One of the criticisms aimed at the so-called payday loan business is that in requiring payment of the loan in full, without partial payments to reduce the principal, payday lenders trap consumers “in a vicious cycle of indebtedness.” Creola Johnson, Payday Loans: Shrewd Business or Predatory Lending? 87 Minn. L.Rev. 1, 4 (2002). Id. at 56. To roll over a loan is “to refinance a maturing obligation ? by offering a new obligation of the same type in exchange.” Webster’s Third New International Dictionary 1969 (1993).
Typically, payday loan customers are unable to pay off the entire indebtedness by the loan’s due date and have to “roll over” the loan
In Washington, WAC 208-630-085(2)(a) prohibits the classic form of roll over for chapter RCW small loans: “No loan made under this act shall be repaid by proceeds of another loan made under chapter RCW by the same lender or affiliate. The proceeds from any loan made under this act shall not be applied to any other loan from the same lender or affiliate.” 3 In an attempt to comply with this regulation, Cash Store requires its customers to “pay off” each loan with cash that is promptly returned to the customer when he or she pays the finance fee for the original loan, signs a new consumer loan agreement, and writes out a new postdated check. CP at 93. Johnson, supra, at 70. By paying back the loan and immediately taking out a new loan for the same amount, the consumer enters a debt treadmill, where the loan is nonamortizing and payment of a finance fee every two weeks is necessary to prevent a default. Id. at 59. The payday loan industry maintains that the risk of default is high and justifies exorbitant finance fees. However, “because the rollover practice is part of its business model, the risk of losing capital decreases over time.” Id. at 70-71.
Johnson alleged that Cash Store’s annual percentage rate of between 322 and 608 percent was usurious and an unfair practice for the purposes of the CPA
Mr. Ahlberg’s affidavits and the report compiled by the DFI do not address Cash Store’s policy of renewing Ms. Johnson’s loan every two weeks for a 15 percent finance fee. In fact, this evidence does not specifically address Ms. Johnson’s allegations that she lacked a meaningful choice in the terms of the contract and that she did not understand the true ramifications of entering into an agreement that required payment in full-or unlimited renewals of the debt-for a 15 percent fee every two weeks. Cash Store insists that the fact that the DFI found Cash Store’s small loans compliant with the disclosure and interest rate requirements of chapter RCW supports a prima facie defense against Ms. Johnson’s claim of payday loans Connecticut unconscionability. The general nature of this evidence, however, does not support a “strong or virtually conclusive defense” to the specific acts of unconscionability alleged in Ms. Johnson’s complaint. White, 73 Wash.2d at 352, 438 P.2d 581.
Ms. Johnson’s second cause of action was for violation of the Consumer Protection Act, chapter RCW. To establish a violation of the CPA, a plaintiff must prove (1) an unfair or deceptive act or practice, (2) occurring in the conduct of trade or commerce, (3) that impacts the public interest, and (4) proximately causes injury to the plaintiff in his or her business or property. Guijosa v. Wal-Mart Stores, Inc., 144 Wash.2d 907, 917, 32 P.3d 250 (2001). Ms. She also claimed that an agent of Cash Store conducted an unfair business practice by threatening her with criminal prosecution.