By TED CARTER
A federal judge Friday put a speed bump in front of Mississippi banking regulators seeking to shut down payday lender All American Checking Cashing over allegedly collecting illegal fees from borrowers.
The Department of Banking and Finance can’t revoke the licenses for All American’s 43 stores and force payment of a $3 million penalty without giving the payday lender a hearing before Banking Commissioner Charlotte Corley, said Senior Judge Tom S. Lee of the U.S. District Court for the Southern District of Mississippi.
Lee’s order followed two hours of arguments from state lawyers and lawyers for owner Michael Gray on Gray’s bid for an injunction to halt the regulatory penalties. Lee said he would rule later this week.
Gray is fighting regulatory claims his stores made thousands of illegal loan rollovers and committed other offenses as a corporate strategy. The main offense, regulators say, involved letting borrowers repeatedly pay the loan fees of $20 per $100 on two-week loans instead of the principal loan amount, thus creating a new loan (or rollover) and trapping borrowers in a cycle of debt.
Instances of the rollovers “are so widespread that they are innumerable,” Taft Webb, director of the banking department’s Consumer Finance Division, said in his Jan. 29 penalty notice to Gray.
Representing the banking department, Justin Matheny of the Mississippi Attorney General’s civil division said Banking Commissioner Corley likely would conduct a hearing regardless of whether it is required. “There’s a lot of documents and evidence that must be considered,” Matheny said.
But putting a halt to the administrative actions, including the license revocations, is unmerited, Matheny said. He cited case law he said required that the potential harm to a license holder must be “the greatest of the greatest irreparable harm.
“Irreparable harm means no remedy in law,” he said.
The soon-to-be-held hearing and a judicial appeal to Chancery Court are available remedies, Matheny added.
Gray’s lawyers from the Memphis firm of Dinkelspiel Rasmussen & Mink said state regulators have failed to substantiate any of the illegal loan rollover claims and have served as “government thugs” in imposing “a summary death sentence” on All American Check Cashing.
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