AGO finds loan company operating illegally on Tinian

The Attorney General’s Office has sued two persons for allegedly operating an unlicensed consumer loan company on Tinian that over-charged interest on their customers mostly government employees.

The CNMI government sued Concepcion M. Manglona and Edward A. Villagomez, owners of EC Payday, for violation of the Consumer Protection Act.

In total, the AGO claimed, Manglona and Villagomez over-charged consumers by at least $65,000 in interest amounts beyond what Commonwealth law sanctions.

Assistant attorney general Brian R. Caldwell, in the complaint filed on Friday, asked the Superior Court to rule that the defendants have engaged in trade or commerce within the meaning of the Consumer Protection Act.

Caldwell requested the court to find that the defendants have engaged in unfair methods of competition or unfair or deceptive acts or practices in the conduct of trade or commerce in violation of the Act.

Caldwell sought court’s judgment enjoining the defendants from engaging in the business of advertising, selling, or contracting for sale, extensions of credit to consumers.

The government demanded that the defendants pay a civil penalty of $2,500 for each separate act or practice found to be a violation of the Act.

The AGO also moved the court to order the defendants to pay restitution to consumers harmed by defendants’ unfair or deceptive acts or practices.

Caldwell stated in the complaint that Manglona and Villagomez, together doing business as EC Payday, operate an unincorporated partnership on Tinian.

Caldwell said the defendants are engaged in “commerce” and “trade” as defined in the Act “ in that they sell, advertise, offer for sale, and contract for sale to the general public consumer credit transaction services commonly referred to as payday cash advances.”

On Dec. 30, 2004, the defendants began offering payday cash advances from its office in San Jose, Municipality of Tinian and Aguigan, the lawyer said.

He said the defendants failed to obtain a license from the Department of Commerce to operate as a consumer loan company pursuant to the statute.

Defendants rely on word of mouth to attract customers, Caldwell said.

“When a consumer approaches defendants for a payday cash advance, the defendants inform the consumer that they must fill out an application and provide: proof of identification—either a driver’s license or passport—and copies of their last three paycheck stubs,” he said.

Defendants, Caldwell noted, then require the consumer to sign three documents that purport to assign to defendants all rights to that consumer’s next paycheck.

“In most situations, before the defendants will consummate the loan, the defendants require the consumers’ employer to certify that the consumer has already worked the hours necessary to entitle that consumer to receive the full amount of his or her paycheck on the next payday,” he pointed out.

In most situations, Caldwell said, the typical loan term is less than 14 days, which is the length of a normal government pay period, most of the borrowers being government employees.

In other situations, he said, where the amount of the loan is greater than $287, the consumer is given the option to pay back defendants over several pay periods.

“In exchange, the defendants negotiate a check to the consumer in an amount that is equal to the amount of the consumer’s next paycheck, or next several paychecks, or a designated portion thereof, less a percentage discount which represents the fee to defendants,” he said.

When payday arrives, Caldwell said, the defendants’ documents purportedly require the consumer to either brings their paycheck to defendants and endorse the paycheck over to defendants, or purportedly allow the defendants to physically pick up the paycheck from the consumers’ employer and then deposit the paycheck into defendants’ own bank account.

Defendants, he said, do not disclose on any of the loan documentation what the Finance Charge or Annual Percentage Rate of the loan is as required by the Federal Truth in Lending Act.

Caldwell said the defendants also do not use credit terms mandated by the Federal Truth in Lending Act such as “Amount Financed” or “Total of Payments,” using the respective labels “Capital” and “Figure” instead.

Caldwell cited a statute that prohibits transactions as a criminal offense where the amount of interest exceeds two percent per month—or 24 percent when expressed as an Annual Percentage Rate.

Caldwell said in addition, the defendants charge each consumer a one-time “processing fee” of $20 on their first payday purchase transaction.

Beginning Dec. 30, 2004, defendants have entered into at least 650 illegal payday cash advance transactions with at least 170 different consumers, he said.

Defendants, he asserted, regularly charged these consumers a rate of interest up to 62 times greater than the legally enforceable amount under the Commonwealth Usury Law, or up to over 30 times greater than the amount prohibited by law.