Check ‘n Go and Money Mart litigation settlement secures direct restitution to overcharged consumers, employed innovative social media outreach tactics
SAN FRANCISCO (August 5, 2013) — City Attorney Dennis Herrera today announced that more than 2,000 claimants for restitution from storefront payday lender Check ‘n Go will begin receiving refund checks this week as a result of his office’s consumer protection litigation settlement and statewide outreach program. All Check ‘n Go claimants are expected to receive their refund checks — totaling nearly $2.2 million — by the end of the month, according to the independent settlement administrator. The payments to Check ‘n Go borrowers conclude a major consumer protection initiative by Herrera’s office that previously netted more than $5.5 million in similar refunds from payday lender Money Mart/Loan Mart for some 8,100 claimants statewide.
In total, Herrera’s litigation secured $7,725,324 for more than 10,000 eligible borrowers throughout California.
“This has been an enormously successful effort — not just to win restitution for California borrowers who deserve it, but to send a message to payday lenders that they’ll be held accountable for flouting consumer protection laws,” said Herrera. “I’m very grateful to the many elected officials, community organizations and consumer advocates who worked so hard to educate potential claimants about the refund programs. It was a great collaborative effort that maximized restitution for borrowers, and showed that California’s consumer protection laws have teeth.”
Both the Check ‘n Go and Money Mart/Loan Mart refund programs arose from a settlement of litigation that Herrera’s Consumer Protection Unit originally filed on April 26, 2007. Herrera’s complaint offered evidence from his investigation that the Mason, Ohio-based Check ‘n Go and Berwyn, Pa.-based Money Mart each conspired with an out-of-state bank to circumvent California’s interest rate and loan principal limits. According to the civil action filed in San Francisco Superior Court, Check ‘n Go and Money Mart engaged in so-called “rent-a-bank” arrangements with the First Bank of Delaware, marketing installment loans with annual percentage rates that exceeded 400 percent — far in excess of California’s 36 percent maximum allowable annual interest rates for such loans. In addition, Herrera’s action challenged Money Mart’s marketing of over-size payday loans, which charged unlawfully high fees. Both the installment and payday loans were marketed largely to low- and middle-income borrowers.
‘Pay Me Maybe,’ ‘Less Miserable‘ viral videos highlighted innovative effort
After agreeing to resolve the litigation with terms that included an independent settlement administrator to facilitate refunds and a “reasonable effort” by the defendant lenders to notify their borrowers, Herrera’s office launched an aggressive statewide public outreach program to educate the communities targeted for installment and payday loans, which were most likely to be eligible for refunds. The program would ultimately partner with hundreds of consumer advocates, elected leaders, and church and community organizations, and employ innovative social media tactics to communicate information about eligibility for the refund program.
The three-month outreach drive targeting Money Mart and Loan Mart borrowers (which concluded on Oct. 1, 2012) employed a highly successful satirical viral video whose “Pay Me Maybe” lyrics were set to the tune of Carly Rae Jepsen’s hit song, “Call Me Maybe.” The online video offered a clever send-up of one of 2012’s most ubiquitous Internet memes, and earned extensive news coverage in online and broadcast news outlets. The success of that innovative social media strategy led the office to launch a similar outreach campaign targeting Check ‘n Go borrowers who were eligible for refunds. Herrera’s office and partner organizations premiered a viral video parody of the trailer for the Oscar(r)-nominated film “Les Misérables” during Academy Awards week earlier this year at events in both Los Angeles and San Francisco. The video, called “Less Miserable,” drew parallels between travails of the 19th Century French peasants and modern day financial challenges that can force consumers to turn to online and storefront predatory lenders. It, too, earned national broadcast news coverage.
About the S.F. City Attorney’s Consumer Protection Unit
The San Francisco City Attorney’s Office’s Consumer Protection Unit pursues public interest causes of action under California’s Unfair Competition Law, which are funded virtually exclusively by civil recoveries — not taxpayer dollars. The award-winning program, for which the National Association of Consumer Advocates recognized Dennis Herrera as its 2009 Consumer Attorney of the Year, reflects voter-enacted changes to California law that require civil penalties recovered by public prosecutors to be used exclusively to enforce consumer protection laws. Since voters passed the amendments as part of Proposition 64 in 2004, Herrera’s Consumer Protection Unit has recovered some $20 million in successful battles against unlawful business practices that include price-fixing, illegal marketing, credit card collections arbitration scams and more. The unit has won equally important industry changes to protect consumer privacy, reformed discriminatory practices in health insurance and media metrics, shuttered an unlawful immigration law practice, halted predatory evictions, ended fraudulent product marketing, and recovered wages and benefits for victims of wage theft.
The litigation is: People of the State of California ex rel. Dennis Herrera v. Check ‘n Go of California, Inc., et al. (San Francisco Superior Court Case No. CGC-07-462779).