Annapolis, MDThe state of Maryland is the latest to bring the hammer down on the Internet payday loan and, specifically, the duo of Western Sky Financial (Western Sky) and CashCall Inc. According to The Baltimore Sun (6/24/14), the lenders and state regulators agreed to a $2 million settlement designed to address unsavory lending and collection practices that were described as “abusive.”
Western Sky, based in South Dakota and no longer operating, tried to hide behind Native American Indian immunity in an effort to avoid regulatory pressures. Those pressures have proven fierce, given the number of states and regulatory authorities having taken up the cause on behalf of consumers saddled with terms and interest rates described as predatory at best.
In Maryland, the current settlement had its beginnings with consumers seeking payday loan legal help. According to The Sun, Western Sky and CashCall succeeded in making in excess of 1,200 loans to Maryland residents between 2010 and early 2011 via telephone or the Internet. Consumers lodged complaints with regard to the interest rates they were charged. While Maryland observes interest rate caps of anywhere from 24 to 33 percent depending on the size of the loan, regulators were getting reports that consumers were charged rates as high as 1,825 percent per annum, which critics described as nothing short of predatory.
“Western Sky Financial and CashCall worked together to charge outrageous rates to vulnerable citizens in a time of great economic distress,” said Mark Kaufman, Maryland’s commissioner of financial regulation, in a statement appearing in The Sun. “They sought to structure around long-standing statutory prohibitions and to deny borrowers’ protections to which they are legally entitled.”
Western Sky was based at the Cheyenne River Sioux Reservation but reportedly not run by the tribe, and therefore not a qualifier for immunity that Western Sky had claimed. The Internet payday loan provider announced last September it would cease operations.
Meanwhile, the crackdown by state regulators against the illegal payday loan industry is beginning to reverberate through the industry - to the point where some providers of payday loans are getting out of that business in spite of record profits.
It was reported by The Dallas Morning News (7/22/14) that Cash America International is looking to wind down its payday and installment loan business and focus instead on its heritage pawnshop operations. This, in spite of revenues from payday loans growing from $21 million in 2003 to $878 million last year.
Payday loans can seem too good to be true
Payday loans are legitimate sources of short-term cash sought by consumers who either don’t have a relationship with a bank or are maxed out. Interest rates are higher for payday loans, but are regulated by the state in which the payday loan operator does business. Storefront operations must adhere to strict guidelines, and states have no quarrel with storefront or online providers of payday loans that play by the rules.
It is the out-of-state Internet payday loan operator that refuses to abide by local caps and guidelines that rile the authorities and consumers alike. Payday loan operators don’t believe they need to adhere to local state regulations given that they are not physically based in the state requiring those regulations.
While there are reputable Internet operators who take pains to ensure that the local, state-based regulations required of a loan according to where the consumer lives are observed, most do not - hence the ongoing crackdown by state officials and consumers seeking payday loan legal help.
In the Maryland case against Western Sky and CashCall, more than $275,000 of existing debt is being wiped from the books, together with a $1.7 million fund available for payday loan lawsuit consumers who may have made interest payments above 24 percent per year.
While the crackdown continues, consumers still stuck with payday loan woes have the option of consulting a payday loan lawyer, in order to begin the process to get out from under predatory fees no consumer should have to pay.
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