On January 24, 2014, New York Attorney General Eric Schneiderman announced that a settlement had been reached with Western Sky Financial, LLC, Cash Call, Inc., WS Funding, LLC, and their principals for alleged violations of New York usury laws. The Attorney General’s Office charged the defendants with circumventing the 16 percent interest-rate cap by funding loans over the Internet to New York State residents carrying annual rates between 89 percent and 355 percent.
Among other things, the defendants agreed to cease all efforts to collect interest on outstanding loans, as well as refund to New York residents any amounts in excess of the principal and legal rate of interest. The Attorney General estimates the settlement would provide approximately $35 million to New York residents. A settlement fund has been created to administer payments to eligible New York consumers. Lastly, the defendants agreed to pay a $1.5 million penalty to the Attorney General’s Office.
In announcing the settlement, Attorney General Schneiderman warned payday lenders and their providers that “illegal collectors and lenders, in particular, must pay a price for their behavior and pay back the New Yorkers they harmed.” The Attorney General’s Office had claimed the defendants misrepresented to New York residents that the usury caps did not apply to their loans, and targeted other consumers with deceptive debt collection calls.
This settlement is the latest act in the Attorney General’s and New York Department of Financial Services’ (DFS) ongoing crackdown on Internet payday lenders and their providers. We anticipate that payday lending will remain a top priority for the Attorney General and DFS in 2014.