For Immediate Release:
Attorney General Lori Swanson and Commerce Commissioner Mike Rothman today filed a lawsuit against CashCall, Inc., a California outfit with a history of legal troubles, for charging Minnesota borrowers annual percentage rates ("APRs") of up to 342 percent and origination fees of up to $500 after falsely telling them that the loans are governed by tribal law.
“This outfit has a history of hiding behind front companies to circumvent the legal protections -- including limits on interest rates -- available to borrowers under state law. The Internet is flooded with unlicensed lenders, and people need to be on guard,” said Attorney General Swanson.
“Minnesota is not open for illegal and sham lending businesses that prey on our consumers,” said Commerce Commissioner Rothman, whose Department licenses and regulates lenders making loans in Minnesota. “The Commerce Department is committed to stopping lending schemes that rip off Minnesota consumers with exorbitant interest rates.”
While the loans are held out to consumers as being made by a front company called Western Sky Financial, LLC, in reality, CashCall or its subsidiaries fund the loans, immediately purchase the loans before the consumer has made a single payment, service the loans, and collect the interest and payments on the loans. CashCall uses Western Sky as a facade to fraudulently give the loans the appearance to consumers that they are subject to tribal law, not state law, and therefore not subject to state interest rate caps and other consumer protections. Western Sky and CashCall falsely claim that the loans are not subject to state lending laws (including state interest rate caps) because Western Sky’s owner, Martin Webb, is a member of the South Dakota Cheyenne River Tribe.
Western Sky makes loans to Minnesota borrowers of between $850 and $10,000 with APRs of between 89 and 342 percent. Consumers also must pay origination fees of up to $500 at the front end of the loan, which are financed and subject to the same interest rates. In other words, a Minnesota resident who wants to receive $1,000 must finance $1,500--with $500 immediately going for fees--and then must repay the full $1,500 at an interest rate of 149 percent. (In contrast, a licensed lender making a similar loan would only be allowed to charge a $25 fee, with a 21.75% APR.)
At least nine states, including Colorado, Illinois, New Hampshire, Massachusetts, Oregon, Georgia, Missouri, Maryland, and Washington, and the Federal Trade Commission have taken action against CashCall and/or Western Sky for unlawfully making loans without proper state licensure and in violation of state usury laws.
The lawsuit was filed in Hennepin County District Court and seeks to stop the company from engaging in this scheme and restitution for consumers.