consumer Fraud Claims.    

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