Update on Ohio Neighborhood Finance, Inc. (dba Cashland) v. Scott, C.A. No. 11CA010030

January 4, 2013

Cash America customers taken to court for collections of payday loans will be refunded because of technical problems in legal documents.  Payday lender Cash America said it would issue refunds to 14,000 Ohio customers it had sued for past-due loans because of “technical errors” in legal documents.

The decision comes on the heels of Monday’s Ninth District Court of Appeals decision that Cash America’s Ohio division, which does business here as Cashland, improperly made payday loans under the state’s mortgage lending act.

That 2-1 decision upholds a ruling by an Elyria magistrate that Cashland cannot charge customers more than 8 percent interest on its loans, the state’s default rate for loans that aren’t specifically exempted from state usury caps. Cashland is considering appealing the decision to the Ohio Supreme Court.

The company said it would reimburse any money that customers paid in response to all debt collection suits filed in 2008 and after. Pending cases will be dismissed, with one notable exception, that of Ohio Neighborhood Finance, Inc. (dba Cashland) v. Scott,  C.A. No. 11CA010030.  http://www.supremecourt.ohio.gov/rod/docs/pdf/9/2012/2012-ohio-5566.pdf

Payday loans are high-cost, two-week loans made against a consumer’s next paycheck. In 2008, Ohio passed a law popularly known as the Short Term Lending Act, which capped the annual percentage rates, or APRs, on short-term loans at 28 percent.

Payday lenders have done an end-run around the law, dodging the interest rate cap by issuing payday loans under the state’s mortgage lending or credit service Ohio Neighborhood Finance, Inc.  The Scott case challenged that practice. The Ninth District’s opinion bars  Cashland from collecting more than the default interest rate on loans that the court said properly should have been made under the short-term loan act.

Murray & Murray lawyers John T. Murray and Leslie Murray are currently litigating on similar issues in The Cuyahoga County Court of Common Pleas in the case of Ohio Neighborhood Finance, Inc.DBA Cashland, Inc.v. Vanessa L. Leggett.

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