Tuesday, April 02, 2002

High Court turns down payday lending customers' case

By Gina Holland
Associated Press

        WASHINGTON — The Supreme Court passed up a chance Monday to review a case that asked about recourse for America's working class poor who want to sue payday lenders.

        The check-cashing businesses in poor neighborhoods lure customers with on-the-spot money. Justices refused, without comment, to consider whether those businesses' lending contracts can be disputed in court even if they included arbitration agreements. The case was from Kentucky.

        Legislatures around the country have debated how to regulate the nontraditional businesses, which in some states can charge unlimited interest rates.

        In payday lending, a cash-strapped customer writes a check for the amount he wants to borrow, plus a fee that the lender keeps. The lender holds the check until a set date — typically the borrower's payday — before depositing it.

        Courts have split over customers' rights in lawsuits over the transactions.

        Arbitration is a familiar subject at the Supreme Court, and justices have ruled that people should be held to their promises to settle any disputes through arbitration, not a lawsuit.

        The Supreme Court was told in this case that people were charged interest rates of about 500 percent.

        A group of people who got loans filed a lawsuit against Check Into Cash of Kentucky. Their lawyers do not dispute that some of the loan contracts included an arbitration agreement. But they say the contracts were illegal and against public policy.

        An appeals court dismissed those arguments.

        Lawyers for the check-cashing business warned the Supreme Court that if justices made an exception here, they could encourage more lawsuits by people in other areas. The lawyers said the company has done nothing wrong.

        The case is Burden v. Check Into Cash of Kentucky, 01-1078.


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