Court: Payday loans can't stop class action suits

MADISON, Wis. (AP) — A court says payday lenders cannot require customers to waive their ability to join class action lawsuits in order to receive loans.

The District 3 Court of Appeals ruled Tuesday that such requirements, typically in fine print, violate the Wisconsin Consumer Act.

The court says the ability to file or join class action lawsuits is often the only effective way to protect consumers from unfair practices.

The case involves Cottonwood Financial, which runs a payday lender called The Cash Store.

Borrower Darcie Estes received $1,400 cash at high interest rates and ended up paying back $4,500. Estes defaulted still owing $1,000.

Because of the provision in the loan agreement, Estes was prevented from filing a lawsuit alleging violations of the consumer act.

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