Three file suit against check-cashing chain in U.S. District Court

Terms of `payday loans' exceed allowable interest in Md., plaintiffs contend

May 13, 2000|By Gail Gibson | Gail Gibson,SUN STAFF

An Arlington, Texas, company with 28 check-cashing outlets across Maryland violated state and federal law by making short-term, high-interest "payday loans," three Baltimore residents contend in a federal lawsuit.

The suit is the third such case to be filed this year in U.S. District Court in Baltimore. Plaintiffs in all three want their cases certified as class-action lawsuits, which means that potentially hundreds of people who have paid high fees for fast cash could be represented.

The latest suit was filed Thursday on behalf of three Baltimore residents who took out loans against their next paychecks by writing postdated checks to the businesses. The fees on such transactions often work out to an annual interest rate of 500 percent or more.

Critics say the lenders prey on the poor and violate state and federal consumer loan laws. In Maryland, state law limits annual interest on small loans at 33 percent. Lenders have countered that they are simply charging a fee for a needed service.

The lawsuit filed Thursday was against Texas-based First Cash Financial Services and Famous Pawnbrokers Inc. The company operates 142 pawnshops and check-cashing outlets across the country, according to its corporate Web site; 28 Maryland locations are identified in the suit.

Company officials did not return a phone call yesterday seeking comment.

Two of the plaintiffs, Karen Dowhite and Sheila Diane Dowhite, both of Shamrock Avenue in Northeast Baltimore, say that they were charged annual interest rates approaching 500 percent for loans they took out this year and in 1999. The third plaintiff, Rudolph A. Greene Sr. of West Franklin Street in West Baltimore, faced similarly high rates and was threatened with criminal prosecution for not paying after he took out a payday loan in 1999 at Famous Pawnbrokers/First Cash at 6623 Reisterstown Road in Baltimore, the suit says.

Attorneys representing the three plaintiffs also filed the two earlier check-cashing suits.

A suit filed in January named as a defendant Colleen Inc., which does business as A&B Check Cashing, Hollinswood Check Cashing and People's Check Cashing Service. And a similar suit was filed in February against Mr. Cash Inc.

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