August 15, 2002
Sean Caine, 410-576-6357
AFFIRMS ORDER TO TWO COMPANIES TO
STOP MAKING SHAM "SALE-LEASEBACK" LOANS
General J. Joseph Curran, Jr. announced today that the Circuit Court
for Baltimore City has upheld a decision by his Consumer Protection
Division that two Maryland companies were engaging in illegal and
usurious loans that were disguised as "sale-leasebacks."
Circuit Court held that there was "overwhelming" evidence
that the transactions offered by the companies under the trade names
"Kash-2-U Leasing" and "Cash-2-You Leasing"
were nothing more than disguised loans. The companies, B& S
Marketing Enterprises, LLC and S&B Marketing Enterprises, LLC,
were not licensed to make consumer loans, and the loans that were
offered were at an annual interest rate of 720 percent, which far
exceeds the 33 percent annual interest allowed by the Maryland Consumer
Loan Law. The companies disguised their loans as sale-leasebacks
in an effort to avoid the consumer loan law and Consumer Protection
has been a long history of predatory lenders trying to get around
consumer protection laws and charging outrageous interest on their
loans, and this current sale-leaseback scheme is a reincarnation
of one of the oldest schemes," Curran said. "Maryland
is at the forefront of states working to prevent predatory lending,
including payday loan sale-leaseback schemes."
two companies operated three stores in Baltimore, Camp Springs,
and Wheaton. They advertised that consumers who needed cash quickly
could get up to $200 with "no red tape." Consumers were
asked to provide the serial number of an item of personal property,
such as a TV or VCR. The company "bought" the item, typically
for $100. The consumer then signed a lease agreement to pay "rent"
on the item, typically $30 every 15 days, until he or she could
repay the loan.
Circuit Court upheld the Divisions order to the two companies
to pay restitution to consumers who paid interest on the loans (which
was disguised as "rent") between January 1994 and January
1997, and to pay civil penalties of $591,400 and the costs of the
Divisions investigation. The Circuit Court remanded the Divisions
order back to the Division to clarify its order to ensure that disguised
loans in any form would be prohibited.