They Loan You Money. Then They Get A Warrant For Your Arrest

Zachery Limas and his wife, Amber Greer, both 24, waited in the lobby area for their audience with Stauffer. Limas had borrowed $700 from Loans for Less last summer for a down payment on a 2012 Hyundai Santa Fe, an SUV with enough space to accommodate car seats for three children, one of whom was then on the way. (Limas and Greer had another loan with a different company to cover the balance of the purchase price.) Since the $700 loan came with a 180% APR, Limas would have to pay back around $1,400 — double the amount borrowed — within 10 months. At the time, he earned $16.87 an hour driving a forklift at a warehouse; she worked at Subway.

Limas said he made a few payments before a new owner took over his employer and he was laid off. By the time he found a new job, Greer had given birth to their child and stopped working. With his entire paycheck going toward basic expenses like rent and electricity, they could no longer afford to pay back the loan. In March, Loans for Less won a default judgment against Limas for $1,671.23, which included the outstanding balance plus court fees. “We can’t catch up. We can’t do this,” Greer said. “There’s no way we’re ever going to catch up, especially not with the interest rate that they have.” After Limas missed a court date for the second time, a constable came to their home, threatening to take him to jail unless he paid $200 in bail at the door. “Obviously, we don’t have extra money like that lying around,” he said. Greer called a friend of her mother’s and borrowed the money, jotting down her card details over the phone.

Standing outside the courtroom, the couple told Stauffer they had met with a lawyer and planned to file for Chapter 7 bankruptcy, which would put the lawsuit on hold and eventually discharge their debts. Stauffer was not sympathetic and tried to persuade them to agree to a payment plan. “Even if they’re broke,” Stauffer said later, “we’ll set up $25 a month.” The couple refused.

Limas and Greer say they went to court planning to speak to a judge. After addressing their case with Stauffer, they asked her if they were “good to go.” When she said yes, according to Greer, they took that to mean that they had fulfilled their obligations at the courthouse. Limas and Greer left. They were absent when their case was heard before a judge an hour later.

These hallway negotiations between payday lenders and borrowers are ubiquitous in small claims courts across Utah. They raise red flags, according to consumer advocates. Borrowers are typically unfamiliar with the courts and can’t afford to hire lawyers; collectors deal with dozens of cases every month. Consumers might not understand that they are meeting with a representative from a payday loan company rather than a court-appointed official, said April Kuehnhoff, an attorney at the National Consumer Law Center. They might not understand that they have a right to a hearing before a judge or that government benefits like Social Security and disability are exempt from collection. “The settlement agreement just gets rubber-stamped by the court and people get railroaded through this process,” she said.

Stauffer maintained that she is trying to help. “We try and set up arrangements outside of court to make it easier on them. That way, they don’t have to go in front of the judge,” she said. “Any judge intimidates people, so it’s easier just to try and set up arrangements outside.”

Defendants wait to meet with Stauffer. At a quarter to 10, Stauffer gathered her folders and walked inside the courtroom. She had 52 cases to be heard, which represented all but two of the cases on the court’s docket that day. Stauffer had been able to strike a deal with a handful of debtors. None of them followed her inside the courtroom. I sat with a handful of people in the gallery. Judge Bryan Memmott was presiding. Temporarily stationed in South Ogden, he spends most of his time handling minor criminal and civil matters in the justice court in Plain City, about 15 miles away. A former partner at a small law firm near Phoenix, specializing in real estate and bankruptcy law, Memmott began his legal career in the Judge Advocate General’s Corps in the Air Force. He seemed at ease with Stauffer and talked to her as though they were colleagues. (Memmott declined to be interviewed for this article.)

“Why don’t you tell me what cases you’ve got and we’ll go through them that way?” he said. Stauffer laughed. “OK,” she said. “So I’ll go in alphabetical order.” The judge moved quickly, approving judgments as soon as Stauffer shared a defendant’s name and the amount they owed. When the judge lingered once on a case for more than 30 seconds, he begged her pardon: “Sorry. My computer’s being a little slow. I was going between screens. I apologize.” “No, you’re OK,” Stauffer said. In many cases, a judgment had been previously entered and borrowers had missed the follow-up hearing. “Can we get a bench warrant?” Stauffer asked in one such case. Memmott obliged, setting the bail amount at $200. During the half-hour hearing, Memmott issued 21 such warrants. He never refused a request by Stauffer. When they came to Limas’ case, Stauffer told the judge that Limas had paid $200 in bail but had told her he was planning to file for bankruptcy. “We were going to set up arrangements,” she explained. “He walked out.”

Memmott didn’t wait for Stauffer to request that the Limas’ bail be transferred to Loans for Less. “He hasn’t filed bankruptcy yet,” the judge said, “so we’ll forfeit the bail [to the company] and issue a new warrant. If he files bankruptcy, we’ll stay the proceedings.” “So, what’s your new warrant,” he said, glancing at Stauffer. “$300?” “OK,” she said.

After the hearing was over, Stauffer stepped into the hallway to talk to a constable stationed by the metal detectors outside the courtroom. He works for Wasatch Constables, a company hired by South Ogden to serve as bailiffs in its courthouses. The company is also deputized by payday lenders, who pay them a fee to serve warrants on debtors. S. Steven Maese, who was then Wasatch’s chief operating officer, defended his company’s work for payday lenders. “The biggest misconception, I would say, is that people think that they are being punished for owing money — they are not,” he said. “A warrant is a wake-up call to say that you need to comply with court proceedings.” Stauffer lowered her stack of folders to the gray folding tables near the metal detectors. The officer leaned over and snapped a picture of an address in one of her folders, ready for his next job. A few weeks after the hearing, a constable showed up at the home of Limas and Greer to arrest him. Greer said she was able to provide evidence of the couple’s bankruptcy filing and the constable went away, but not before informing her that court records indicated Limas had missed his court date. At first blush, Utah would seem an unlikely home to a concentration of companies that specialize in peddling high-interest loans to low-income, often minority customers. Utah has one of the lowest unemployment rates in the country, and its population is more middle class and white than the rest of the U.S. Yet a quarter of the state’s population lives in a household that earns less than $39,690 a year.