The Consumer Financial Protection Bureau has filed suit against CashCall, WS Funding, Delbert Services Corporation, and J. Paul Reddam for alleged violations of the Consumer Financial Protection Act. The CFPB is charging that online loan servicer CashCall, Inc. continued to collect money from consumers after their obligations for online loans had been nullified.
The seeds of this action took root a few years ago, when a South Dakota lender named Western Sky Financial claimed that, because it was based on a Native American reservation and owned by a Native American, state laws did not apply. It was determined that when Western Sky Financial made Internet-based loans, the company was bound by state laws. CashCalll and WS Funding bought the loans originated by Western Sky Financial, which began to unwind its business this fall after being investigated and sued by several state Attorneys General.
According to a CFPB press release, the online loans either violated licensing requirements or interest rate caps in at least eight states, voiding the consumers’ loan obligations. According to the CFPB complaint, CashCall allegedly continued to debit consumers’ bank accounts or engaged in debt collection activities.
According to CFPB Director Richard Cordray, “All of this conduct violates federal law, specifically the Consumer Financial Protection Act’s prohibition on unfair, deceptive, and abusive acts and practices. It is unfair to collect money that consumers do not owe on loans that do not legally exist. It is deceptive to trick consumers into repaying illegal loans that state law has nullified in part or in whole. And it is abusive to take unreasonable advantage of a lay person’s lack of understanding when it comes to the application of state and tribal laws. So in our lawsuit today, we are seeking monetary relief and civil penalties from CashCall and its affiliates to require them to refund the money they unlawfully took from consumers. We also seek injunctive relief to require the defendants to adhere to all federal consumer financial protection laws that prohibit such unfair, deceptive, and abusive acts and practices.”