West Virginia Attorney General Darrell McGraw has filed suit against California-based CashCall, an Internet lender he says pushes predatory loans with interest rates up to 99 percent.
With rates that high, consumers inevitably defaulted. McGraw charges CashCall then unleashed a barrage of collection abuse and harassment, including threats to visit consumers at their place of employment and charge them fees for the trip.
"CashCall created a business model intended to fly under the protective radar of West Virginia laws that set limits on interest rates to protect consumers from financial calamity," McGraw said. "It is these kinds of unregulated lending practices that have brought West Virginia consumers and the nation to a financial precipice. Today, my office has drawn a line in the sand in an effort to fill the void left by lax or non-existent federal regulation to protect our consumers from financial predators."
As an Internet lender, the company operates nationwide, and has produced a number of complaints to ConsumerAffairs.com.
"I took out a loan with them July 2006 for $2000. I starting have some financial difficulty and fell behind on some payments," said Nakisha, of Pine Bluff, Arkansas. "They have called and harassed my co-workers several times a day. They even called my cell phone 20 times a day leaving nasty messages."
The complaint filed by McGraw's office alleges that CashCall solicited consumers to take out high interest loans from Community State Bank, a state-chartered bank in Millbank, South Dakota. CashCall contends that because the bank is located in South Dakota, West Virginia's usury laws do not apply.
Despite the paperwork listing the bank as the lender, McGraw says CashCall does all the heavy lifting and, in fact, appears to assume the actual risk of the loans, which CashCall repurchases in full from the bank three days after the loans are funded.
In addition to asking the court to find that CashCall's loans are illegal and to provide all aggrieved consumers with restitution, the suit asks that CashCall comply with the Attorney General's investigative subpoena.
In response to the Attorney General's investigation, CashCall asserted that its business practices are exclusively regulated by federal law. CashCall also argued that the Attorney General is prohibited from even investigating the facts underlying CashCall's assertion that it is beyond state regulation.
