August 2001 / Indiana Supreme Court Deals Blow to Payday Lenders

Associated Press Newswires

Friday, August 17, 2001

Indiana Supreme Court deals blow to payday lenders

By MIKE SMITH

Associated Press Writer

INDIANAPOLIS (AP) - Hundreds of payday lenders in Indiana might be on borrowed time because of an Indiana Supreme Court ruling that subjects their short-term loans to the state's interest ceilings. Judy Woods, an attorney for some in the industry, said it won't be feasible for many payday lenders to continue offering the loans if they're only allowed to collect pennies on them. "That is really a sad thing because the marketplace has shown the loans are not only much needed but highly demanded by consumers," she said. Attorneys who sued the industry on behalf of borrowers, however, have no sympathy for lenders they claim have taken advantage of their clients by violating the state's loan-sharking laws. "The way we look at it is there is a segment of the financial services industry that just got shut down," attorney Clifford Shepard said of the ruling. Under payday loans, borrowers write postdated checks for the principal and a finance charge of up to $33 a transaction. If they can't pay when the loans come due, they can renew by paying an additional finance charge without paying the principal. The high court said such a practice was inconsistent with the purposes and policies of Indiana's commercial code and "creates an absurd result" that the Legislature could not have intended when it enacted loan laws. "This court can offer lenders no refuge," Justice Robert Rucker wrote in a 4-1 ruling that subjects the short-term loans to the state's 36 percent interest cap on consumer loans. Under the ruling, the most lenders could charge for a $100 two-week loan is $1.38. The more than 500 payday lenders in Indiana face federal lawsuits filed by borrowers who claim the loans violate state loan-sharking laws, among other things. At the request of federal judges handling the cases, the state Supreme Court agreed last year to determine if the loans were subject to interest caps. Although the cases return to federal court for other matters to be resolved, plaintiffs' attorneys said the Supreme Court settled the central issue by essentially declaring the current loan practices illegal. "I think this is going to prevent literally thousands of people from being further victimized by these payday lenders," said Terre Haute attorney Stephen Williams. Payday lenders have claimed they are exempt from the state's interest ceilings, just as pawnbrokers are. Woods said she and others were still reviewing the ruling and discussing legal options. Payday lenders first appeared in Indiana in 1994. A change in the law two years earlier had made it profitable to issue the loans, which typically range from $100 to $200 and must be repaid within two weeks. State officials say more than 90 percent are not paid back within two weeks, and the average loan is outstanding for six months. Because of that, interest rates on payday loans often hit triple digits. The interest cap on consumer loans in Indiana is 36 percent. The criminal loan-sharking law kicks in when interest exceeds 72 percent, with each violation punishable by up to 18 months in prison and a $10,000 fine. Shepard said one of his clients renewed a $200 loan 12 consecutive times by paying $25 each time. On the 13th time, his check bounced and the payday lender sued him, seeking $1,100 for repayment of the loan and attorneys fees. Tony Miller, manager of Express Cash Advance in Shelbyville, said he was shocked by the ruling. "The whole question is, is it a fee or is it an interest rate?" Miller said. "That's the question they need to decide. And that question right there decides the statute, because the statute was written for interest rates, not fees."Chief Justice Randall Shepard dissented from the majority opinion. Under his interpretation of state law, a lender can charge no more than 36 percent interest a year, but can apply a $33 finance charge if the loan is small or the loan period is short. But he also said it was unlikely lawmakers contemplated allowing lenders to collect $33 every two weeks on what is for all practical purposes one continuing loan. "It has been awhile since we last encountered a statute in such serious need of revision," Shepard wrote.

