Arizona Attorney General Terry Goddard is suing national payday lender QC Holdings Inc., which operates Quik Cash lending stores, and accusing the company of deceptive business practices.
The state wants the company to pay $5 million in restitution and to have a court set aside debt collection judgments that the lender secured against defaulting borrowers. The lawsuit was filed Friday in Pima County (Ariz.) Superior Court.
QC Holdings spokesperson Tom Linafelt today told Collections & Credit Risk: "We have always sought to comply with Arizona state law and were unaware of this administrative issue. We are cooperating with the Attorney General's office and are investigating the issue ourselves."
The company, which is based in Overland Park, Kan., reported a $4.7 million profit on $56.8 million in revenue in the third quarter ended Sept. 30. The company employs 2,000 employees in 588 branch offices located in 25 states.
Payday and short-term lenders offer quick loans to consumers in need of cash who might not have credit or access to other financing. Payday loans are limited by law to $500 or less due on the consumer's next payday, typically in two weeks.
The typical annual percentage rate on a two-week $500 payday loan, at the maximum $75 finance charge, is 391%. The typical annual percentage rate for a two-week $300 payday loan, at the maximum $60 finance charge, is 521%.