Nearly 1,700 Massachusetts consumers who took out small-dollar loans from a South Dakota payday lender and its California-based partner have been reimbursed $2.3 million collectively under a settlement reached by the attorney general’s office and the state Division of Banks.
The settlement alleges that Western Sky Financial LLC and its affiliate CashCall Inc. made illegal, unlicensed loans over the Internet to Bay State consumers.
Massachusetts law sets a limit of 12 percent interest to be charged on loans of $6,000 or less, but consumers who did business with Western Sky and CashCall incurred high up-front fees with interest rates between 89 percent and 135 percent and annual percentage rates ranging from 89 percent to 355 percent, state regulators said.
“This settlement serves as a reminder to consumers that they need to be aware of the significant risks in connection with obtaining online short-term or payday loans,” John C. Chapman, undersecretary of the Office of Consumer Affairs and Business Regulation, said in a statement. “We are very pleased with the success of the refund process and I’m grateful for the joint efforts of the Division of Banks and attorney general’s office in securing this significant relief for Massachusetts consumers.”
The settlement provided for the refund of approximately $2.4 million to more than 1,800 borrowers for illegal interest and fees, and it also included loan modification relief via interest rate reductions for some borrowers. The total settlement will provide more than $17 million in debt relief to Massachusetts consumers. To date, 93 percent or approximately $2.3 million of the total refunds have been distributed to 1,673 Massachusetts borrowers, the division said in a statement.
“These companies’ deceptive and predatory practices put greater economic strain on consumers who were already financially vulnerable,” Attorney General Maura Healey said in a statement. “As a result of this settlement, more than 1,500 consumers have been repaid and these companies must cease operations in Massachusetts. We thank the Division of Banks for working with us on this case.”
Western Sky and CashCall have also faced similar settlements in Connecticut, North Carolina and Maryland.
The division said in its announcement that any funds still unclaimed after the June 26 filing deadline were turned over to the Massachusetts Treasurer’s Unclaimed Property Division, but consumers who received a notice from the settlement administrator can still claim their refund from the treasurer’s office.
