Payday Loan Companies Agree to $7M Class Action Settlement

Payday loan companies Payday Financial LLC, Western Sky Financial LLC, Cashcall Inc., and WS Funding LLC have agreed to pay $7 million to settle a class action lawsuit alleging that they misled consumers and charged interest rates higher than many states allow.

In July of 2013, lead plaintiffs Chad Martin Heldt, Christi W. Jones, Sonja Curtis, and Cheryl A. Martin filed the payday loan class action lawsuit alleging that the loan companies “conspired to charge usurious interest rates and deceive consumers” by telling consumers that they were “exempt from United States laws because of an affiliation with the Cheyenne River Sioux Tribe.”

On Nov. 4, the defendant payday loan companies and the lead plaintiffs jointly asked the court to approve the proposed settlement. In addition to the $7 million in cash, the payday loan companies agreed to automatically reduce the interest rate of current loans to Class Members to 18 percent, and to remove any items on class members’ credit history reports from the loan companies.

Members of the payday loan class action lawsuit are anyone who “obtained a loan from Western Sky that was subsequently purchased by WS Funding at any time between February 10, 2010 and September 8, 2013.” The payday loan companies believe that there are almost 350,000 eligible Class Members. They propose to send notice of the settlement to the last known address of each potential Class Member.

To receive part of the $7 million cash payout, potential members of the payday loan class action lawsuit will have to file a claim based on the amount of money each class member has paid on a loan with an interest rate higher than 18 percent, with a minimum of payment of $15.

Heldt, Jones, Curtis, and Martin all allege that they received loans from the defendant payday loan companies through the internet, were deceived by the companies’ false advertising, and paid a higher interest rate on their loans than various laws allow.

The payday loan companies continue to state that they did nothing wrong, that each loan agreement is governed by tribal law, and that the class action lawsuit should have been filed in Cheyenne River Sioux Tribal Court. In addition, the loan agreements prohibit consumers from filing class actions, and require arbitration. Nevertheless, the payday loan companies agreed to automatically reduce the interest rate of current loans to class members, which they estimate will cost them $32 million in lost revenue.

The payday loan companies also face lawsuits or administrative actions from at least 10 states and the Consumer Financial Protection Bureau over their advertising and loan practices. The future financial uncertainty of the payday loan companies was one reason the plaintiffs are requesting approval of this payday loan class action settlement.

More information about how to file a claim for the payday loan class action settlement was not immediately available. Keep checking TopClassActions.com or sign up for our free newsletter for the latest updates. You can also mark this article as a “Favorite” using your free Top Class Actions account to receive notifications when this article is updated.

The plaintiffs are represented by Patrick R. Burns of the Burns Law Firm, PLLC, and Shawn J. Wanta of Baillon Thome Jozwiak & Wanta LLP.

The Payday Loan Class Action Lawsuit is Heldt, et al. v. Payday Financial LLC, et al., Case No. 3:13-cv-3023-RAL, in the U.S. District Court for the District of South Dakota, Central Division.

UPDATE: On Feb. 12, 2016, after attempting to settle this payday loan class action lawsuit, the lenders have asked a federal judge to send the case back to tribal court because the plaintiffs are no longer interested in settling.