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EDELMAN, COMBS & LATTURNER SUES

ANOTHER HIGH-INTEREST LENDER

The Chicago law firm of Edelman, Combs & Latturner has filed a class action lawsuit against a Tampa, Florida "payday loan" firm, All-State Pay Day Advance, that made loans to Illinois residents at more than 700% interest by fax, phone and wire transfers.

The lawsuit alleges violation of the federal Truth in Lending Act, the Illinois Consumer Fraud Act, and the Illinois Interest Act, and that the transactions are unconscionable.

The case was filed in federal district court in Chicago. Henry v. Roth, 99 C 6817.

"Payday loans" are short term, very high interest rate loans. The loans are typically two weeks in duration and carry annual percentage rates of 100% to over 1800%. The lender generally obtains a post-dated check as a means of repayment. The loans are typically "rolled over" on multiple occasions.

"Payday loans" are generally made to consumers facing financial emergencies. Once a consumer obtains a "payday loan," he or she will often be unable to pay it off except from the proceeds of additional "payday loans." Often, the "payday loans" force the borrowers into unnecessary bankruptcies.

Edelman, Combs & Latturner concentrates in representation of consumers against lenders, car dealers, debt collectors, and other businesses.

Copyright 1999 Times Publishing Company

St. Petersburg Times

October 22, 1999, Friday

SECTION: BUSINESS; Pg. 1E

LENGTH: 495 words

HEADLINE: Borrower sues area payday loan firm

BYLINE: HELEN HUNTLEY

BODY:

The lawsuit charges that a Tampa company allegedly charged excessive interest rates, violating federal and Illinois laws.

A Tampa company has put a high-tech twist on payday lending, the old-fashioned business of making short-term loans at very high interest rates.

While its competitors cash postdated checks from storefronts in strip shopping centers, All-State Pay Day Advance Inc. does business by electronic bank drafts and deposits. Customer contact is primarily by fax.

But an All-State borrower in Illinois says the company is breaking federal and Illinois state laws by charging excessive interest rates and failing to disclose them.

All-State, which is not related to the big insurance company, specializes in one- and two-week loans of $ 100 to $ 300. The profit is in the fees, which range from $ 15 to $ 65 and translate into annualized interest rates of 563 to 780 percent.

Anita Henry, a clerical worker in suburban Chicago, heard about the Tampa company from a friend who was aware of its advertising, said her attorney, Daniel Edelman. Henry requested $ 100 by fax in July and All-State sent the money electronically to her bank account. In exchange, she signed a form authorizing the company to electronically withdraw its repayment plus fees from her account two weeks later. When the time was up, Henry did not have the money to repay the loan.

She said All-State sent her a threatening fax warning "bad check writers are prosecuted in Florida" and noting that the potential penalties include jail time and fines.

In response, she filed a lawsuit Monday in U.S. District Court in Chicago against the company and officers Jack Roth, Cynthia Traina and Domenick Traina.

Her suit claims All-State failed to disclose the interest rate she was being charged as required by federal law and charged far more than the 9 percent rate Illinois permits for lenders not licensed in that state.

Domenick Traina, who is All-State's president, said he had not seen the suit and could not comment on it. He said he is not familiar with where or how the company does business and that Roth, who manages the business, is in the hospital. The three people named in the lawsuit also are officers of Redi-Cash Auto Title Loan Inc., according to Florida corporate records.

Edelman said the lawsuit is one of several his Chicago firm has filed against payday lenders. The suit asks for damages on behalf of anyone who borrowed money from All-State during the past three years.

Florida law limits consumer finance companies to 30 percent annual interest. Check cashers are allowed to charge no more than 10 percent of the value of the check plus a $ 5 fee. All-State Pay Day Advance is not licensed in Florida as either a consumer lender or a check casher, although it is not known whether the company did business with any Florida consumers.

An attempt to pass a law regulating payday lenders failed in the most recent legislative session.