State cuts deal with payday lending company
Firm with 13 offices, including one in GJ, will refund clients for overcharges back to 2004
Attorney General John Suthers reached a settlement agreement Tuesday with a payday lending company that was overcharging its clients.
Security Finance, which has 13 offices throughout Colorado, including one in Grand Junction, is to refund fees it charged consumers going as far back as 2004.
The small-installment lender violated the Uniform Consumer Credit Code through its lending practices, Suthers’ office said.
According to a lawsuit filed by the state against the company in 2008, the lender would refinance loans that increased the amount of fees it could legally charge, but it made them so high that its clients couldn’t pay them off. The company will close all of its Colorado offices as a result of the suit.
“Colorado’s lending laws are designed to ensure that consumers are given a fair shake when they need to borrow money,” Suthers said in a statement. “This case marked the first time my office alleged a lender was making loans to consumers who had no reasonable ability to pay off the loans.”
Suthers said the company, which operates a branch at 1059 North Ave. in Grand Junction, also was suspected of misstating its customers’ net monthly income in order to lend them larger loans than they had the ability to repay.
By law, payday lenders are limited to offering loans no greater than $1,000 that must be repaid within 12 months. The law also caps to three the number of times a loan can be refinanced, and it prohibits lenders from loaning money to people who do not have a reasonable ability to repay.
As a result of the case, the payday lender and its parent company, Security Finance Corporaton of Spartanburg, S.C., is to close all of its operations and surrender its lending licenses. It also will pay $125,000 to the state to cover attorney and witness fees.
The lawsuit against Security Finance was one of the reasons that spurred the Colorado Legislature this year to revamp the way payday lenders operate. Under current law, they can charge the equivalent of 500 percent in annual interest rates in some cases.
A measure that awaits approval by Gov. Bill Ritter would cap that rate to about 135 percent a year.