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The Payday Loan Rule Changes That Only Payday Lenders Want …

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Follow the money: payday lenders gave significant campaign money to legislators who are now trying to undo Washington State’s landmark payday lending reforms.dcwcreations /

Washington State passed some of the strongest payday lending reforms in the nation in 2009. But now a group of lawmakers want to scrap those reforms in favor of a proposal backed by Moneytree, a local payday lender.

The rule changes they’re going after limit the size and frequency of payday loans and provide a free installment plan option to help borrowers who can’t pay back their loan when it’s due.

According to data from the Department of Financial Institutions, these reforms hit payday lenders hard. In fact, before the reforms took effect, payday loans were available at 603 locations across Washington and lenders were making more than $1.3 billion in loans per year. Last year, there were only 173 locations and it was a $331 million industry.

Now, a proposal, sponsored by Rep. Larry Springer, D-Kirkland, and Sen. Marko Liias, D-Lynnwood, would replace the payday loan system in Washington with a “small consumer installment loan” system that would clear the way for lenders like Moneytree to start offering 6-month to 12-month loans with effective interest rates up to 213 percent.

The proposed law would also increase the maximum size of a loan from $700 to $1,000 and remove the current eight-loan cap, effectively removing the circuit breaker keeping borrowers from getting trapped in a debt cycle.

What’s more, instead of the easy-to-understand fee payday loans we have now, the new loans would have a much more complex fee structure consisting of an amortized 15 percent origination fee, a 7.5 percent monthly maintenance fee, and a 36 percent annual interest rate.

It is incomprehensible, after years of working on payday reforms that finally worked in Washington, that lawmakers would throw out that law and replace it with one created by Moneytree.” says Bruce Neas, an attorney with Columbia Legal Services, a group that provides legal assistance to low-income clients.

Proponents say the new system could save borrowers money. And they’re right, technically, since interest and fees accrue over the life of the loan. However, a loan would need to be paid off in around five weeks or less for that to pencil out—and that seems highly unlikely. In Colorado, which has a similar installment loan product, the average loan is carried for 99 days. What’s more, according the National Consumer Law Center, “loan flipping” in Colorado has led to borrowers averaging 333 days in debt per year, or about 10.9 months.

While numerous consumer advocates have spoken out against the proposal—along with payday loan reform hawks like Sen. Sharon Nelson, D-Maury Island, and even the state’s Attorney General—few have voiced support for it. In fact, in recent committee hearings on the proposal, only four people testified in favor of it:

Dennis Bassford, CEO of Moneytree;

Dennis Schaul, CEO of the payday lending trade organization known as the Consumer Financial Services Association of America;

Rep. Larry Springer, prime House sponsor of the proposal and recipient of $2,850 in campaign contributions from Moneytree executives;

Sen. Marko Liias, prime Senate sponsor of the proposal and recipient of $3,800 in campaign contributions from Moneytree executives.

Springer and Liias aren’t the only state legislators Moneytree executives backed with campaign contributions, though. In the past two years, executives with Moneytree have contributed $95,100 to Washington State Legislature races.

At least 65 percent of the money went to Republicans and the Majority Coalition Caucus. Which is expected, since Republicans have been loyal supporters of Moneytree in the past. When a similar proposal was brought to the Senate floor two years ago, only one Republican voted against it.

More telling is where the remaining money went. Of the $33,150 Moneytree gave to Democrats, $20,500 went to 11 of the 16 Democratic House sponsors of the proposal and $5,700 went to two of the four Democratic Senate sponsors.

Both the Senate and House versions of the proposal have cleared their first major hurdles by moving out of the policy committees. The bills are now up for consideration in their respective chamber’s Rules Committee. The Senate version appears to be the one most likely to move to a floor vote first, since the Republican Majority Coalition Caucus controls the Senate.

Regardless of which bill moves first, payday lenders undoubtedly want to see it happen soon.

The Consumer Financial Protection Bureau, established by Congress in response to the Great Recession, is poised to release their initial draft of regulations for payday lenders. Although the agency’s deliberations are private, it is widely believed the rules will crack down on the number and size of loans payday lenders can make.

Those rules may well affect Moneytree and other payday lenders Washington.

In the likely chance they do, payday lenders could see their profits shrink. Unless, that is, Washington scraps its current system in favor of one carefully crafted by payday lenders looking to avoid federal regulators.


