A Fort Worth financial firm will cancel its outstanding loans and pay consumers nearly $ 40 million after it engages in an alleged payday loan transaction that used Native American tribes as shields against state laws.
Think Finance Inc. has managed loans that charged interest rates above 375% and locked borrowers into plans in which loan repayment was nearly impossible, according to one. Complaint 2016 filed in Vermont.
The loans came from Plain Green LLC, an online loan company believed to be owned by the Chippewa Cree tribe of Montana.
The loan agreements were designed to avoid state laws that cap interest rates by making it clear that they were “not subject to the laws of any state in the United States.”
Ann Baddour, director of the equitable financial services project at nonprofit Texas Appleseed, called the settlement an important step forward.
“There are so many different programs that have sprung up nationwide around payday lending and securities lending that are designed to circumvent state laws,” Baddour said. “It’s important that we push this back. Interest rate caps are important.
The consumer settlement stems from Think Finance’s bankruptcy filing in October 2017. Lawsuits against Think Finance’s lending practices have been 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 the wrongdoing. The agreement must be approved by the Dallas bankruptcy court and all parties before it becomes effective.
The $ 39.7 million to be paid by Think Finance will be paid into a trust for affected consumers, under the terms of the agreement. GPL Servicing, a subsidiary of Chicago-based Victory Park Capital Advisors, will invest $ 7.5 million in the trust. Victory Park funded a large part of Think Finance’s activities. Tribal defendants and others named in the lawsuit will pay $ 16 million.
The settlement also requires the cancellation of all outstanding loans managed by Think Finance. The estimated number of these loans was not provided.
Jay Speer, executive director of the Virginia Poverty Law Center, said the proposed cancellation was important.
“I’m sure a lot of people are still paying for it,” he said. “Many of these people have already paid back what they originally took out in the form of a loan.”
Think Finance was founded in 2001 in Fort Worth and employs just under 200 people. It transferred its consumer lending arm to a new company, Elevate, in 2014. Think Finance is now focused on providing analytics and marketing services to payday lenders.
Earlier this year, the company and its subsidiaries were ordered to pay a total of $ 7 to the Consumer Financial Protection Bureau.
Texas had over 2,000 payday loan stores in 2017, according to Texas Appleseed, a nonprofit organization that promotes social and economic justice in the state. Almost 300 of them were in the metropolitan areas around Dallas, Plano, and Irving.
Interest rates on payday loans and auto securities in Texas ranged from 209% to 530% in 2017. The average cost to pay off a $ 500 loan without refinancing was between $ 586 and $ 1,288. When borrowers refinance their debt, the total payment on a $ 500 loan can exceed $ 3,000.
The consumer loan industry is more active in Texas due to the state’s permissive loan laws, experts say.
“Texas is an outlier nationally, and not in a good way,” Baddour said.
A number of municipalities in North Texas have issued their own ordinances promoting payment structures that allow loan repayment.
Speer, of the Virginia Poverty Law Center, said there was no guarantee that such a move would deter companies from starting similar operations in the future.
“We have sued a lot of these companies, probably a dozen of them,” he said. “But there is so much money in it. They just pay the price and keep going.
Think Finance and its lawyers did not immediately respond to requests for comment.
CORRECTION, 3:30 p.m., June 21: A previous version of this article stated that FirstCash Inc. is one of the largest payday lenders in the country. It operates primarily as a pawnshop. Payday loans made up just over 3% of FirstCash’s revenue in 2018, according to the company’s annual filing with the SEC.