Fort Worth Firm to Pay Back $39.7 Million on Payday Loans That Charged 375% Interest

A Fort Worth financial firm will cancel its outstanding loans and pay nearly $40 million to consumers after engaging in an alleged payday lending operation that used Native American tribes as shields from state laws.Think Finance Inc. serviced loans that charged interest rates over 375% and locked borrowers into plans in which paying off the loan was nearly impossible, according to a 2016 complaint filed in Vermont.The loans were originated by Plain Green LLC, an online lending business purportedly owned by the Chippewa Cree Tribe of Montana.The loan agreements were designed to avoid state laws that cap interest rates by clarifying they were “not subject to the laws of any state of the United States.”Ann Baddour, director of the fair financial services project at the nonprofit Texas Appleseed, called the settlement an important step forward.“There are so many different schemes that have come up nationally around payday and title lending that are designed to get around state laws,” Baddour said. “It’s important that we push back on that. Interest rate caps matter.”The consumer settlement stems from Think Finance’s bankruptcy filing in October 2017. Lawsuits against Think Finance’s lending practices were filed in Vermont, Virginia, Florida, North Carolina and California.The defendants agreed to stop the business practices that led to the lawsuits but did not admit wrongdoing. The agreement must be approved by the bankruptcy court in Dallas and all parties before it becomes effective.The $39.7 million to be paid by Think Finance will go into a trust for affected consumers, according to the agreement's terms. GPL Servicing, a subsidiary of Victory Park Capital Advisors, will put $7.5 million into the trust. Victory Park funded much of Think Finance’s business. Tribal defendants and others named in the lawsuit will pay $16 million.The settlement also requires the cancelation of all outstanding loans serviced by Think Finance. An estimated count of such loans has not been provided.Jay Speer, executive director of the Virginia Poverty Law Center, said the proposed cancellation is significant.“I’m sure a lot of people are still paying on it,” he said. “A lot of these people have paid back already what they originally took out as a loan.”Think Finance was founded in 2001 in Fort Worth and employs just under 200 people. It spun off its consumer lending arm into a new business, Elevate, in 2014. Think Finance now focuses on providing analytics and marketing services to payday lenders.Earlier this year, the company and its subsidiaries were ordered to pay $7 total to the Consumer Financial Protection Bureau.Texas had more than 2,000 payday lending storefronts in 2017, according to Texas Appleseed, a nonprofit that promotes social and economic justice in the state. Nearly 300 of those were in the metropolitan areas around Dallas, Plano and Irving.One of the nation’s largest payday lenders, FirstCash Inc., is headquartered in Fort Worth. Its revenue topped $1.8 billion last year. The company’s 2,111 locations nationwide operate as pawn shops and offer check-cashing services, payday loans and cash for gold.Interest rates on payday and auto title loans in Texas ranged from 209% to 530% in 2017. The average cost to repay a $500 loan with no refinances was between $586 and $1,288. When borrowers refinance their debt, total payment on a $500 loan can exceed $3,000.The consumer lending industry is more active in Texas because of the state’s permissive lending laws, experts say.“Texas is quite the outlier nationally, and not in a good way,” Baddour said.A number of municipalities in North Texas have enacted their own ordinances to promote payment structures that allow loans to be paid back.Speer at the Virginia Poverty Law Center said it’s not guaranteed a ruling like this will deter companies from creating similar operations in the future.“We’ve sued a lot of these companies, probably a dozen of them,” he said. “But there’s so much money in it. They just pay the price and keep going.”Think Finance and its attorneys did not immediately respond to requests for comment.  Continue reading...