After three years of litigation, at least 406 Montana consumers who took out Internet payday loans at exorbitant interest rates from LoanPoint USA will have their loans forgiven and many will share a $233,000 settlement.
Geneva Roth Ventures, Inc., which does business under the name LoanPoint USA, was making the loans without being registered to do business in Montana.
After a class-action lawsuit that went all the way to the U.S. Supreme Court, consumer attorneys reached a settlement with Geneva, which is based in Mission, Kan.
Billings attorney John Heenan, of the Bishop Heenan law firm, and co-counsel assistant attorney general Chuck Munson, of Helena, presented the settlement Wednesday to Yellowstone County Judge Russell Fagg, who quickly approved the deal.
“We’re both really proud that real money will go out to these people,” Heenan said. “This is an important restriction against high-interest payday lenders.”
The case began in 2011 when Tiffany Kelker, of Billings, sued over her $500 Internet loan. Over a six-month period, she paid more than $2,100 to LoanPoint, but still owed the original $500 principal.
Kelker was the lead plaintiff in the class action suit because she was paying 800 to 1,000 percent interest, Heenan said. Montana law caps the rate at 36 percent.
Other states, including West Virginia, have settled similar cases with LoanPoint, but for about one-eighth as much money, Heenan said.
The company also agreed to stop doing business in Montana unless it registers with the state, Munson said. The settlement applies to Montanans who have borrowed money from LoanPoint since Aug. 31, 2009.
All the Montanans involved in the suit will have their debts forgiven.
There is an additional bonus for the 335 borrowers who actually paid LoanPoint back. They will receive checks ranging from $27.30 to $2,947 out of the $233,000 settlement.
“We’re not going to pay a windfall to people who haven’t paid their loans back,” Munson said.
The average refund will be $497 and the checks will be mailed within 20 days.
LoanPoint also agreed not to harm borrowers’ credit ratings or try to collect debts through third-party collection agencies.
Before approving the settlement, Fagg questioned the $30,000 fee requested by the Bishop Heenan law firm, saying it seemed low.
“It seems like that’s a very, very reasonable fee,” Fagg said, about a case that was appealed to the U.S. Supreme Court.
Heenan said class-action settlements get a lot of bad publicity when lawyers’ fees eat up too much money.
“People are rightly concerned in some consumer actions that the consumer gets coupons and their lawyers get all these attorneys’ fees,” he said.
Another $30,000 was paid to the Washington, D.C., attorney that handled the U.S. Supreme Court appeal. The state of Montana will receive $6,000 to cover the costs of locating the borrowers and mailing checks.
Geneva’s attorney, Peter Habein of the Fleck Crowley law firm, also urged Fagg to approve the class action settlement.
While the exact amount of debt being forgiven wasn’t calculated exactly, Heenan said it amounted to several hundred thousands of dollars.
In a separate, but related, action, Geneva sued to force the Kelker case to be settled by an arbitrator. Fagg ruled in Kelker’s favor and so did the Montana Supreme Court. Geneva then petitioned those decisions to the U.S. Supreme Court. The parties reached a settlement before the high court could decide whether to hear the case.
“Montana now has the best consumer protection against unfair arbitration laws in the country,” Heenan said.