The Consumer Financial Protection Bureau recently filed its first lawsuit against an online lender, CashCall, Inc., as well as CashCall’s owner, subsidiary and affiliate. The bureau charges that they engaged in unfair, deceptive and abusive practices, including illegally collecting payments for voided loans.
California-based CashCall and its subsidiary, WS Funding LLC, entered into an agreement with South Dakota-based online lender Western Sky Financial in 2009, the CFPB said. The bureau’s complaint alleges that loans were “made in Western Sky’s name, [but] were marketed by CashCall, financed by WS Funding, almost immediately sold and assigned to WS Funding, and then serviced and collected by CashCall” and/or CashCall’s affiliate Delbert Services Corporation, a Nevada-based collection agency.
Loans ranged from $850 to $10,000, carried upfront fees, lengthy repayment terms, and annual interest rates from approximately 90 percent to approximately 343 percent, the agency said.
Western Sky says that it was not subject to state laws since it was based on an Indian reservation and owned by a member of the Cheyenne River Sioux Tribe, the bureau said.
The CFPB claims, however, that Western Sky violated licensing requirements or interest-rate caps in at least eight states: Arizona, Arkansas, Colorado, Indiana, Massachusetts, New Hampshire, New York, and North Carolina.
Because of these violations, loans in at least those eight states were rendered void in whole or in part, the CFPB said. Western Sky stopped making loans in September after several states began investigations and court actions. CashCall and Delbert, however, continued to collect on loans, sometimes by automatically debiting the consumer’s checking account.
The bureau’s complaint is seeking a refund from CashCall of money collected on voided loans, as well as additional damages and civil penalties.
“Today we are making clear that you cannot avoid federal law simply because your activities take place online,” CFPB Director Richard Cordray said in a press call. “This action against CashCall is a significant step in the Consumer Bureau’s efforts to address regulatory evasion schemes.”
CashCall, WS Funding and Delbert are all owned by J. Paul Reddam, who is also named in the lawsuit.