Internet Payday Loan Lawsuit Filed Just before Christmas

Boston, MAThe parade of Internet payday loan lawsuits advanced last month with the filing of an action by the Consumer Finance Protection Bureau (CFPB) against CashCall Inc., among other defendants. CashCall is based in Anaheim. The allegations include an accusation that CashCall had undertaken to debit consumer checking accounts for loans that had been made illegally. The loans therefore, according to the lawsuit, are void.

That’s because Internet payday loan sites do not acquire the necessary licensing required by more traditional, storefront payday loan vendors. The Internet vendors have also been widely accused of charging exorbitant fees that fly beyond interest rate caps observed by most states. This positions the loans, according to lawmakers, as completely illegal - and various attorneys general in several states are cracking down in an effort to protect consumers.

But it is not an easy task, according to a story published in The Kansas City Star (12/17/13). Loan vendors have been known to find various ways around the regulations and jump through any available loophole with both feet. In the case of Western Sky Financial, which reportedly made the actual loans that have lawmakers in the CashCall lawsuit up in arms, it is claimed the enterprise is owned by an individual with Indian tribe status and, therefore, remains exempt from state laws.

The Kansas City Star reports that Western Sky halted the making of loans last year. CashCall, meanwhile, is reported to have continued to attempt collecting on loans that lawmakers have interpreted as illegal, and thus have initiated internet payday loan lawsuits against CashCall and two of its subsidiaries. For its part, CashCall is of the view that it has every right to collect on those loans and has done nothing wrong, vowing to fight any challenge to its right for collecting on those loans, in court.

The internet payday loan industry has grown thanks to the convenience and widespread availability of the Internet. Traditional payday loan vendors, working out of storefronts, have long been a mainstay for individuals with poor credit, low wages or with an inability to manage their finances. They seek payday loans often as a means to keep going between paychecks.

Rates of interest for payday loans are usually higher than those offered by more traditional sources of financing, such as banks. That said, various states observe caps for interest rates in an effort to protect the consumer, and storefront operators are required to operate within those caps.

Internet payday loan operators, however, do not adhere to those caps as they don’t maintain premises in the states where consumers reside and approach them online for loans. As a result, interest rates can be in the hundreds of percent compounded annually, and sometimes up over a thousand percent. Such financing rates, for those who can least afford such rates, have been described in terms ranging from predatory to inhumane.

Various attorneys general in states such as Arkansas, Arizona, Colorado, North Carolina and New York have launched Internet payday loan lawsuits in an effort to prevent these vendors from making loans and conducting commerce in their respective states in which the vendors are not properly licensed.

The lawsuit is Consumer Financial Protection Bureau v. CashCall, Inc., WS Funding, LLC, Delbert Services Corporation, and J. Paul Reddam, Case No. Case 1:13-cv-13167, Filed December 16, 2013, in US District Court, District of Massachusetts.