As more seniors rely on reverse mortgages, troubles beckon for heirs

A new government report shows many seniors are taking out reverse mortgages on their homes without fully understanding the ramifications, leading to foreclosures among borrowers and a tangle of problems for heirs after the borrower dies.

“Consumer complaints tell us that the complex terms of reverse mortgages continue to be misunderstood,” said Richard Cordray, director of the Consumer Financial Protection Bureau, which just released a report highlighting the top complaints the agency received about reverse mortgages over the last three years.

A reverse mortgage is a type of loan that allows homeowners age 62 and older to tap a portion of the equity in their homes. The money typically is paid out in a lump sum or in regular fixed payments, with fees and interest added to the balance each month. Unlike a home equity loan, the money does not have to be repaid until the borrower dies, moves out or sells the home.

The loans can be a life line for house-rich, cash-poor seniors struggling with daily living expenses. Reverse mortgages also have been used to help retirees improve their lifestyles, allowing them to buy the summer home they had always dreamed about, for example.

But problems and confusion are expected to continue as more baby boomers retiring with little or no savings turn to the loans for help getting by.

The Consumer Financial Protection Bureau cited a 2010 Federal Reserve report concluding that in the 55-to-64 age group, 41 percent had no retirement savings. Even among those who had a nest egg, the average balance was only $103,200, the report said.

Many complaints that the protection bureau received showed people were confused about the way reverse mortgages work.

“Many consumers struggle with understanding how quickly their loan balance will go up and their home equity will fall,” the report said. As a result, many borrowers who wanted to refinance their loans were frustrated because there wasn’t enough remaining equity in their homes.

One of the most common types of complaints involved the inability of a borrower’s family members to assume the loan in order to keep the house when the borrower died, according to the report.

Reverse mortgages prohibit loan assumptions because actuarial tables are used to help determine the loan amounts. Adult children may keep the home only by paying off the loan or by paying 95 percent of the current appraised value of the house.

Those rules can present problems for multigenerational households when family members are living in the home at the time of the borrower’s death.

Heirs also complained about what they believed were inflated appraisals that required them to pay more than they expected, the report said.

Another common complaint involved the shock of having to sell a home or face foreclosure when a spouse died because the surviving spouse’s name was not on the reverse mortgage. Some couples were advised to take a reverse mortgage in the older spouse’s name to qualify for a bigger loan.

“Some consumers report that their loan originator falsely assured them they would be able to add the other spouse to the loan at a later date,” the report said.

To help more seniors stay in their homes, the U.S. Department of Housing and Urban Development — which insures most reverse mortgages through its Home Equity Conversion Mortgage program — implemented a new rule allowing surviving spouses who meet certain conditions to remain in the home regardless of their borrowing status.

The rule only applies to reverse mortgages originated through HUD’s program after Aug. 4, 2014.

The financial protection bureau also reported a number of complaints from borrowers who faced foreclosure or who lost their homes because they did not keep up with payments for property taxes and homeowners’ insurance, which under terms of a reverse mortgage must be kept current.

“Some consumers describe unsuccessful attempts to halt foreclosure proceedings by paying overdue taxes in full or through payment plans,” the report said.

In an effort to stem such defaults, lenders making loans under HUD’s program after March 2 will be required to make certain financial assessments of a prospective borrower. Currently, loan qualifications primarily are a borrower’s age and the amount of equity in a home.

The financial protection bureau recommends three steps that homeowners with reverse mortgages should take to protect their heirs. The advisory, “Three Steps You Should Take If You Have a Reverse Mortgage,” is available at

The steps involve verifying who is on the loan, and planning ahead for the non-borrowing spouse and for any family members living in the home.

The advisory also has links to a consumer guide for people considering a reverse mortgage and a question-and-answer tutorial.

Consumers can submit a complaint to the protection bureau at, or by calling toll-free 1-855-411-2372.

Patricia Sabatini: or 412-263-3066.


Bipartisan bill puts payday loan industry before people | The Stand

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(Feb. 12, 2015) — If your friend told you that she could get a payday loan of $700, and that the interest would be 36%, plus a small loan origination fee of 15%, plus a monthly maintenance fee of 7.5%, you might advise her to get out her calculator. Here’s why: That $700 loan could cost her $1,687, even if she makes all her payments on time. Right now, under state law, she can get the same loan and it will cost her $795 in all.

