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Wednesday, May 29, 2024 | Back issues
Courthouse News Service Courthouse News Service

Loan Company Evades Unconscionability Claim

OAKLAND, Calif. (CN) - Southwestern & Pacific Specialty Finance dba Check 'n Go need not face claims that it made unconscionable consumer loans, a federal judge ruled

Bill Graves and Minerva Lopez had filed suit earlier this year against the company, which operates a group of loan stores that offer payday and installment loans.

The putative class action alleged that Check 'n Go's loan agreements carry unreasonable terms in violation of California's Financial Code and Business and Professions Code.

Graves had entered into a $5,000 installment loan agreement with the company this past January.

It allegedly gave Graves nearly a full year to repay principal and interest in 26 installment payments. In addition to an annual percentage rate of 217.02 percent, the loan carried finance charges of $8,057.09, according to the complaint.

Graves said portions of the online loan application he filled out through the company's website appeared as "pop-ups" on his computer monitor, and that he was required to click on boxes to signify that he had "signed" the agreement.

Lopez said she entered into her loan agreement with Check 'n Go in December 2012. The loan of $2,600 allegedly required Lopez to repay principal and interest in 10 installment payments from Jan. 20, 2013, to Oct. 20, 2014. It included an APR of 198.17 percent and finance charges of $2,856.82, according to the complaint.

Lopez applied for her loan at one of Check 'n Go's stores.

Among allegedly unconscionable terms in the agreements, Graves and Lopez pointed to the amount of the finance charges and the APR. Graves claims to have paid at least $502 toward the amount owed, and Lopez allegedly paid at least $545.

Check N' Go moved to dismiss those claims and to strike the class action allegations.

Armstrong found Monday that "the granting of a motion to dismiss or strike class allegations before discovery has commenced should be done rarely."

"While defendant's arguments may ultimately prove to be persuasive, the court finds that defendant's motion to strike is premature given that defendant has not filed an answer to the complaint, discovery has not yet commenced, and no motion for class certification has been filed," the ruling states.

"In the absence of discovery and the presentation of specific arguments from both parties concerning class certification, the court lacks sufficient information to rule on the propriety of the class allegations," Armstrong added.

She did, however, dismiss the claim alleging violations of California's Financial Code and Business and Professions Code because "courts considering this issue have concluded that there is no private right of action to enforce a violation."

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