Office of the Attorney General News Release ArchiveTuesday, October 31, 2000
AG's OFFICE GETS FAVORABLE VERDICT IN 'PAYDAY' LOAN SCAM
Interest Rates as High as 780% Cited in Trial
McALLEN - The state of Texas has prevailed in cases against two "payday" lenders in Hidalgo County who made loans without a license from the Office of Consumer Credit Commissioner while charging exorbitantly high interest rates.
The two businesses, EZ Cash and Quick Cash, and owners George Moreno and Anna Gaytan, were found by jury verdict liable to pay $250,000 and $17,500, respectively, to restore interest overpayments resulting from rates as high as 780% paid by unsuspecting customers of these businesses. Combined civil penalties were $12,000 and state's attorneys fees total $36,000.
The jury also found that the defendants used threats or coercion to collect money from customers, including the threat of filing criminal charges, when no law had been violated by these customers.
"These are clearly illegal acts perpetrated by unscrupulous individuals," said Attorney General John Cornyn. "The people of this state have no tolerance for lenders who prey on those least able to protect themselves against these kinds of practices."
Businesses that engage in payday loan arrangements typically lend small amounts to customers who face short-term financial difficulties and often live paycheck to paycheck, with little access to mainstream forms of credit. However, the usurious interest rates exacted against these customers caused much more harm than their original financial difficulties.
As a result of the jury's findings EZ Cash and Quick Cash violated the following:
Under Texas law, interest rates on short-term loans must be capped at 10%, unless made by a licensed lender. Neither of these businesses are licensed lenders.
These lawsuits were filed at the request of Consumer Credit Commissioner Leslie J. Pettijohn.
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Contact Mark Heckmann, Heather Browne, or Tom Kelley at (512) 463-2050
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