Arizona Attorney General Terry Goddard filed a lawsuit alleging deceptive business and debt litigation practices against national payday lender Quik Cash (QC Holdings, Inc., and subsidiary QC Financial Services, Inc.).
The lawsuit seeks up to $5 million in restitution, asks the court to set aside hundreds of deceptively obtained court judgments against Arizona payday loan borrowers and seeks to stop the company from doing business in Arizona.
The suit, filed in Pima County Superior Court, alleges that Quik Cash engaged in a pattern of deceptive business and debt collection litigation practices against hundreds of Arizonans from across the state from 2007 through 2009. The Attorney General requested a Temporary Restraining Order to stop the payday lender from violating Arizona law by deceptively suing debtors in improper court venues.
“The deceptive business and debt litigation practices alleged in the complaint are outrageous and make a mockery of Arizona’s Justice Court system,” Goddard said. “The practices alleged in the complaint allowed the company to obtain a veritable assembly line of default judgments against borrowers who could not pay off their payday loans.”
Quik Cash is one of the largest publicly traded payday lenders in the country with 585 stores nationwide as of last year. Quik Cash has about 38 locations in 12 Arizona counties. In 2008, QC Holdings reportedly originated some $1.35 billion in payday loans and posted revenues of approximately $180 million in payday loan fees. In 2008, profit from its Arizona branches represented nearly 8 percent of its total revenues.
The complaint alleges that from 2007 through 2009, Quik Cash entered into payday loan agreements with consumers from across the state, promising that the agreements would be governed by Arizona law. However, the company then engaged in a widespread deceptive practice of suing hundreds of Arizona payday loan customers from outside of Pima County in the distant forum of Pima County Justice Court. These court filings were far from where the consumers lived or where the loans occurred in alleged violation of state law.
The complaint alleges that Quik Cash’s pattern of deceptive litigation tactics benefited the company by reducing its costs and making it more likely to obtain default judgments against Arizona consumers. After filing suit in the wrong court and county, Quik Cash pursued default judgments and wage garnishment actions in the same distant court venue.
The suit further alleges that Quik Cash deceptively advertised and represented that it follows “mandatory” industry standards requiring lawful methods of debt collection. The suit contends that Quik Cash began aggressive new collection strategies to counter the company’s increasing losses and decreasing collections.
The suit states that at least one Justice of the Peace in Pima County issued orders in several Quik Cash debt collection cases informing the company that it had sued in the wrong court and/or ordering the company to file in the correct county. Quik Cash even sued Nevada customers in Pima County, even though the customers had obtained their payday loans in Bullhead City, Ariz.
Arizona law requires lawsuits on small claims ($10,000 or less) to be filed in Justice Court and in the Justice Court precinct where the defendant lives or where the transaction occurred.
The lawsuit specifically alleges:
- Quik Cash misrepresented to customers that its payday loan agreements will be governed by Arizona law, when in fact the company knowingly violated Arizona law by filing debt collection lawsuits in the incorrect court venue.
- Quik Cash deceptively engaged in “distant forum abuse” by improperly filing lawsuits against Arizonans from across the state in Pima County Justice Court in violation of Arizona law, which increases the debt burden and makes it difficult for consumers to respond, thus increasing the likelihood of obtaining default judgments.
- Quik Cash deceptively filed related default judgments and garnishment actions against consumers in the same distant venue after having deprived consumers of their day in court at the outset of the debt collection litigation.
- Quik Cash deceptively advertised that it follows “mandatory” payday lender association standards requiring lawful collection methods.
The suit asks the Pima County Superior Court to:
- Prohibit the defendants from engaging in deceptive or false business practices and advertising and from doing business in the State of Arizona.
- Impose a penalty of up to $10,000 for each violation of the Arizona Consumer Fraud Act, which could be up to $5 million in this case.
- Set aside the deceptively obtained default judgments against consumers.
- Require the defendants to reimburse the Attorney General for costs of the investigation and reasonable attorneys’ fees.
Assistant Attorney General Vince Rabago is prosecuting this case. For more information, please contact Steve Wilson at (602) 542-8351.