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Dow Jones International News

Chicago Tribune

Tuesday, August 21, 2001

Metro

Cemeteries told to clean up sites Decree settles class-action suit

Carlos Morales, Tribune staff reporter

Two cemeteries in the south suburbs must tighten standards for burial practices, grave placement and landscaping, under orders from a federal judge in Chicago. Cemetery owner Willard Timmer must begin work immediately at his cemeteries in Glenwood and Willow Springs under the consent decree, which settles a class-action lawsuit that alleged consumer fraud and negligence. Sonja Washington, a plaintiff in the suit who has eight family members buried at Mt. Glenwood Memory Gardens in Glenwood, said she's been fighting to improve conditions at the cemetery since she was unable to locate the marker for her great-grandmother in 1992. "We once had a cemetery, then we had a graveyard and now we have a junkyard," Washington said of the Glenwood cemetery. "The only thing missing is the dog." Besides Mt. Glenwood, the suit slammed practices at Mt. Glenwood West in Willow Springs. Timmer, whose primary residence is in Florida, also owns Evergreen Hills in Steger, which was not included in the lawsuit. Plaintiffs in the suit contended that the two cemeteries had damaged headstones and grave markers, put access roads too close to graves, and let landscaping and maintenance deteriorate. In the settlement signed Thursday, which U.S. Magistrate Judge Arlander Keys characterized as a compromise, the judge called for immediate action on numerous complaints and set target dates for the resolution of others. The decree will be monitored by the court for two years and does not preclude any members of the class action from taking further legal action against Timmer. Under the decree, the cemeteries must immediately begin cutting and removing dead trees, planting new trees and making reasonable attempts to designate areas for public-aid burials. Workers must immediately cease using broken vaults or headstones as landfill, using manure as a fertilizer or filler, and must not allow burials within 3 feet of any road unless the plots were sold before the decree. Cemetery workers also must cover graves on the day of the burial. "As a businessman, whether covered by the agreement or not, it's in his [Timmer's] best interests to keep his customers happy," Keys said in approving the consent decree. "With a settlement agreement you are never going to get everything you want. I think it's a good, fair and reasonable settlement. Mr. Timmer will be aware there are people looking over his shoulder." Timmer did not appear in court, and repeated efforts to reach him for comment were unsuccessful. His attorney, Louis Elovitz, said, "I think we have reached a very fair settlement. My client has told me to address the complaints of his customers, and I think we have addressed them. We want to run a better cemetery." Daniel Edelman, the attorney for the plaintiffs, called the settlement "a compromise on a lot of the problems, but not all of them. He [Timmer] has got to start fixing things."According to the state comptroller's office, which has oversight of a trust fund for cemetery upkeep, there have been at least 69 complaints lodged against the two Mt. Glenwood cemeteries since the comptroller established a consumer hot line in 1999. Comptroller spokeswoman Karen Craven said most complaints involved maintenance issues. Craven said Timmer has been cooperative in addressing complaints and fixing problems. "As far as the comptroller's office is concerned, Timmer has complied with every demand we've made," Craven said. Inspectors have been to the two sites 44 times since 1999, Craven said. She said the latest inspection was in the first week of June. Timmer's problems in the Chicago area pale in comparison with allegations about the family's management of cemeteries it owns in Florida. Earlier this summer Timmer and his wife were banned for life from the death-care business, including burials, funerals and cremations. Florida officials last year filed a lawsuit to take control of the Timmer's 10 funeral and cemetery businesses there. That suit alleged dozens of misplaced burials, questionable financial transactions, vaults intentionally broken to squeeze more people into spaces, caskets buried upside down and more than $130,000 in refunds promised to customers but never paid. In a settlement in June, the Timmers agreed to pay a $1.17 million penalty and give up all of their Florida funeral and cemetery businesses, according to Veronica Genco, assistant general counsel for the Florida comptroller's office. Former cemetery manager Edwin Timmer, son of the owners, pleaded guilty in July in a Florida court to fraud, after deceiving a family about burying a man in the wrong crypt near Daytona Beach. He faces up to 5 years in prison when he is sentenced in October, Genco said. After the Timmers' settlement, Jim Stephens, the court-appointed manager of the Florida cemeteries, estimated that thousands of bodies may be in the wrong places. He said nearly one in three that he has investigated so far has been misburied.