The CFPB filed a lawsuit on Monday against online loan servicer CashCall and its affiliates for allegedly collecting money not owed by consumers and for engaging in “unfair, deceptive and abusive practices.”
“Today we are taking action against CashCall for collecting money it had no right to take from consumers,” CFPB Director Richard Cordray said. “Online lending is rapidly growing and deserves ample regulatory attention.”
Based in California, CashCall, as well as its subsidiary WS Funding and affiliate Delbert Services Corp., are owned by J. Paul Reddam. The CFPB’s investigation found that beginning in 2009, CashCall and WS Funding entered a business arrangement with Western Sky Financial, which said state laws did not apply because it was based on an Indian reservation and owned by a member of the Sioux tribe.
The CFPB alleges in its suit that the defendants illegally debited consumer checking accounts for void loans ranging between $850 and $10,000, many of which carried upfront fees and lengthy repayment terms, as well as interest rates as high as 343 percent.
Many consumers signed agreements allowing loan payments to be debited directly from bank accounts, and the loans were then acquired by WS Funding and serviced by CashCall.
When Western Sky stopped making loans in September and began to shut down its business following a number of investigations and court actions, CashCall and Delbert continued to take monthly installment payments from consumers’ bank accounts or sought money from borrowers.
The CFPB’s investigation also revealed that the loans violated either licensing requirements or interest rate caps in at least eight states, including Arizona, Arkansas, Colorado, Indiana, Massachusetts, New Hampshire, New York and North Carolina.
The CFPB is seeking to have CashCall refund consumers the money taken where loans were void or if the consumer’s obligation was nullified.