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Daye v. Community Financial Service Centers, LLC

United States District Court, D. New Mexico

November 30, 2017

CLARA DAYE, On behalf of herself and all others similarly situated, Plaintiff,
v.
COMMUNITY FINANCIAL LOAN SERVICE CENTERS, LLC, d/b/a SPEEDY LOAN Defendant.

          Charles M. Delbaum National Consumer Law Center, Inc. Boston, Massachusetts and Richard N. Feferman Nicholas H. Mattison Feferman & Warren Albuquerque, New Mexico Attorneys for the Plaintiffs

          Donald Kochersberger Alicia M. LaPado Business Law Southwest, LLC Albuquerque, New Mexico Attorneys for the Defendant

          MEMORANDUM OPINION, FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

         THIS MATTER comes before the Court on: (i) the Plaintiff's Requested Findings of Fact and Conclusions of Law, filed May 24, 2017 (Doc. 158)(“Daye's FOFs”); (ii) the Defendant's Proposed Findings of Fact and Conclusions of Law, filed May 24, 2017 (Doc. 156)(“Speedy's FOFs”); and (iii) the Opposed Motion to Strike Witnesses, filed May 13, 2016 (Doc. 95)(“Motion to Strike”).[1] The Court held a bench trial on March 15, 2017. See Transcript of Bench Trial, held March 15, 2017 (“Tr.”).[2] The primary issues are: (i) how much should the Plaintiffs recover on account of the misrepresentations of Defendant Community Financial Loan Service Centers, LLC, doing business as Speedy Loan, regarding the cost of its loans; and (ii) how much should the Plaintiffs recover on account of Speedy Loan's violations of New Mexico law regarding payday loans. The Court determines that Speedy Loan's misrepresentations did not damage the Plaintiffs, because those misrepresentations made Speedy Loan's loans appear more expensive than they actually were. Consequently, the named plaintiff can recover statutory damages and attorney's fees, but the unnamed plaintiffs can recover nothing. The Court also determines that Speedy Loan must return the interest and fees it collected from the Plaintiffs to the extent that it collected more than the New Mexico Small Loan Act, N.M. Stat. Ann. §§ 58-15-1 to -39, permits.

         FINDINGS OF FACT

         The Plaintiffs and Speedy Loan have stipulated to some facts. See Pretrial Order ¶¶ 1-53, at 8-19, filed February 15, 2017 (Doc. 144)(“Pretrial Order”). The proposed findings of facts and conclusions of law submitted by the parties agree on other facts. See, e.g., Daye's FOFs ¶ 9, at 2 (alleging that Speedy Loan made 31, 082 loans during the time period covered by Daye's suit); Speedy's FOFs ¶ 9, at 2 (same).[3] The Court has carefully considered those stipulations and proposed findings, and it sets forth its findings (“FOFs”) below.[4]

1. Speedy Loan is a Delaware LLC. See Pretrial Order ¶ 2, at 8 (stipulated fact).
2. Speedy Loan is a profitable business. See Pretrial Order ¶ 4, at 8 (stipulated fact).
3. Speedy Loan is in the business of providing short term, unsecured loans to individuals and operates twelve loan stores in New Mexico. See Daye's FOFs ¶ 7, at 2; Speedy's FOFs ¶ 1, at 1.
4. Those loans are made “in the regular course of [Speedy Loan's] trade or commerce.” Pretrial Order ¶ 15, at 10 (stipulated fact).
5. “Since at least August 22, 2010, Speedy has offered a single loan product, which it calls an ‘installment loan.'” Pretrial Order ¶ 12, at 9 (stipulated fact).
6. “Speedy entered into 31, 082 loans in New Mexico between August 22, 2010 and August 22, 2014.” Pretrial Order ¶ 13, at 10 (stipulated fact). See Daye's FOFs ¶ 9, at 2; Speedy's FOFs ¶ 2, at 1.
7. To qualify for a loan, Speedy Loan required its customers “to have a bank account from which payments could be withdrawn through electronic fund transfer.” Pretrial Order ¶ 16, at 10 (stipulated fact).

