Tuesday, September 18, 2012

WV AG Scores $15M Win Against Internet Lender Accused Of Using Sham Deal With South Dakota Bank To Evade Usury Law, Abusive Collection Tactics

In Charleston, West Virginia, The West Virginia Record reports:

  • Kanawha County Circuit Court Judge Louis "Duke" Bloom has ordered a California Internet lender to pay $15 million in civil penalties, refunds and cancelled debts to the nearly 300 West Virginia consumers who obtained loans and to the State.

    Bloom entered two lengthy orders Monday finding in favor of the State on all of its claims against Anaheim-based CashCall.

    West Virginia Attorney General Darrell McGraw filed a lawsuit against CashCall in 2008.

    In the suit, McGraw's office alleged that CashCall entered into a "sham" relationship with the First Bank and Trust of Milbank, S.D., for the purpose of using the bank's charter to evade West Virginia's usury laws.

    The attorney general alleged that although the loans obtained by West Virginia consumers were made to appear as if they were issued by the South Dakota bank, in fact, CashCall was the "true lender" because it bore the entire economic risk of the loans. In his orders, Bloom agreed.

    McGraw's office also alleged that CashCall engaged in a wide range of abusive debt collection practices, including severe telephone harassment -- calling some consumers 20-25 times a day -- and calling and sometimes disclosing alleged debts to various third parties, including friends, family members, co-workers and persons that consumers listed as "references" on their loan applications.

    The attorney general also alleged that CashCall repeatedly contacted consumers at work, subjecting them to embarrassment and humiliation -- even after the consumers had asked that the calls stop.

    McGraw's suit against the California company garnered national attention earlier this year after it was learned that CashCall's founder and owner, J. Paul Reddam, also owned the race horse "I'll Have Another."

    The horse was in line to be the first Triple Crown winner in 34 years after it won the Kentucky Derby and the Preakness Stakes. However, on the day before the Belmont Stakes, he was scratched due to tendonitis and was retired from racing.

    "I am proud of my consumer protection staff for making West Virginia the only state to successfully challenge CashCall's 'sham' business model that was designed to evade laws intended to protect West Virginia consumers from excessive interest rates," McGraw said in a statement Tuesday.

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