Which loan would you choose? That seems like an easy question to answer. But a lot of legislators have failed this test in Olympia. They are sponsoring a bill, HB 1922, to enable MoneyTree to sell “small consumer installment loans,” with high interest, maintenance fees, and origination fees.

Why would these legislators — 36 in the House and 12 in the Senate, both Democrats and Republicans — want to enhance the revenue of the payday loan industry? State Rep. Larry Springer (D-Kirkland) is the prime sponsor of this legislation. He says that “(o)ur current payday lending system is broken. Too often it leaves consumers in a never-ending cycle of debt.”

Unfortunately, HB 1922 makes matters worse, not better, for borrowers.

Rep. Springer may not know how well the law that he helped pass in 2009 reformed payday loan practices. That law leashed in the payday loan industry, with new standards that helped to make sure that people with loans did not get pushed deeper and deeper into debt. The industry didn’t like it, as the total amount of loans fell by more than $1 billion, from $1.3 billion in 2009 to $300 million in 2013. The amount of fees that the industry collected dropped by $136 million annually. The number of payday loan storefronts has fallen from over 600 in 2009 to less than 200 now. The total number of loans has fallen from 3.2 million in 2009 to 870,000 in 2013. That’s a lot of money for people to keep in their communities, rather than giving it to MoneyTree.

But very quietly last year, the owners and executive staff of MoneyTree, principally the Bassford family, dropped $81,700 in campaign contributions to both Democrats and Republicans. Many of the beneficiaries of this largesse are sponsoring the MoneyTree bill, HB 1922. In fact, the chief sponsor in the Senate, Sen. Marko Liias (D-Edmonds) received $3,800 from the Bassfords.

What would be the result of the bill that Rep. Springer and Sen. Liias are pushing? For a $700 loan, what now costs a total of $795 could cost $1,687. The poor person (literally) who gets this loan would end up paying $252 in interest, $105 in origination fees, and $630 in monthly maintenance fees, as well as, of course, the original one-year loan of $700. From 2017 on, the fees on these loans will be automatically raised through the consumer price index.

MoneyTree’s investment of $81,700 in campaigns could result in literally hundreds of millions of dollars in revenue. That’s quite a cost-benefit equation for the Bassfords. How about the working people who take out these loans? Their average monthly income is $2,934, or about $35,000 a year. With this bill, legislators punish the already poor for being poor, while enhancing the wealth of the payday loan perpetrators.

The legislation pretends to be helpful to borrowers by requiring this notice to be included in loan documents: “A SMALL CONSUMER INSTALLMENT LOAN SHOULD BE USED ONLY TO MEET SHORT-TERM CASH NEEDS.” Now isn’t that helpful! What is not helpful is that this bill was scheduled to be voted out of committee Thursday, even before the committee heard the bill on Wednesday, and even before any bill analysis was developed by legislative staff.

Our current payday loan system may be broken from MoneyTree’s perspective. But, while it is not perfect for low-income borrowers, it works, and it is a lot better than the previous system. Perhaps some responsible legislators will slow down the fast-track on the MoneyTree bill, and put people ahead of MoneyTree profits.

John Burbank is the executive director and founder of the Economic Opportunity Institute in Seattle. John can be reached at


Peter Mandelson gets £400,000 tax-free loan from company he owns

Peter Mandelson received £400,000 tax-free in cash last year from a company he owns, accounts filed recently at Companies House reveal.

The company, of which he is the sole shareholder, gave the former secretary of state a loan for that amount in the financial year 2013/14 – a move described by a leading tax campaigner as likely to have been motivated by tax avoidance.

Salary payments or dividends from a small business are liable for tax under UK rules, but in the case of a loan to a director – provided a certain minimum rate of interest specified by HMRC is charged – the borrowing is not liable for tax. The official interest rate that applied at the time was 3.25%.

The accounts for Willbury Limited – a company set up by Mandelson two weeks after the 2010 general election to receive income from his book and public speaking engagements – show the company charged £15,211 in interest on the balance, an amount it refers to as the official rate.

The document shows no repayments were made on the loan by Mandelson during the year, nor was any repayment schedule or term of loan set out.