         8. Speedy Loan required its customers to provide the account and routing numbers associated with such an account “[a]s part of the loan application process.” Pretrial Order ¶ 17, at 10 (stipulated fact).

         9. Speedy Loan required all of its customers to sign both a loan agreement and a “PPD/ACH [Prearranged Payment and Deposit/Automated Clearing House] Authorization” form. Pretrial order ¶¶ 18, 20, at 10-11 (stipulated facts). See Daye's FOFs ¶¶ 35-36, at 5.

         10. All of Speedy Loan's loan agreements listed the “Total of Payments, ” and stated that the Total of Payments is the amount that the borrower “will have paid when [they] have made all scheduled payments.” Pretrial Order ¶ 39, at 13 (stipulated fact).

         11. Each loan agreement also contained a “Payment Schedule” and stated that the borrower promised to pay “each installment payment as it becomes due as shown above in the Payment Schedule.” Pretrial Order ¶ 38, at 12-13 (stipulated fact).

         12. The loan agreements also provided:

On or about the day each installment payment becomes due, you authorize us to affect [sic] one or more ACH [Automated Clearing House] debit entries to your Account at the Bank.
You acknowledge that the account on which the Check/ACH Authorization is drawn is a legitimate, open, and active account.
This document represents the final agreement between creditor and you and may not be contradicted by evidence of any alleged oral agreement.

         Pretrial Order ¶ 19, at 10 (stipulated fact).

         13. For each loan, the PPD/ACH Authorization form specified a “schedule of automatic debits from the customer's bank account.” Pretrial Order ¶ 20, at 11 (stipulated fact).

         14. Speedy Loan used that schedule of automatic debits to remind employees when they should withdraw money from the customer's bank account. See Pretrial Order ¶ 21, at 11 (stipulated fact).

         15. The Total of Payments listed in all of the loan agreements was consistent with the schedule of automatic debits contained in the corresponding PPD/ACH Authorization form. See Daye's FOFs ¶ 73, at 17; Speedy's FOFs ¶ 14, at 3.

         16. 25, 976 of Speedy Loan's loan agreements, however, listed a Total of Payments that was “lower than the sum of payments disclosed in the Payment Schedule.” Pretrial Order ¶ 40, at 13 (stipulated fact).

         17. The total discrepancy between the Totals of Payments and the Payment Schedules was $783, 282.50. See Pretrial Order ¶ 42, at 13 (stipulated fact).

         18. Both Speedy Loan and its customers expected payments in accordance with the loan agreement's Total of Payments and the PPD/ACH Authorization form's schedule of automatic debits and not in accordance with the loan agreement's Payment Schedule. See Speedy's FOFs ¶ 16, at 3 19. Speedy Loan “never attempted to collect the amounts identified in the Payment Schedule, ” and instead “collected the amounts on the PPD/ACH schedule.” Speedy's FOFs ¶ 16, at 3.[5]

         20. Speedy Loan “has known of the New Mexico Small Loan Act's provisions governing payday loans since at least August 22, 2010.” Pretrial Order ¶ 24, at 11 (stipulated fact).

         21. Speedy Loan's employee handbook included the following instructions as part of the process of giving a loan:

Have the customer sign the PPD/ACH Authorization and again take it to ensure that you have it in your possession. Remember to tell the customer that if they do not want the payment to come out of their account on the date shown, they must come in to the store and make the payment in cash, before 2:30 p.m. (Central time) on the business day before the ACH date. You may ask the customer to initial individual items for emphasis but it is not required. The signature is sufficient.
. . . .
Make copies of all of these documents, Contract, PPD/ACH Authorization (you need the original plus two copies of this document, original for file, one copy for the customer and one copy for the Installment PPD/ACH binder or drawer), Privacy Policy Statement, and the Installment Loan disclaimer. The copies go to the customer. We keep the originals! All Originals go in the customer file.
. . . .
Following this procedure is mandatory and will ensure that you are operating within the limits of the Truth in Lending Act [15 U.S.C. §§ 1601-67f] and other laws.

