An Arkansas state board denied a claim against a payday lender’s insurance company, and a lawyer said the agency was sending the wrong message to consumers, according to an Associated Press report.
The State Board of Collection Agencies denied a claim seeking money from the American Manufacturers Mutual Insurance Co. The company insured Americash, a payday loan company that lost a lawsuit filed by a group of consumers.
The payday lender went out of business at the time of the lawsuit, Arkadelphia attorney Todd Turner said, so a claim was filed against the insurer.
The board agreed with the insurer’s attorney, Paul Morris, that the state’s check cashers act does not hold insurance companies liable for such claims.
Several members of Arkansans Against Abusive Payday Lending, a coalition of groups seeking to ban such businesses, attended the hearing. The coalition contends that the lenders, who provide high interest loans with no credit check, take advantage of the poor.
Turner filed a class-action lawsuit in Pulaski County Circuit Court in 2001 against Americash, claiming the company charged its customers unfairly high interest rates. Shortly after the suit was filed, Americash ceased its operations in the state.
Turner’s clients received a judgment in 2002 of more than $886,000 in the case, but the payday lender was unable to pay the judgment. Turner then sought a claim against American, the company’s insurer.
Turner, who has represented consumers in other payday loan cases, said the ruling could scare off future claims against the lenders.
“If we can’t collect against these bonds, who will want to go after these companies?” Turner said after the hearing. “They’ll be able to operate with immunity.”
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