Payments arose from three class actions against payday lenders
Pictured (left-right): Mal Maynard, Jerry Hartzell, Carlene McNulty, Thomas Maher (IDS) and Evelyn Pursley (IOLTA)
RALEIGH (September 19, 2013) — Legal counsel in three major class action lawsuits against North Carolina payday lenders presented checks yesterday to the Indigent Person’s Attorney Fund and the North Carolina State Bar Plan for Interest on Lawyers’ Trust Accounts (“IOLTA”), totaling over $1 million.
The payments constitute “cy pres” awards arising out of class action lawsuits originally filed in 2004 by the North Carolina Justice Center and a team of consumer lawyers. The cases, against Advance America, Check’n Go and Check Into Cash, challenged the legality of payday lending in North Carolina and sought the return of illegal fees and interest paid by borrowers.
The three cases, settled in 2010, have resulted in payouts to class members of $28,228,649. Approximately $1 million remained from the fund after payout efforts were completed. This “residual” amount was divided equally between the Indigent Person’s Attorney Fund and IOLTA pursuant to orders signed by Superior Court Judge D. Jack Hooks, Jr.
So-called “payday loans” are short-term loans or cash advances, usually for a period of 14 days, secured by a post-dated check for the full amount of the loan plus interest or other fees. Payday loans typically have triple digit interest rates. The class representatives in Kucan v. Advance America obtained loans from Advance America with annual percentage rates exceeding 450 percent, despite state law capping interest for that type of loan at 36 percent. Some states, unlike North Carolina, permit payday loans. The Federal Consumer Financial Protection Bureau is currently considering whether federal limits should be placed on payday lenders.
North Carolina lawyers Carlene McNulty, Director of Litigation at the NC Justice Center, Jerry Hartzell, of Hartzell and Whiteman in Raleigh, Mona Lisa Wallace and John Hughes from Wallace and Graham in Salisbury, and Mal Maynard of the Financial Protection Law Center in Wilmington worked on the trio of lawsuits from their inception. Two out-of-state attorneys also assisted in representing the class, Paul Bland from Public Justice in Washington DC, and Richard Fisher from Cleveland, Tennessee.
“Through these class action cases, we were able to distribute in excess of $28 million dollars to over 275,000 individuals who were victimized by illegal and predatory payday lending in North Carolina,” McNulty said. “An underlying premise for all class actions is to make access to justice a reality for people who otherwise would not be able to obtain the protections of the court system. We are proud that we were able to achieve this result with our litigation, and pleased that the residual funds in these cases have been awarded to organizations whose missions will help to further that important goal.”
The Indigent Defense Fund supports criminal defense for indigent persons, while IOLTA funds statewide legal aid projects where helpis needed most.
“We are hopeful these funds will assist the the Indigent Person’s Attorney Fund and IOLTA in fulfilling their important missions in our state,” Wallace said.
In 2012 the North Carolina Equal Access to Justice Commission, an organization chaired by the Chief Justice of the North Carolina Supreme Court, published a booklet encouraging the use of “cy pres” and other court awards to support legal aid providers. The Commission’s initiative attempts to offset some of the hardship arising from curtailed legal aid funding and reduced interest rates on IOLTA accounts. More information about the Commission and its efforts can be found at www.ncqualaccesstojustice.com.
FOR MORE INFORMATION, CONTACT: Carlene McNulty, email@example.com, 919-856-2161; Jeff Shaw, firstname.lastname@example.org, 503.551.3615 (cell).