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Founder, CFP®

UPDATED: May 20, 2013

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The Pennsylvania Supreme Court denied an appeal on a case dealing with predatory lending on business loans.

Girard Finance Company, based out of Bala Cynwyd, PA, was denied a formal appeal last week on the $700,000 case. The Pennsylvania Human Relations Commission (PHRC) found Girard Finance Company, and its owner Thomas Richter, guilty of targeting minorities and charging them with excessive business loan rates. The court’s appeal denial is final.

Girard failed to run credit checks to assess borrowers’ abilities to repay their business loans. This claim, among others, met legal tests for predatory lending. The case is being upheld by the Pennsylvania Human Relations Act, which prohibits discrimination in lending for commercial properties.

Richter told that the $700,000 settlement is a compilation of five or six formal complaints. In addition, both Richter and Girard Finance Company are ordered to pay $10,000 each to the commonwealth for civil penalties.

Richter said the size of the settlement is “ludicrous.”

According to PHRC, Girard primarily targeted black neighborhoods in Philadelphia for new business loans. The loans carried interest rates of up to 35 percent, with additional fees and penalties. Furthermore, Girard was accused of flipping loans or resetting interest rates without benefitting the borrower.

“They found that any company that makes a loan to another company that could include points upfront, that could include high interest rates, that could include resetting loans and could include balloons at the end of the loan, is discriminatory,” Richter said. “I am thus called a predatory lender.”

Last year, the company appealed to the Pennsylvania Commonwealth Court. The court issued a formal opinion on July 2012.

PHRC executive director JoAnn Edwards said that lenders who use minority-businesses in this manner should know that it is illegal, and not simply bad business practices.

“Loan terms and conditions must be based on financial qualifications, not race,” she said in a statement.

Despite the classification about race discrimination, Richter said the case was not as described.

“This is not a case about discrimination, this is a case about the Pennsylvania Human Relations Commission trying to expand their jurisdiction into business law and business cases where they have no experience and no training and no ability,” he said.