         Speedy Loan Policy and Procedure Manual 14.23 (updated November 12, 2014)(CFSCDayeDiscovery000277)(Exhibit 50). See Tr. at 2:22-3:23 (Mattison, Court, Kochersberger)(admitting, without objection, the fifty exhibits specified in the parties' amended consolidated exhibit list).

         22. Speedy Loan required its customers, as a condition of receiving a loan, to provide a debit authorization giving Speedy Loan the authority to electronically transfer funds from the customer's bank account for repayment.[6]

         23. “Between August 22, 2010 and August 22, 2014, 31, 074 of [Speedy Loan's] 31, 082 [New Mexico] loans charged more than the legal fee for payday loans.” Pretrial Order ¶ 31, at 12 (stipulated fact).

         24. Speedy Loan “collected $7, 340, 471.14 above the legal fee for payday loans.” Pretrial Order ¶ 32, at 12 (stipulated fact).

         25. Speedy Loan never included in its loan agreements “the disclosures required to accompany a payday loan” under New Mexico law. Pretrial Order ¶ 27, at 11 (stipulated fact).

         26. Speedy Loan frequently renewed its loans. See Pretrial Order ¶ 34, at 12 (stipulated fact).

         27. Speedy Loan did not afford “borrowers the right to enter an unsecured payment plan.” Pretrial Order ¶ 25, at 11 (stipulated fact).

         28. Speedy Loan did not afford borrowers “the right to rescind any of its loan documents.” Pretrial Order ¶ 28, at 11 (stipulated fact).

         29. All of Speedy Loan's loans had “repayment periods exceeding 35 days.” Pretrial Order ¶ 29, at 12 (stipulated fact).

         30. 12, 189 of Speedy Loan's loans were “to be repaid in fewer than four payments” or had a term that was “less than 121 days.” Pretrial Order ¶ 23, at 11 (stipulated fact).

         31. Daye, the named plaintiff, took out four loans from Speedy Loan. See Daye's FOFs ¶ 10, at 2 (“Speedy made four loans to Ms. Daye.”); Speedy's FOFs ¶ 34, at 6 (“Ms. Daye is the named Plaintiff in this case, and obtained and four loans from Speedy.”).

         32. To obtain those loans, Speedy Loan required Daye to authorize electronic fund transfers from her bank account for repayment of those loans. See supra FOFs ¶ 21. See also Daye's FOFs ¶ 15, at 3.

         33. Speedy Loan used that authorization to withdraw money from Daye's bank account to pay her loan. See Pretrial Order ¶ 11, at 9 (stipulated fact).

         34. Daye would have preferred to make her loan payments in person, and pays her electricity, water, and car insurance bills in person. See Tr. at 35:21-25 (Mattison, Daye)(stating that Daye “would have gone into the store to make [her] payments” if Speedy Loan “had given [her] the choice of not paying by automatic withdrawals”); id. at 36:10-15 (Mattison, Daye)(stating that Daye pays her “electricity bill, [her] water bill[, ] [a]lso my insurance, my vehicle insurance bill” in person).[7]

         35. Daye repaid her four loans in full. See Daye's FOFs ¶ 17, at 3; Speedy's FOFs ¶¶ 35-38, at 6.

         36. Daye believed that the PPD/ACH Authorization forms attached to her loan agreements “specified when [her] payments were going to be made and how much” she had to pay. Tr. at 44:21-24 (Kocherberger, Daye).

         37. Daye “never paid any attention or even noticed” the loan agreements' Payment Schedules. Tr. at 45:15-18 (Kochersberger, Daye). See Speedy's FOFs ¶ 41, at 6.

         38. Daye never expected to make the payments that those Payment Schedules specify. See Tr. at 46:1-4 (Kochersberger, Daye). See Speedy's FOFs ¶ 41, at 6.