Such a measure is perfectly legal, but it allows those who take advantage of the mechanism to delay when they pay tax on income earned through their company – potentially indefinitely.

Richard Murphy, a chartered accountant and director of Tax Research UK, said Mandelson’s use of loans raised questions.

“How to extract cash from small companies whilst paying as little tax as possible on the way is a massive part of the UK tax avoidance industry,” he said.

“Directors taking loans from companies they own is one way in which this is done, which has been widely condemned in the past when done by footballers and others. It’s just about impossible to think this is motivated by anything but tax avoidance.

“All politicians, including members of the House of Lords, should not only be seen to comply with the spirit of the law on tax but should be required to do so as a condition of holding office.”

When contacted by the Guardian about the arrangement, a spokesperson for Lord Mandelson said the peer and his company paid all relevant taxes.

The Guardian put to Lord Mandelson that a loan of the sort he had taken from his company could serve to potentially delay tax indefinitely, especially given there was no term of repayment specified in the documents. A spokesman for Mandelson did not address the specific point, but instead issued a statement.

It said: “Willbury Ltd is the company that oversees all of Lord Mandelson’s writing, public speaking, broadcasting and personal commercial undertakings. It pays all relevant UK corporate taxes and Lord Mandelson pays all relevant personal taxes.”

Mandelson recently criticised Labour’s tax policies on wealthy individuals. Speaking on Newsnight last Monday about the mansion tax, Mandelson said Ed Miliband’s plan to tax properties worth more than £2m was “crude” and “sort of short-termist” and would “clobber” homeowners.

In August 2011, the Mail on Sunday reported that Mandelson paid £8m for a four-storey Regent’s Park townhouse with its own wine cellar.

Mandelson’s loan and property dealings previously came under scrutiny after he was forced to resign from Tony Blair’s cabinet in 1998 when it was revealed he failed to declare a secret property loan from Geoffrey Robertson, a fellow Labour MP and tycoon, who was at the time under investigation by Mandelson’s department.

After a brief return to the cabinet, he was forced to resign a second time in 2001 over his involvement in a passport application of Indian billionaire Srichand Hinduja.

Mandelson’s comments on wealth and tax have long attracted a great deal of attention. During the early years of Blair’s premiership, he famously commented to an audience of tech entrepreneurs that he was “intensely relaxed about people getting filthy rich as long as they pay their taxes”.

Since Labour’s election defeat in 2010, Mandelson’s attention has turned to the private sector. In addition to releasing his autobiography entitled The Third Man – which had paperback sales of around 13,000 – he has made public speaking appearances for clients including Coca-Cola, Lloyds bank and Samruk-Kazyna, Kazakhstan’s sovereign wealth fund, as well as for mining companies operating in Africa.

Separately, Mandelson established a second company, Global Counsel LLP, in partnership with his long-time aide Ben Wegg-Prosser and the advertising giant WPP.

Global Counsel’s clients include multinationals such as BP, Goldman Sachs and commodities giant Glencore.

In 2012, the Guardian revealed that Mandelson was advising Asia Pulp and Paper, which has been accused by environmental groups of destroying large swaths of an Indonesian rainforest.


Rangers agree to £10m Sports Direct loan

The cash-strapped Rangers board has agreed a £10m emergency loan deal with Mike Ashley’s Sports Direct firm, the Scottish soccer club told the London Stock Exchange today.

Without the injection of fresh funding, the Ibrox outfit would not have been able to cover pay checks due to be delivered on Thursday.

The loan will be secured against Murray Park, Edmiston House, Albion Car Park, and the club’s registered trademarks – but not Ibrox.

The move spells the end of attempts by the Three Bears – wealthy fans Douglas Park, George Letham and George Taylor – to have their own loan offer accepted.

It was their promise to match Ashley’s deal while demanding Ibrox remained unsecured that forced the Newcastle United owner to drop the stadium from the terms of his agreement.

In return for the money – which will be paid to Rangers in two £5m tranches – Ashley will be able to nominate two more directors to the board.

His associates Derek Llambias and Barry Leach are already serving as chief executive and financial director.


Trying to time the market with a mortgage?


