Settlements tackle predatory financial schemes of Money Mart and National Arbitration Forum
SAN FRANCISCO (Oct. 19, 2011)— City Attorney Dennis Herrera secured two major settlements this week with Money Mart and the National Arbitration Forum. The Money Mart settlement will provide restitution to California consumers of some of the fees and interest that they paid on the payday loans and installment loans that Herrera challenged. Both settlements forbid the two companies from engaging in similar schemes in California and require them to pay the City & County of San Francisco a total of $1.875 million dollars.
“It is no coincidence that people are angry at Wall Street’s financial irresponsibility and its impact on average Americans living on Main Street,” said City Attorney Dennis Herrera. “People are squeezed financially, and many are resorting to storefront lenders such as Money Mart. But some of these companies’ schemes are pushing individuals and families further in debt. I hope that today’s settlements send a strong message to other financial institutions to protect the interests of consumers.”
In 2007, City Attorney Dennis Herrera filed suit against storefront payday lender Money Mart, together with an associated out-of-state bank, for unfair and fraudulent business practices stemming from their marketing of short-term installment loans and oversized payday loans at exorbitant and illegal interest rates to low-income borrowers. Such loans often target low-income and working class families living paycheck to paycheck. According to Herrera’s complaint, Money Mart illegally offered oversized loans of up to $1,500—with annual percentage rates exceeding 400 percent—through a questionable arrangement with the First Bank of Delaware, which Herrera charged was a deliberate effort to circumvent California’s interest rate and loan principal limits.
Today’s settlement with Money Mart requires the company to repay California consumers some of the interest and fees they paid on these loans from a restitution fund of up to $7.5 million. Money Mart is also required to forgive $8 million in other debt owed by California consumers. In addition, Money Mart is prohibited from affiliating with out-of-state banks to make similar loans for 30 months and will pay the City & County of San Francisco $875,000.
City Attorney Dennis Herrera also secured a settlement with National Arbitration Forum, Inc. (NAF), which until 2009 was the go-to arbitration provider for credit card companies trying to collect debts from consumers. NAF and its affiliates held themselves out as neutral in collections arbitrations but its arbitration administration operation was secretly partly owned by a hedge fund that also owned one of the debt collection companies that used NAF to collect debts. NAF also acted as a one-stop shop for debt collectors, helping them to set up arbitration programs and offering to help them improve their debt collection rates. Under the settlement, the Superior Court has entered an injunction requiring the National Arbitration Forum to stop arbitrating debt collection cases in California forever, and to stop arbitrating employment disputes for three years. NAF will also make a $1 million payment to the City & County of San Francisco.
The City Attorney’s cases are: People of the State of California v. National Arbitration Forum, Inc., San Francisco Superior Court No. 473-569, filed March 24, 2008; and People of the State of California v. Check ‘n Go of California Inc, Monetary Management of California, Inc. d/b/a Money Mart, San Francisco Superior Court No. 462-779, filed April 26, 2007.
PDF copy of the Judgment and Judgment and Stipulated Injunction and Order for Entry against Money Mart (Sept. 29, 2011)
PDF copy of injunction, Findings of Fact, and Order for Entry of Judgment Pursuant to Stipulation against NAF
PDF copy of Judgment Pursuant to Stipulation Against National Arbitratioin Forum, Inc.; National Arbitration Forum, LLC; Dispute Management Services, LLC DBA Forthright.