California Department of Business Oversight Enters Into $900,000 Consent Order With Payday Lender

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On January 22, 2019, the California Department of Business Oversight (DBO) announced that it had entered into a consent order with a payday lender to resolve allegations that the company violated the California Financing Law, Fin. Code Section 22000 et seq.

Per the consent order, the payday lender allegedly steered borrowers into loans in excess of $2,500 in order to evade state law interest-rate limits on loans below that amount.  The DBO alleged that because “the loan amounts were chosen for the purpose of evading the regulatory ceiling,” they were “not loans of a bona fide principal amount of $2,500.00 or more and were subject to the limitations on charges and administrative fees” for small-dollar loans under California law.

The consent order also resolves allegations that the lender refused to allow consumers to make payments in advance on their loans, overcharged about $700,000 in payday loan transactions by collecting charges twice, and deposited payment checks earlier than agreed to in violation of California’s Deferred Deposit Transaction Law, and made misrepresentations concerning the minimum amount of the loans it offered ($2,501).

Under the terms of the settlement, the payday lender will refund approximately $100,000 related to about 1,200 affected consumer loans and approximately $700,000 related to about 3,000 payday loan transactions.  The lender will also pay $110,000 to the DBO in costs and administrative penalties.

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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