Local news 5 broke the story regarding a $2.5M settlement by a payday lender, Pacific Financial Holding dba Fast Cash Loans.
What’s remarkable is that the plantiff’s attoneys got 10,000 people to participate. I don’t know a lot about class action law suits, but each person will probably get $200 and the attorney’s will split up $500k. This does not include the attorney’s fees for the defendants.
I guess the practical advice is don’t leave voicemails, don’t send threatening letters and be nice to people, whether they pay you or not.
Part of the dilema for payday lenders is that if they outsource their collections, they tend to start throwing good money after bad money. This is one way to hedge your loan companies exposure.
A collection agency out of Florida collection agency was sued in Illinois for threatening people. There did not seem to be any suits filed against the lender, in this situation.
Comments
2 responses to “Fast Cash Loans Settles $2.5M Class Action Suit”
After reading the story, AND the voicemail quotes, it looks pretty clear that the messages were outside of FDCPA guidelines. Although technically, a first party creditor is exempt under the law form the FDCPA, most creditors that I have worked with in my career choose to follow its common sense guidelines.
This does however make a strong argument for automated messages. The cost for IVR messaging is cheaper, cleaner, and you know that each and every message left is exactly compliant with your message to customers.
For the second point, in an outsourced collection environment, the PDL company (creditor) is protected via the contract with the agency against improper collection techniques, and the agency itself is governed by the federal regulations of the FDCPA.
A reputable agency is not going to cross these lines as it is a lose-lose proposition. in a contingency environment, the agency only gets paid when it recovers money for its clients, and there is no margin in getting sued like this.
In my career, it has always benefited my PDL clients for the agencies to take a proactive stance to both comply with customer and federal guidelines, and to work with the delinquent customers to get them current on their bill, and eligible to become a repeat customer for the PDL creditor.
Please feel free to reach out to me if you have questions.
Jack
Jack, this is an excellent recommendation. Thanks for particpating.