Class action against payday lender settles for $25M

A class action lawsuit against Quik Cash has been settled for nearly $25 million in debt forgiveness and cash payments.

An American Arbitration Association panel approved the settlement in January, and, in accordance with the settlement agreement, the parties filed a motion to in the St. Louis County Circuit Court to have the settlement entered as a judgment.

The judgment became final Feb. 28, and distribution will begin at the end of March, class lawyer John Campbell said.

The plaintiff, Dequae Woods, filed a class action lawsuit in the St. Louis County Circuit Court in October 2006. She alleged, in part, that QC Financial Services Inc., doing business as Quik Cash, violated the Missouri Merchandising Practices Act as well payday lending laws, which deal with unsecured loans of up to $500.

Quik Cash “built a system designed to make these long-term loans profitable for them and bad for customers,” Campbell said, summarizing the class allegations. The class is defined as all people, not connected with QC Financial Services, who took out payday loans between Oct. 11, 2001, and Sept. 1, 2011, at any Quik Cash location in Missouri.

Quik Cash denied all the allegations.

Woods’ lawsuit was the first to be filed against Quik Cash since the payday lender began doing business in Missouri.

The contract Woods, and all other borrowers, was required to sign included a mandatory arbitration clause that barred class action lawsuits and class arbitration. St. Louis County Circuit Judge Richard Bresnahan declared the class waiver unconscionable and severed it from the rest of the mandatory arbitration clause. The Missouri Court of Appeals Eastern District affirmed Bresnahan’s decision in December 2008. The state Supreme Court denied transfer in May 2009.

The dispute then went to the AAA panel, which scheduled a hearing on Woods’ motion for class certification for Aug. 8, but on Aug. 2 the parties agreed to a tentative settlement.

According the motion asking the AAA panel for final approval of the settlement, the agreement will translate to debt forgiveness for 107,900 people and cash payments to 15,597 people.

Campbell explained, “If you still owed money to the company, you got debt forgiveness. If you were free and clear of the company, you got money.”

The agreement calls for cash payments of $3.62 per loan. Those with 12 or more loans will receive $43.44.

“Basically there was a fixed amount of cash and the settlement said that the amount per loan would be pro rata,” Campbell explained in an email. “We had over 15k claims that represented over 100,000 loans, so that is how the math worked out.”

The total cash distribution is estimated at $455,000, and the total cost of administering the settlement is $209,095, according to the joint motion for final approval.

Almost every class member will receive 100 percent debt forgiveness, he said. Roughly 15,506 people will have 50 percent of their debt forgiven; those class members incurred their debt between Sept. 1, 2010, and April 1, 2011.

The agreement also requires Quik Cash to post notices in every Missouri store to provide customers with information concerning loan length options and a disclosure that competitors may give customers more time to pay off loans, among other things.

The Simon Law Firm will receive roughly $1.2 million in fees and costs. Campbell said fees and costs come to just 5 percent of the settlement amount. Woods is to receive a $10,000 honorarium fee.

In addition, any checks that are not cashed will be divided between two charities: Beyond Housing of St. Louis and Project XOXO, Campbell said.

The case is Woods v. QC Financial Services Inc., d/b/a Quik Cash, 12SL-00318