Dear Dr. Don,
We currently own a multifamily unit with two 30-year fixed mortgages. One is for $200,000 at 5.25 percent and the other is for $65,000 at 3 percent. Our home is valued at $280,000. We would like to refinance and have cash to pay down the mortgage so that we will have 5 percent equity in the house to refinance. Do you recommend using the cash to pay down the debt to refinance or waiting until the home value rises? We also want to buy another home in the next few years in addition to the one we have.

— Michelle Myriad

Compare refinance rates and lower your monthly payments

Dear Michelle,
Unless you’re having cash flow problems that you’re trying to resolve by refinancing the two mortgages into one loan, the assumption here is that the lender on the $65,000 mortgage won’t sign off on refinancing the $200,000 loan, which forces you to refinance both loans. Otherwise, you’d hold on to that 3 percent rate.

Bringing cash to closing can get you that new mortgage, but you’ll still wind up paying private mortgage insurance on a conventional mortgage with less than 20 percent down. If you live in the home, an FHA loan requires less money down, but you’ll pay mortgage insurance upfront and in your monthly mortgage payment. An FHA loan requires a 3.6 percent down payment, and you’ve got that much equity in the property now without bringing cash to closing.

I’d lean toward refinancing now versus waiting for home values to rise, just because I don’t think you’ll like where mortgage rates go if you wait. It also makes things easier by having the financing in place before shopping for your next property.

Compare the cost of a cash-in closing on a conventional mortgage with the cost of closing an FHA loan. Private mortgage insurance doesn’t last forever with a conventional loan, but the mortgage insurance premium is permanent on an FHA financing. The difference in interest rates between the two loans should be small, but that’s also important in determining which loan is right for you.


Pros and Cons of Reverse Mortgages

Over the last decade, reverse mortgages have been marketed as an easy way for seniors to cash in their home equity to pay for living expenses. However, many have learned that improper use of the product – such as pulling all their cash out at one time to pay bills – has led to significant financial problems later, including foreclosure.

In actuality, there are some cases where reverse mortgages can be helpful to borrowers. However, it is imperative to do extensive research on these products before you sign.

Reverse mortgages are special kinds of home loans that let borrowers convert some of their home equity into cash. They come in three varieties: single-purpose reverse mortgages, Home Equity Conversion Mortgages (HECMs) and proprietary reverse mortgages.

Who can apply? Homeowners can apply for a reverse mortgage if they are at least 62 years old, own their home outright or have a low mortgage balance that can be paid off with the proceeds of the reverse loan. Qualifying homeowners also must have no delinquent federal debt, the financial resources to pay for upkeep, taxes and insurance and live in the home during the life of the loan.

Consider the following pros and cons as a starting point for trying or bypassing this loan choice. Even though HECM loans require a discussion with a loan counselor, you should bring in your own financial, tax or estate advisor to help you decide whether you have a safe and appropriate use for this product.

Pros of reverse mortgages:

They’re a source of cash. Borrowers can select that the amount of the loan be payable in a lump sum or regular payments. Proceeds are generally tax-free. Final tax treatment may rely on a variety of personal factors, so check with a tax professional. Generally, they don’t impact Social Security or Medicare payments. Again, important to check personal circumstances. You won’t owe more than the home is worth. Most reverse mortgages have a “nonrecourse” clause, which prevents you or your estate from owing more than the value of your home when the loan becomes due and the home is sold. Reverse mortgages may be a smarter borrowing option for some downsizing seniors. With proper advice, some borrowers use them to buy new homes.

Cons of reverse mortgages:

You may outlive your equity. Reverse mortgages are viewed as a “last-resort” loan option and certainly not a singular solution to spending problems. You and your heirs won’t get to keep your house unless you repay the loan. If your children hope to inherit your home outright, try to find some other funding solution (family loans, other conventional loan products) first. Fees can be more expensive than conventional loans. Reverse mortgage lenders typically charge an origination fee and higher closing costs than conventional loans. This adds up to several percentage points of your home’s value. Many reverse mortgages are adjustable rate products. Adjustable rates affect the cost of the loan over time. If you have to move out for any reason, your loan becomes due. If you have to suddenly move into a nursing home or assisted-living facility, the loan becomes due after you’ve left your home for a continuous year.

Bottom line: Reverse mortgages have become a popular, if controversial, loan option for senior homeowners. For some, they may be a good fit, but all applicants should get qualified financial advice before they apply.

