Wednesday, Dec. 27, 2017 | 1:29 p.m.
CARSON CITY — The Nevada Supreme Court has stopped payday loan companies from filing lawsuits to collect outstanding debts in certain cases.
The court, in a 6-1 decision Tuesday, held that loan companies cannot bring a civil action in a case where a person received a second loan to pay off a first loan.
The decision overturns the ruling of a Clark County District Court judge who ruled in favor of Dollar Loan Center and against the state Financial Institutions Division. The entities entered into a suit to clarify the law after conflicting legal opinions.
Justice James Hardesty, who wrote the majority decision, said the law bars a licensed loan company from taking any enforcement action on a defaulted refinancing loan in which the borrower used the money to pay off the first outstanding loan.
The Legislative Counsel Bureau, in a 2011 legal opinion, said the law did not prohibit a loan company from suing to collect on a defaulted refinancing loan. The state Attorney General’s Office in 2012 held the loan company was barred from bringing such suits.
Hardesty said if the loan company agrees to make a deferred-deposit loan or a high-interest loan to satisfy the first loan, the firm foregoes the right to bring suit if the second loan goes into default. The prohibition stops borrowers from finding themselves on a “debt treadmill,” he said.