CashCall, Western Sky to Pay $9 Million to NC Consumers for Illegal Loans
Consumers faced annual interest rates of 89 to 342 percent, far greater than the allowed maximum
Online fast cash lenders CashCall and Western Sky must cough up more than $9 million in refunds to bilked North Carolina consumers, according to North Carolina Attorney General Roy Cooper and North Carolina Office of the Commissioner of Banks Ray Grace.
Cooper and Grace's office filed suit against CashCall, Western Sky, and related companies in December 2013, alleging that the group violated North Carolina laws that ban excessive interest rates on small consumer loans. According to the complaint, consumers took out personal loans of $850 to $10,000 from the defendants and faced annual interest rates of 89 to 342 percent, far greater than the allowed maximum.
In August 2015, a North Carolina court banned the companies from making or collecting on loans within the state.
The defendant companies issued more than 21,000 loans to North Carolina consumers via the internet between 2010 and 2013. The North Carolina Attorney General's Office and the North Carolina Office of the Commissioner of Banks received more than 300 complaints from consumers about the loans. Many of these consumers reported that they made loan payments for months before learning that nearly all of their payments had gone toward interest and very little toward paying off the principal.
"Instead of pulling you out of the ditch, these kinds of loans sink borrowers deeper and deeper in debt," Cooper said in a written statement. "North Carolinians who fall prey to these unfair and unlawful loans deserve relief."
In a consent judgement issued by Special Superior Court Judge Gregory P. McGuire, Western Sky and CashCall are ordered to:
- Stop collecting on loans made to North Carolina borrowers.
- Cancel all loans owed by North Carolina consumers.
- Ask the credit bureaus to remove any negative information about the loans that appears on North Carolina borrowers' credit reports.
- Pay $9,375,000 including $9,025,000 in refunds to North Carolina consumers and $350,000 to cover the costs of the investigation, lawsuit, and administering the settlement.
- Cease unlicensed lending in North Carolina, including advertising, soliciting, making, facilitating, servicing, collecting on, selling or transferring any loans.
The settlement marks North Carolina's first successful effort to ban an online payday-type lender that tried to evade the law by claiming affiliation with an Indian tribe. The case is expected to help the state enforce its lending laws against other violators operating online.
While payday lending is outlawed in North Carolina, no such federal statute exists, leaving North Carolina consumers potentially vulnerable to the practice.
"Though our state's laws are stronger, tougher rules for payday lenders just over state lines could help protect North Carolina borrowers who seek loans outside state borders," said Cooper.