The Oregonian | By Aimee Green | May 3, 2016
In August 2013, Stephanie Banks was battling lung cancer. She also was struggling with her finances. So she turned to Rapid Cash for help.
She took out a $300 loan from the payday and title loan lending company with a storefront in Southeast Portland. The annual percentage rate was 153 percent, the most allowed under Oregon law.
Soon after, Banks became too weak to work her $15-an-hour job as a bookkeeper at the Salvation Army and she declared bankruptcy.
Banks thought the $300 loan was history until nine months ago when she got a letter in the mail claiming that she owes $40,000.
“I said, ‘These people are trying to give me a heart attack. … I don’t have $40,000,'” recalled Banks, 62, whose cancer is now in remission. She lives in the St. Johns area of North Portland.
Banks wondered how $300 turned into $40,000. So did Michael Fuller, a consumer lawyer in Portland who has taken on Banks’ case for free.
Banks and Fuller still haven’t been able to get any answers, they said.
Because of a clause in the loan contract Banks signed, they also haven’t been able to go to court to dispute the $40,000 amount — or argue that Banks shouldn’t owe any money to Rapid Cash or collection agency Ad Astra.
“The number has to be zero because she’s in bankruptcy,” said Fuller, who works as a consumer lawyer in private practice but also is an adjunct consumer law professor at Lewis & Clark Law School.
Rapid Cash didn’t respond to a request seeking comment. The 19-year-old company has more than 230 storefronts in 14 U.S. states and in Canada — under the names Rapid Cash, Speedy Cash or Cash Money.
On Tuesday, the parking lot at its 39th and Powell Boulevard storefront was full and a crowd of customers filled the lobby.
Banks has run up against a practice in the payday and title loan industry that consumer advocates are trying to change. The consumer agreements typically include a requirement that any dispute go before a private arbitrator of the company’s choosing.
So, in Banks’ case, her lawyer can’t go before a judge in U.S. Bankruptcy Court, U.S. District Court or Multnomah County Circuit Court to sort it all out.
That sets up an uneven playing field, said Fuller and Amanda Werner, a consumer advocate hired by two Washington, D.C.-based consumer groups — Public Citizen and Americans for Financial Reform — to campaign against forced arbitration clauses.
Payday and title loan companies pick arbitrators who are more likely to rule in their favor, Werner said.
“They’re only going to see Ms. Banks the one time she comes before them, whereas they’re probably going to see this payday loan company hundreds of times,” Werner said. “It tends to be a very lopsided process, where the consumer can’t get a fair shake.”
A study by the U.S. Consumer Financial Protection Bureau found that 99 percent of payday loan businesses in California and Texas have clauses requiring arbitrators — not a judge — to settle disputes. But arbitration clauses can be found in all sorts of written agreements — including contracts with credit card companies, gyms and cellphone and internet providers.
Arbitrators often aren’t required to have legal training and don’t have a sworn duty to follow laws, Werner said. Arbitration costs also can reach into the hundreds and even sometimes thousands of dollars, she said.
In Banks’ case, she also could be stuck with paying Rapid Cash’s attorneys fees. “Their agreement says just that,” Fuller said.
And in the end, the results of the arbitration are secret, so consumer advocates have no way of monitoring how these cases turn out, Fuller and Werner said.
Consumer advocates are enthusiastically anticipating what they expect to be a new rule announced Thursday by the Consumer Financial Protection Bureau, which has the power to ban or restrict forced arbitration in all sorts of consumer contracts, including those written by payday and title loans companies.
Werner said she expects that the new rule won’t include a broad ban on forced arbitration, but probably will ban contract language that prohibits consumers from filing class-action lawsuits. Consumer groups plan to continue to try to convince the bureau to ban all forced arbitration.
Banks knows that any future bans won’t affect her dispute. She doesn’t see any end to her fight, given that it could be many months or years before the arbitration process is over.
But Banks supports the consumer campaign and is thankful to have Fuller’s help, which he has offered pro bono.
Banks said she receives $1,240 a month in Social Security — and that’s barely enough to live off after paying her $890 rent.
“This will have to be sorted out, there’s no way I can pay $40,000,” Banks said. “If I could pay them $40,000, I wouldn’t have filed bankruptcy.”
https://www.oregonlive.com/portland/2016/05/300_loan_balloons_into_40000_d.html
