Cash Store cannot bar class action suits, says Wisconsin court

One of Cottonwood Financial LTD's The Cash Store locations. A Wisconsin appeals court has said personal loans contracts cannot prevent customers from their right to file or join class action lawsuits.

One of many Cash Store locations, this one yet to be opened for business. (Photo: Sign-Tech Electric)

A Wisconsin appeals court has ruled that the Cash Store cannot use language in its loan contracts that bars customers from the right to be able to file or join class action lawsuits, reports the Associated Press. Such verbiage has often been found in the fine print of contracts that Cottonwood Financial LTD (parent company of The Cash Store) uses. The court deemed the business practice “unconscionable” and said it violates the Wisconsin Consumer Act.

Class action ban protects consumers

The statement regarding class action comes according to New Richmond, Wis., consumer rights attorney Eric Crandall. He told the AP that a lender like the Cash Store could be “easily annihilated” by the damages awarded in such a class action. At the very least, the class action ban should cause The Cash Store to change its contract language immediately. Considering the trouble the franchise has had in Georgia and New Hampshire over the past year, it seems unlikely that the Cash Store will resist the ruling.

Governor Jim Doyle’spersonal loans law will begin in December

Starting Dec. 1, personal loans in Wisconsin must be limited to $1,500 or 35 percent of a borrower’s income. Furthermore, only one rollover per existing loan will be allowed. Doyle’s move also banned post-maturity interest on personal loans of 91 days or longer.

It began with Darcie Estes

According to reports, Darcie Estes borrowed $1,400-plus from a Hudson, Wis., Cash Store to help pay her mortgage and other bills. Estes defaulted on her loan, which left her in the position of owing more money. Cottonwood Financial LTD took her to small claims court in 2007 to collect the balance owed, to which they had the legal right. Estes was represented by Eric Crandall, who helped her file a counterclaim regarding the anti-class action clause. They sought damages and attorney’s fees. The Pierce County judge at the time ruled that Estes had waived her right to a jury trial based upon what was in the contract. The subsequent appeal overturned this ruling.

Class actions – are they that great to begin with?

There are various theories regarding whether class actions actually help the class proponents (the parties that filed the suit). Cottonwood Financial LTD and the Cash Store were deemed to be in violation of the Wisconsin Consumer Act, hence there may have been good reason for Darcie Estes and the rest of the class to file against them. However, as the legal blog Class Action Lawsuits: Putting People Together suggests, the claimants are rarely the people who derive the most benefit from a class action. Usually the lawyers end up with most of the money, a fact that has spawned a lifetime of resentful jokes on their behalf.

Sources:

Associated Press

“Class Action Lawsuits: Putting People Together” (How they REALLY work)

“Class Action Lawsuits: Putting People Together” (The squeaky wheel gets the grease)

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