“Why would a down-on-his-luck working person, who needed a payday advance to pay his bills, whose check to the payday lender subsequently bounced, and who knew that he still owed money to the payday lender, question the legality of a judgment requiring him to pay treble damages and costs to the payday lender?”
– Michigan Court of Appeals Judges Curtis T. Wilder, Peter T. O’Connell and Michael J. Talbot, per curiam, in Michigan Deferred Presentment Services Ass’n v. Ross.
Good question. Before the advent of the Deferred Presentment Service Transactions Act (DPSTA), MCL 487.2121 et seq., payday lenders enthusiastically sought treble damages under MCL 600.2952(4), a provision of the Revised Judicature Act, after their customers repaid the loans with nonsufficient funds (NSF) checks. Often, treble damages were awarded after the hapless borrowers failed to appear in court.
The DPSTA, which provided licensure of payday lenders and subjected them to oversight by the Office of Financial and Insurance Regulation (OFIR), limited the lenders’ remedy to the amount of the check plus $25.
But the treble damage actions apparently continued unabated, prompting OFIR Commissioner Ken Ross to issue an administrative order directing the lenders to follow the DPSTA or risk having their licenses yanked.
How dare he? The Michigan Deferred Presentment Services Ass’n, a trade group that represents payday lenders, sued Ross under 42 U.S.C. 1983, claiming that Ross was denying the lenders their First Amendment day in court.
The COA’s response was a polite version of “utter nonsense.”
Plaintiff cannot claim that a violation of 42 USC 1983 occurred simply because a newly enacted statute precluded recovery of certain damages that plaintiff’s members had become accustomed to receiving in NSF cases.
Further, the administrative order simply informs payday lenders of the authority that, by statute, the Legislature granted to the OFIR to enforce the DPSTA and to respond to violations.
If it so chooses, a licensed payday lender may still file a cause of action with the district court seeking recovery in excess of what the DPSTA statutorily permits. The statute, however, permits the OFIR to revoke licenses and impose civil fines for violations of the DPSTA.
The administrative order notifies payday lenders of the consequences of choosing to violate the DPSTA, all of which are authorized by statute. Defendant does not violate 42 USC 1983 by issuing another administrative order informing payday lenders of the statutorily mandated penalties that they face if they violate the provisions of the DPSTA.
The panel noted that the DPSTA was enacted to “curb abuses” and scolded the payday lender industry.
We find it particularly curious that payday lenders continue to seek damages under the RJA, in contravention of the DPSTA, against individuals who do not have the resources or legal acumen to address the payday lenders’ repeated application of the incorrect statute.
Many customers of payday lenders are individuals who live paycheck to paycheck; the point of the payday lending business is to provide short-term salary advances to individuals who otherwise would not have enough money to make it to their next payday.
Therefore, many of these default judgments would be against individuals who probably cannot afford legal representation and who likely are not even aware that the payday lender sought recovery under the wrong statute. …
Realistically, how would such an individual even know that the DPSTA, not the RJA, governed the amount that a payday lender could recover for his bounced check, and how could that individual, lacking legal training or the funds to hire an attorney, hope to make such a technical legal argument?