Out of State Debt Collectors, Predatory Lenders, Can Be Sued in Massachusetts Courts

debt collectors predatory lenders payday loansA judge in the federal District Court in Boston denied a motion to dismiss a lawsuit by a Massachusetts consumer against two payday lenders, two debt collectors, and an attorney, all based in Illinois, for numerous violations of Massachusetts and federal debt collection laws, and Massachusetts lending and consumer protection laws.

The judge also denied the defendants’ motion to transfer the case from Massachusetts to Illinois.

The case arose out of a payday loan from a company called Guaranteed Cash Now, along with affiliated companies named VIM Holdings Group, U Solutions Group, and B Financial, LLC. The law firm/debt collector was KRW Attorneys & Associates.

Attorney Kristin Thurbide and Attorney Josef Culik of Culik Law represented the consumer.

The suit alleged that the unlicensed defendants engaged in illegal, unfair, and deceptive acts in connection with a payday lending scheme. The payday loan included fees, penalties and interest that, when combined, totaled more than 800%, on a loan of only $200. Massachusetts law prohibits lenders from offering small loans (under $6,000) that charge interest and fees which exceeding 12% when combined, without first obtaining approval and a license from the Division of Banks.

Massachusetts law also requires debt collectors to be licensed by the Division of Banks before engaging in any debt collection activity.

Here, after allegedly debiting $982 from the consumer’s account in just a 10-week period, the unlicensed defendant debt collectors sent her a statement showing the new outstanding balance was still over $1,000 — on a debt that was originally only $200.

The lawsuit further claimed that the defendants engaged in unlawful, unfair, and deceptive practices including illegally drafting the consumer’s account, threatening to garnish her wages, and falsely telling her they had the right to do so without a court order, and even threatening to have her arrested and brought to Chicago to face a court action.

The defendants filed a motion to dismiss the consumer’s claims, arguing that a Massachusetts court did not have jurisdiction over the Illinois defendants, and further asserting that the loan contract included a “forum selection clause” which required lawsuits to be heard in Illinois.

In a detailed, 48-page decision, the court denied the defendants’ motions. There was a sufficient legal basis for Massachusetts courts to exercise specific personal jurisdiction over the Illinois-based defendants, said the judge. Requiring the defendants to travel to Massachusetts to defend the action does not violate their constitutional due process rights.

Among other factors, the court concluded that the defendants should have reasonably expected to be subjected to the jurisdiction of Massachusetts courts because the website was available in Massachusetts, the loan was issued to a Massachusetts bank account, and the alleged harms relating to the predatory lending and unfair and deceptive debt collection tactics occurred in Massachusetts.

The court also denied the defendants’ motion to transfer the case to Illinois. The clause was unenforceable because it was unreasonable and unjust, against Massachusetts public policy, and because requiring the consumer to bring her lawsuit in Illinois would “raise the level of inconvenience to the level of gross injustice.”

Massachusetts has a strong public policy against usurious payday loans and unfair and deceptive debt collection practices, and has enacted laws designed to protect consumers.

A copy of the decision is here: Grice v. Guaranteed Cash Now.

The decision was also covered extensively in Massachusetts Lawyers Weekly.

If you are having debt collection issues or are being harassed by a payday lender, give us a call. Culik Law is a consumer protection law firm representing clients in Massachusetts, and our attorneys routinely handle cases involving debt collection violations.

Kristin Thurbide

Kristin Thurbide

Attorney Kristin Thurbide is an attorney at Culik Law and represents clients in consumer financial protection cases. Kristin advocates for individuals in Massachusetts, helping them with mortgage and loan modification issues, foreclosure defense, mortgage litigation, debt collection defense and lawsuits, Fair Debt Collection Practices Act violations, and other consumer protection matters.