Appeals court decision lets payday borrowers argue case
SALT LAKE CITY — When a handful of people in Salt Lake County defaulted on their payday loans, the lenders — a company called Feria Access LLC as well as others — sued them in Utah County. The borrowers failed to show up and Feria Access won the lawsuit and had the borrowers’ wages garnished — or automatically docked — to recover the loan amount, interest and fines.
But a recent decision from the Utah Court of Appeals means those borrowers may still have a chance to fight a portion of that ruling. After their wages were garnished, the borrowers claimed that too much was taken out of their paychecks and went to court over it. A Fourth District judge initially threw that lawsuit out, but the court of appeals recently ruled that the complaint needs to be considered.
Consumer lawyer Brian W. Steffensen, who represents the borrowers in the case, said his argument rests on the idea that Feria Access actually garnished an illegal amount of money.
“Our allegations were mainly that they charged more money in those garnishments than the law allows them to do,” Steffensen said.
Steffensen went on to explain that his clients were not challenging the garnishment made to pay back the loans or the interest on the loans. Rather, the borrowers believed that the processing fees attached to the loans were illegally inflated.
The exceptionally complex court decision sends the case back to Provo’s Fourth District Court, but does not specifically rule on whether or not the garnishments were proper. Instead, it allows the borrowers an opportunity to make that argument before a judge.
Attorney Jamis Gardner, who represented the lenders in the case, said the appeals court decision threw out a number of other arguments the borrowers made. He explained that the borrowers had accused the lenders of fraud and deception, but the ruling threw out most of those claims and instead focused on the Utah Consumer Sales Practices Act.
“The court of appeals found that one of those claims should have survived and they should get their day in court for that claim,” Gardner said.
According to the court decision, the UCSPA is designed to protect consumers from dishonest business practices.
“The UCSPA creates a cause of action against a ‘seller’ who commits either a ‘deceptive’ or an ‘unconscionable’ ‘act or practice … in connection with a consumer transaction … whether it occurs before, during or after the transaction,’ ” the decision reads.
Gardner characterized the decision as a mostly positive development for the lenders because most of the allegations were dismissed. He added that two of his clients, including Feria Access, have since declared bankruptcy, so the appeals court dismissed the borrowers’ case against those two companies. Gardner also disputed claims that the lenders garnished too much money and said he would fight that allegation when the case returned to Provo.
However, Steffensen characterized the court decision as a victory. He explained that the ruling’s focus on the Utah Consumer Sales Practices Act potentially gives consumers protection against predatory business practices and could set a legal precedent for future payday loan cases.
“This case makes it clear that the statute should be enforced liberally,” Steffensen said, referring to the UCSPA.
Ultimately, the case is far from finished as the court decision leaves it up to the Provo judge to determine if anything illegal or improper actually occurred. However, the case also contributes to the increased attention payday loan practices are receiving this year. During the January legislative session, for example, Sen. Ben McAdams, D-Salt Lake City, proposed Senate Bill 110, which would have required lenders to file their cases in the county where the loans were issued.
By contrast, many payday lenders file cases in Provo. McAdams’s bill stemmed from a reported issued by the Coalition of Religious Communities revealing that 70 percent of the cases in Provo’s justice court are related to payay lending. SB110 was rejected by the Legislature.