More State AGs File Suits Against Online Payday Lender, Loan Servicers


On December 16, the North Carolina attorney general (AG) filed a lawsuit against an online payday lender, two loan servicers, and a related debt collection company, and the Colorado AG filed suit against the same loan servicers and collection company. The Colorado AG previously filed a separate suit against the lender. In addition, the New Hampshire AG promised to enforce a state banking department order against the same entities targeted in the other state actions. All three actions are parallel to, and were taken in coordination with, a CFPB action filed December 16 purportedly signaling broader pursuit of “regulatory-evasion schemes.” In general, the states are alleging that the lender violated state usury or licensing laws in the online origination of short-term, small dollar loans. The lender asserts that it is a Native American sovereign entity not subject to relevant state laws. The states also allege that a servicer, either in its own name or through a related entity, provided the lender with marketing, web hosting and customer services, collected consumer information, and conducted the loans’ initial underwriting review, and then purchased all loans immediately after origination. The states further allege that either the servicers or a related debt collection company engaged in servicing and collections, and that the totality of the activities violated state lending and licensing laws by, among other things, financing and collecting on illegal payday loans. The state AG suits are similar to suits previously filed by other state attorneys general, including in New York, Georgia, Minnesota, and Virginia.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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