Tuesday, November 20, 2012

NM Judge Slams Fastbucks For Locking Borrowers Into Recurring Inescapable High-Cost Consumer Loans; 'Star' Employee Testifies: "We Just Basically Don’t Let Anybody Pay Off!"

Law Professor Nathalie Martin writes on Credit Slips:

  • [T]he 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.(1) 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.
For more, see New Mexico Court Finds FastBucks Loans to be Unconscionable.

For the ruling, see State of New Mexico v. Fastbucks Holding Corporation.

(1) The Unfair Trade Practices Act (UPA) is New Mexico's version of the state laws that prohibit unfair and deceptive acts and practices in trade and commerce (generically referred to as state UDAP statutes).

For more on UDAP statutes across the U.S., see Consumer Protection In The States: A 50-State Report on Unfair and Deceptive Acts and Practices Statutes.

(2) See Santa Fe New Mexican: Judge Vigil, just retired, wins $1 million lottery.

No comments: