More than 8,300 loans made to South Carolinians by an internet-based lender are being forgiven after a $9.65 million settlement reached this week between state regulators and CashCall Inc. after accusations that loans violated South Carolina consumer protection laws.
The agreement, finalized earlier this week, comes out of an investigation by the South Carolina Department of Consumer Affairs and the SC State Board of Financial Institutions, which alleged CashCall, Inc. and its affiliate companies violated various South Carolina consumer lending laws, including charging interest rates between 90 and 355 percent, well in excess fees in excess of what state law permits.
The settlement involves a batch of high-interest loans held by CashCall, Inc., which were charging state residents the illegal interest rates. CashCall had purchased these loans from the company initially issuing them, Western Sky Financial.
As part of the agreement reached with state regulators, CashCall must forgive $9.15 million in loans made to all South Carolinians – which ranged from $700 to $10,000 – and inform the recipients that no more payments are due.
In addition, not only will CashCall stop collecting payments on the Western Sky loans, under the agreement they will not be permitted to sell the loans to a third party, who could then attempt to collect payment. The company must also contact credit reporting agencies and remove any loan information they might have provided.
“This settlement should serve as a reminder to businesses that noncompliance with consumer protection laws will not be tolerated in South Carolina,” said SCDCA Administrator Carri Grube-Lybarker.
An examination of the CashCall data revealed 276 consumers who live in either Sumter, Clarendon or Lee county received at least one of these loans. According to Grube-Lybarker, these area residents in total had 292 of the voided loans, as some consumers had multiple loans.
CashCall was also required to pay $500,000 to SCDCA and BOFI so those agencies could make restitution to qualifying South Carolina consumers.
In announcing the settlement, state officials recommended South Carolinians considering getting a loan, especially from a company via the internet, check to see whether the offer is within state law before signing any contract.
Future potential loan recipients can check to make sure a lender is licensed to issue loans by going to the Consumer Affairs office website at www.consumerfinance.sc.gov, and click “Consumer Lending Licensees” on the bottom of the page.
For loans with interest rates of more than 18 percent, South Carolinians can also visit the website, click “Licensee Lookup” then “Supervised Lenders” under the “Maximum Interest Rate Schedules” bullet to see if the loan agreement is permitted in the state.