Collection Practices Lead to $13 million Penalty Against CashCall

A judge in West Virginia has penalized a payday loan purchaser and its collection unit more than $13 million over its lending and debt collection practices. The company will also be forced to cancel all of its outstanding debt in the state. The lawsuit was originally filed in 2008 by the West Virginia Attorney General’s office.

Kanawha County Chief Circuit Judge Duke Bloom issued the ruling Monday against CashCall, Inc., a company based in California that has been referred to as a payday lender, a debt buyer, and a collection agency.

The specifics of what the company does factored into the decision. West Virginia Attorney General Darrell McGraw’s office began investigating CashCall in 2007, eventually filing suit the following year. The investigation and subsequent case revealed that CashCall did not, in fact, fund payday loans itself. Rather, it used a South Dakota-based bank to fund the online cash advance loans and then bought them from that bank three days after the loans were issued. CashCall then acted as servicer and collector of the accounts.

West Virginia does not allow payday loans in its state, capping annual interest rates at 18 percent. But because the bank funding the loans was based in South Dakota, CashCall said those rules did not apply. In addition, the South Dakota bank is regulated by the FDIC and is immune from state consumer protection laws, the company claimed.

But Judge Bloom did not agree with that argument.

The AG’s investigation was kicked off by consumer complaints about the company’s debt collection practices. McGraw’s office said that some consumers received as many as 1,000 phone calls during one collection campaign. The company would also allegedly withdraw money from a consumer’s bank account until it was empty.

West Virginia is not the first state to get a judgment against CashCall. In 2009, California’s AG Jerry Brown (now governor of the state) won a $1 million judgment over the company with similar allegations.

An attorney representing CashCall told The Charleston Gazette that the company disagreed with the ruling and that an appeal was likely in the case.