         39. “Speedy Loan never tried to collect payments [from Daye] in accordance with” that schedule. Tr. at 46:5-7(Kochersberger, Daye). See Speedy's FOFs ¶ 40, at 6.

         40. Speedy Loan “only took the payments that were reflected” on Daye's PPD/ACH Authorization forms. Tr. at 46:8-10 (Kochersberger, Daye). See Speedy's FOFs ¶ 40, at 6.

         41. The Totals of Payments listed in the loan agreements “match[ed] up with” the payments listed in Daye's ACH/PPD Authorization forms. Tr. at 47:10-13 (Kochersberger, Daye).[8]

         42. Kevin Dabney is the President of Speedy Loan Wisconsin -- a legal entity distinct from Speedy Loan -- and he acted as a consultant and overseer for Speedy Loan. See Tr. at 62:14-19 (Kochersberger, Dabney). See also Daye's FOFs ¶ 6, at 2.

         43. Speedy Loan used eCheckTrac software to generate the Payment Schedules in its loan agreements as well as the schedules on its PPD/ACH Authorizations forms. See Tr. at 85:16-22 (Kochersberger, Dabney); id. at 86:2-7 (Kochersberger, Dabney). See also Speedy's FOFs ¶ 11, at 2-3.

         44. Neither Speedy Loan's customers nor New Mexico regulators identified the discrepancies between those two sets of schedules. See Tr. at 90:19-91:6 (Kochersberger, Dabney).

         45. State regulators regularly audited Speedy Loan, and Speedy Loan regularly conducted internal audits. See Tr. at 75:11-77:2 (Kochersberger, Dabney); id. at 78:23-84:24 (Kochersberger, Dabney).

         46. Speedy Loan did not use the Payment Schedules in its loan agreements “for any purpose at all.” Tr. at 88:11-15 (Kochersberger, Dabney).[9]

         47. Speedy Loan's inclusion of inconsistent Payment Schedules and Totals of Payments in some of its loan agreements was not willful.[10]

         48. Luana Gaco, an unnamed class member who testified at trial, took out eight loans from Speedy Loan, and took six of them out between August 22, 2010 and August 22, 2014. See Daye's FOFs ¶¶ 18-19, at 3; Speedy's FOFs ¶ 43, at 7.

         49. Gaco believed that making payments via automatic withdrawals was a requirement for obtaining those loans. See Tr. at 178:6-7 (Gaco).

         50. Speedy Loan collected money from Gaco only in accordance with the payment schedules on her PPD/ACH Authorization Forms. See Tr. at 183:7-15 (Kochersberger, Gaco). See also Speedy's FOFs ¶ 54, at 8.

         51. Gaco relied on Speedy Loan “to give [her] ACH alternate information and [to] follow the law.” Tr. at 186:17-19 (Mattison, Gaco).[11]

         52. Charles Robert Foster is an unnamed class member who took out eight loans from Speedy Loan, and he took six of those loans out between August 22, 2010 and August 22, 2014. See Daye's FOFs ¶ 27, at 4; Speedy's FOFs ¶ 58, at 8.

         53. Speedy Loan told Foster that he “could come in and pay cash, ” and that he “could come in and pay off the money early.” Tr. at 197:24-198:3 (Kochersberger, Foster).

         54. Foster looked to the payment schedules on his PPD/ACH Authorization forms to determine what he was going to pay and when his payments were due. See Tr. at 201:23-202:10 (Kochersberger, Foster).

         55. Foster never noticed the Payment Schedule on the first page of his loan agreements. See Tr. at 202:11-13 (Kochersberger, Foster).[12]

         CONCLUSIONS OF LAW

         The Court will now state its conclusions of law (“COLs”). The Court will begin by summarizing the case's procedural history. It will then set out the law regarding issues relevant to its analysis. The Court will then present that analysis.

