DENVER — Colorado Attorney General John Suthers announced today that attorneys from his office have reached a settlement with a small-installment lender, Security Finance, which will require the company to refund certain fees it charged consumers starting in 2004. Security Finance had 13 locations across the state, including branches in Alamosa, Colorado Springs, Cortez, Denver, Grand Junction, Pueblo and Trinidad.
“Colorado’s lending laws are designed to ensure that consumers are given a fair shake when they need to borrow money. My office is dedicated to vigorously pursuing lenders that violate Colorado law by taking advantage of consumers,” Suthers said. “This case marked the first time my office alleged a lender was making loans to consumers who had no reasonable ability to pay off the loans."
According to the complaint, filed in a Denver District Court in June 2008, Security Finance effectively prevented its borrowers from paying back their small-installment loans through business practices that violated the Uniform Consumer Credit Code. Security Finance, for example, allegedly refinanced its consumers’ small-installment loans to maximize the number and amount of acquisition fees it could charge its customers. Security Finance also was suspected of misstating its customers’ net monthly income in order to lend consumers larger loans than they could repay.
Colorado law limits small-installment loans to no more than $1,000, which must be repaid within 12 months in substantially equal installments. Colorado law also caps the number of refinances per year at three. Colorado law also bars lenders from making loans to people who do not have a reasonable ability to repay their loans.
Under the agreement, Security Finance has agreed to refund the acquisition fees it charged customers in excess of the three in a year. As a result of the case, Security Finance and its parent corporation, Security Finance Corporation of Spartanburg, decided to close its Colorado operations and, as part of the settlement, to surrender its lending licenses.
Security Finance has agreed under the settlement to pay $125,000 for the state’s attorney and expert-witness fees.