Unlawful Payday Lending

Payday loans—small, closed-end loans due in full on the borrower’s next “payday”—have a long and sordid history.  For years, unscrupulous lenders have taken advantage of desperate borrowers, who are unable to obtain funds anywhere else in order to make ends meet, by offering loans at usurious and unconscionable rates.  As a result, thirteen states and the District of Columbia have banned payday loans. Nevertheless, payday lenders operate on the shadowy fringe of the mainstream financial system, and many who are based offshore or (purportedly) on Indian reservations make use of the Internet to circumvent legal prohibitions to offer payday loans.

Tycko & Zavareei has taken a three-pronged attack against unlawful payday lending. First, Tycko & Zavareei, working with a team of experienced class action law firms, has filed ten class action lawsuits across the country against banks who act as Originating Depository Financial Institutions (“ODFI”)—middlemen between illicit payday lenders and the mainstream banking system.   The U.S. District Court for the Middle District of North Carolina rejected the ODFIs’ Motions to Compel Arbitration and Motion to Dismiss Plaintiff’s claims.  This victory enables Tycko & Zavareei to continue to vigorously litigate in order to bring down the unlawful scheme by which payday lenders operate.

Second, Tycko & Zavareei has filed two related class action complaints against major banks who process debits on their customers’ bank accounts from payday lenders.  According to allegations in the complaints, TD Bank and Bank of America process withdrawals on their customers’ bank accounts, despite the fact that they know these lenders’ operations are illegal.  Payday lenders’ abilities to defy state laws and debit borrowers’ checking accounts hinges on the cooperation of financial institutions like TD Bank and Bank of America. Therefore, Tycko & Zavareei is committed to aggressively litigate against these financial institutions in order to limit payday lenders from taking advantage of borrowers.

Finally, Tycko & Zavareei has gone after mainstream banks who directly offer payday loans to consumers. Disguising payday loans under the “FastLoan” cash advance program, BOKF, N.A. offers its customers’ loans structured just like traditional payday loans.  Similarly, Fifth Third Bank maintains a program that misrepresents the annual percentage interest rate associated with the bank’s Early Access payday loans.  Tycko & Zavareei has had noteworthy successes against these banks.  Recently, the U.S. District Court for the District of Colorado granted victory against BOKF regarding Plaintiff’s Motion for Summary Judgment and Plaintiff’s Motion for Class Certification.

If you would like to learn more about these ongoing cases, please contact us.

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