         PROCEDURAL BACKGROUND

         1. The case's procedural history includes Daye's Complaint for Damages, filed August 22, 2014 (Doc. 1)(“Complaint”); class certification, see Memorandum Opinion and Order, 313 F.R.D. 147, filed February 9, 2013 (Doc. 82)(“Class Certification MOO”); and partial summary judgment, see Memorandum Opinion and Order, 233 F.Supp.3d 946, filed January 20, 2017 (Doc. 138)(“SJ MOO”). It also includes a bench trial; written closing arguments, see Plaintiff's Closing Argument at 2, filed May 24, 2017 (Doc. 159)(“Daye's Closing”); Speedy Loan's Closing Argument at 1, filed May 24, 2017 (Doc. 157)(“Speedy's Closing”); and proposed FOFs.

         1. The Complaint.

         2. On August 22, 2014, Daye filed her Complaint. See Complaint at 1. Daye asserts that Speedy Loan violated both federal law -- specifically the Truth in Lending Act, 15 U.S.C. §§ 1601-67f (“TILA”), and the Electronic Funds Transfer Act, 15 U.S.C. §§ 1693-93r (“EFTA”) -- as well as state law -- specifically the New Mexico Unfair Practices Act, N.M. Stat. Ann. §§ 57-12-1 to -26 (“UPA”) and the New Mexico Small Loan Act, N.M. Stat. Ann. §§ 58-15-1 to -39 (“Small Loan Act”). Complaint ¶ 7, at 2.

         3. In the Complaint, Daye asserts four distinct claims for relief. First, Daye asserts that “[t]he payday loans made to Ms. Daye, along with every other payday loan with like characteristics, violated the New Mexico Small Loan Act” such that those loans are void. Complaint ¶ 75, at 13. Consequently, according to Daye, “all borrowers who entered into void loans are entitled to the return of all interest and other charges other than principal, ” Complaint ¶ 76, at 13, and, “[i]n the alternative, Speedy would be unjustly enriched by being permitted to retain or collect amounts in excess of the legally permitted rate [of interest], and should be required to disgorge such amounts and be prohibited from collecting any further unlawful amounts, ” Complaint ¶ 77, at 13.

         4. Second, Daye asserts a claim for TILA “statutory damages plus costs and reasonable attorney fees.” Complaint ¶ 79, at 13.

         5. Third, Daye asserts a claim for EFTA “statutory damages plus costs and reasonable attorney fees.” Complaint ¶ 81, at 14.

         6. Fourth, Daye asserts a UPA claim for “actual damages, trebled, including all money paid to Speedy in excess of the principal amount loaned, plus costs and reasonable attorney fees, ” Complaint ¶ 84, at 14, and for “injunctive relief which enjoins Speedy from continuing to collect unlawful amounts on its illegal payday loans, ” Complaint ¶ 85, at 15.

         2. Class Certification.

         7. On February 9, 2016, the Court certified a class action under rule 23 of the Federal Rules of Civil Procedure. See Class Certification MOO, 313 F.R.D. at 152. The class consists of all persons who entered into a loan with Speedy Loan between August 22, 2010, and August 22, 2014, when Daye filed her Complaint. See Class Certification MOO, 313 F.R.D. at 152.

         8. The Court also certified four subclasses. See Class Certification MOO, 313 F.R.D. at 174. The four subclasses are as follows:

1. The “Payday Loan Subclass” consists of all members of the class who entered into a loan with Speedy beginning four years prior to the filing of this action, and EITHER (a) Speedy conditioned the loan upon repayment by means of preauthorized debit authorization OR (b) Speedy accepted preauthorized debit authorization and either the loan was to be repaid in fewer than four payments, or the term of the loan was less than 120 days. The members of the Payday Loan Subclass assert a right to relief under the UPA and other legal theories for Speedy's illegal payday loans.
2. The “EFTA Subclass” consists of all members of the class who entered into a loan with Speedy beginning one year prior to the filing of this case, and whose loan was conditioned upon repayment by means of preauthorized electronic fund transfer. The ...

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