Jason Alderman directs Visa’s financial education programs. To Follow Jason Alderman on Twitter:


Site Last Updated 12:46 am, Sunday

BALIK PULAU: Police arrested a man, believed to be a loan shark and seized RM545,599 in cash in a raid on his house in Teluk Kumbar, here, on Thursday.

A police spokesman said the 35- year-old suspect tried to escape in the 2.30pm raid but failed, as a team from the Commercial Crime Investigation Division of the Southwest district police headquarters had cordoned the house.

“Acting on information from the public and intelligence report, a team of policemen, through Op Cenderawasih, raided the house and arrested the man.

“While conducting a search at the house, the police team also found RM545,499 in cash, 51 withdrawal slips from various banks, 96 loan cards from various banks, 51 cheques for almost RM1 million and 10 savings account books from various banks,” he said, here, yesterday.

The spokesman said police also found three machetes which were suspected to be used in illegal money lending activities.

The initial police investigation found the man had been carrying out the illegal activity since last year and had been imposing high charges on the borrowers.

Penang CID deputy chief, ACP P R Gunalan, when contacted, confirmed the man’s arrest and that he was being remanded to assist in the investigation.

He urged those who had borrowed money from the man to come forward to facilitate the investigation. — Bernama


Alternatives to risky payday loans | Times-News

The holiday shopping season is coming up, and people in search of some quick spending capital might strongly consider taking out a payday loan.

More than 19 million people struggling with their finances take out one of these unsecured personal loans each year without seeing the danger signs pointing to their finances, like insanely high, triple-digit interest rates.

Before funding your post-Black Friday Christmas shopping with a payday loan, look at some other ways to get money fast.

1. Take out a payday alternative loan.

Yes, these actually exist. Veridian Credit Union, for example, offers a payday alternative loan with a maximum loan amount of $1,000 and a six-month repayment term at an interest rate of around 20 percent.

2. Get a cash advance from your credit card.

Again, the interest rates might not be the lowest, but this time, you’re borrowing against your own credit limit.

3. Withdraw from your emergency fund.

If the added interest of using your credit card is too much to deal with, you can always try taking just enough cash from your emergency fund to cover holiday shopping expenses.

4. Ask your employer for an advance.

Your job might permit you a cash advance taken from your next paycheck. It’s not a loan, so you won’t have to deal with interest or repayment because it’s money that you have earned.

5. Sell, pawn or auction off unwanted belongings.

Now’s a better time than ever to sell some of those old things taking up space in your house. It could be anything from a used cell phone, to furniture, vintage clothing, appliances and more.

— from wire reports


Plaintiffs Find Little Traction In Suits Against Banks Over "Payday …

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In recent months, a number of class actions have been filed across the country against large banks in an attempt to hold those banks accountable for debiting consumers’ deposit accounts for payments to certain companies offering short-term, small dollar loans – often called “payday loans” – online. In all of the lawsuits, the plaintiffs allege that, though they initially authorized the ACH transactions, the banks nonetheless improperly processed these debits because the National Automated Clearing House Association (NACHA) Operating Rules governing ACH transactions required the borrowers’ banks to carry out due diligence and monitoring activity, and to avoid processing debits from entities known to engage in unlawful activities. The suits claim the bank defendants knew the transactions were illegal (in some cases, plaintiffs make this claim based on a letter that the New York Department of Financial Institutions sent to 117 banks in August 2013 naming 35 allegedly illegal payday lenders in connection with its own investigation of payday lending. The letter also urged banks to block online lenders from using the ACH network.).

The cases, including at least ten suits against BMO Harris Bank alone, seek relief under a variety of theories including:

breach of contract (i.e., the borrower’s deposit agreement with the bank); negligence; unjust enrichment; breach of good faith and fair dealing; unconscionability; conversion; violation of state unfair competition law and/or consumer protection statutes; violation of state payday loan laws; and, violation of state and/or federal Racketeer Influenced and Corrupt Organization (RICO) laws.

To date, however, plaintiffs have found little success in these lawsuits, with most cases being ordered to arbitration or outright dismissed because plaintiffs failed to state a claim. The latter result makes particular sense here since the borrowers’ banks ordinarily should not be liable for accepting debits the plaintiffs themselves authorized. LenderLaw Watch will continue to monitor developments of note and bring readers updates in these cases.