Customers of Dennis Bailey's check-cashing businesses in Fordyce have been hauled into hot-check court, forced to pay court fees they shouldn't have had to pay, or spent time in jail for crimes they didn't commit, Attorney General Leslie Rutledge contends.
Bailey agreed on July 8 to settle a consumer-protection lawsuit the attorney general had filed against him a year ago in Pulaski County Circuit Court. Circuit Judge Mary McGowan signed off on the agreement.
In signing the agreement, Bailey admitted to no wrongdoing or liability. Reached by telephone at one of his Fordyce businesses on Tuesday, Bailey declined comment.
Under the agreement, Bailey will pay $50,000 that will be disbursed to an undetermined number of Bailey's customers who were harmed, according to Rutledge's office. The office said it is working on a plan to determine who is eligible for reimbursement and for how much.
Another $250,000 fine was suspended but is subject to reinstatement if Bailey violates any part of the agreement.
And, in a stipulation involving courts in Fordyce and El Dorado, Bailey must withdraw some $125,000 in hot-check affidavits he has filed.
The agreement also prohibits Bailey from using a prosecutor or any law enforcement official in collecting on any transaction involving the state's Hot Check Law for five years. Bailey also is prohibited from holding a customer's driver's license, state-issued identification card or a credit, debit or Electronic Benefits Transfer card as security.
Rutledge's office sued Bailey and his businesses under the Arkansas Deceptive Trade Practices Act, claiming that Bailey illegally used the court system to collect debts.
"Bailey abused the criminal court system to take advantage of vulnerable Arkansans who needed money to pay their bills or for emergencies -- some even paying for a family member's funeral," Rutledge said in a news release Monday announcing the July 8 agreement. "In some instances, consumers who did not repay Bailey's loans on time were arrested, jailed, and convicted of crimes they never committed."
Bailey also "must cooperate and assist the State to resolve all wrongful arrests or convictions of affected consumers, reinstatement of victims' wrongfully-suspended licenses, refunds of fees and fines, and expungement of any criminal records," the attorney general's office said.
Bailey ran the check-cashing operations through his Fordyce businesses, including Bailey's Superstore, Bailey's Bottleshoppe, Brooks Bailey Enterprises, Inc., Bailey's On Main, and Bailey's Pawn and Gun, Rutledge said.
"He and his businesses loan money to his customers -- a lot of money," Kate Donoven, senior assistant attorney general, wrote in the July 2019 lawsuit. "As security for these loans, Bailey accepts a signed blank check. When the debt is due, consumers can buy it back for the cost of the original loan plus interest. If they do not buy it back on time, Bailey adds the principal and interest together, enters it as the amount to be paid on the check, and deposits it into one of his business bank accounts."
If any checks were returned by banks, Bailey would turn those over for prosecution, in violation of Arkansas law prohibiting the use of the Arkansas Hot Check Law for collection of pre-existing debts, Rutledge said.
"In Fordyce, when consumers do not repay Bailey's loans on time, consumers go to jail," Rutledge said.
The attorney general's lawsuit cited the experiences of seven customers of Bailey's but didn't identify them by name. It instead assigned pseudonyms such as Customer A.
While none of the seven accounts cited in the lawsuit specify that any went to jail, a spokeswoman for Rutledge said, "Some victims were arrested; some went to jail and had to pay fines and fees."
This is not the first time Bailey's check-cashing operations ran afoul of state law and authorities.
In 2004, the state Board of Collection Agencies fined Bailey $20,200 for operating Pine Bluff Fast Cash Inc., a payday lender, without a license.
In 2006, the board fined Bailey $1.3 million for operating 14 payday-lending stores in Arkansas without a license. Those stores were in Beebe, Bryant, Cabot, Camden, Corning, Fordyce, Harrison, Hot Springs, Little Rock, Mountain Home, Newport, Searcy, Sheridan and Walnut Ridge.
Bailey challenged the case, but the Arkansas Supreme Court in April 2008 upheld the $1.3 million in fines, plus another $100,000 in interest and fees. Bailey ultimately paid $250,000 to settle the case a little more than a year later.
The payday lending system, meanwhile, had been struck down a few months earlier by the court because it violated the state constitution's limits on usury.
Bailey businesses primarily involved in the check-cashing operations were Bailey's Bottleshoppe, Bailey Enterprises and Bailey's Superstore, all at U.S. 79 Business and U.S. 79-167, or what is informally known as the Fordyce Bypass.
Customer A, according to the attorney general's lawsuit, was a woman who in November 2014 needed $300 to finish paying for her son's funeral. In return for the $300, she signed a blank check that was filled out by Bailey in December for $450 and deposited into one of Bailey's business accounts.
After the check was returned by the bank for insufficient funds, Bailey signed an affidavit alleging a hot check violation and sent the affidavit to a prosecuting attorney, whose letter demanding payment and threatening the issuance of a warrant included $101 in fees.
Customer B, according to the attorney general's office, needed $400 in August 2014, agreeing to pay $600 over three months. She wrote three post-dated checks, for $200 each, to Bailey's Superstore in return for $400 in cash.
"She repaid Bailey $200 in cash on three separate occasions," according to the attorney general's office, yet one of the three checks was deposited. It was returned by the bank because the account had been closed. A Bailey affidavit of a hot-check violation resulted in a prosecutor's fee of $45, a $30 merchant fee, and the issuance of a warrant, according to the lawsuit.
Customer E, according to the attorney general, borrowed $300 in 2016 to help pay for a new apartment and turned over a signed blank check. When he returned to pay the $300, "Bailey told Customer E to give him $600 and he'd call it even," according to the lawsuit.
When the customer refused that deal, the check was filled in for $900 and deposited into the Bailey's Superstore account, according to the lawsuit.
In the five years of the attorney general's investigation, Bailey turned over some 464 checks of more than $100, all in round numbers, that had been sent to prosecutors for collection, Rutledge's office said. A consumer complaint sparked the investigation, according to Rutledge.
The attorney general's office said it reviewed records in hot check coordinators' offices in Fordyce District Court, Dallas County Circuit Court and in the 13th Judicial District in El Dorado as part of its investigation.
Customers routinely paid prosecutors fees ranging from $30 to $90, the attorney general said.