A group of Florida residents is hoping a judge won’t allow Cleveland, Tenn., resident Steve A. “Toby” McKenzie, who has filed for bankruptcy, to avoid their claims that he defrauded them out of their wages with the kinds of “payday loan” practices that made him a millionaire in the 1990s.
According to a lawsuit filed in 2001 in Florida against Mr. McKenzie and his former company, McKenzie Check Advance Inc., five residents claim the businessman engaged in a “loan sharking” operation in which he charged a 270 percent annual percentage rate to unwitting customers who needed advances on their paychecks.
Mr. McKenzie’s company would later cash people’s checks, the lawsuit states, when the company knew the checks would bounce and then threaten sanctions under Florida’s “bad check law.”
Now that Mr. McKenzie has filed for Chapter 11 bankruptcy under the weight of millions of dollars in unpaid loans himself, the plaintiffs want a U.S. Bankruptcy Judge to declare them “class of creditors” whom McKenzie cannot avoid paying should they win their lawsuit in Florida.
Chattanooga lawyer Kyle Weems, who represents Mr. McKenzie, said Tuesday that Mr. McKenzie always has conducted his businesses “in a lawful and proper manner.”
“This litigation is without merit,” Mr. Weems said, adding that they will file a response in U.S. Bankruptcy Court within 30 days in an effort to block the Florida plaintiffs from becoming creditors.
Cleveland attorney Richard Fisher, who represents the Florida plaintiffs, on Tuesday would say only that Mr. McKenzie’s bankruptcy certainly “has not helped” the cause of his clients. According to their lawsuit, the plaintiffs believe the payday loan practices, now heavily regulated by individual state laws, constituted the charging of “exorbitant, unconscionable and usurious interest for the use of money, contrary to law.”
In December, Mr. McKenzie filed for Chapter 11 Bankruptcy, citing about $200 million in debts owed to about 40 creditors nationwide.
Mr. McKenzie, who made his initial fortune in the check-cashing business and whose name is on UTC’s McKenzie Arena, has largely blamed the poor economy and the failures of his real estate ventures for his financial troubles.
Mr. Weems has said they are “confident” Mr. McKenzie will be able to rebuild his fortune and pay his creditors when the economy turns around.