Pasadena Federal Court to Hear Appeal by Lender CashCall

Published : Saturday, July 13, 2019 | 6:11 AM

The Ninth Circuit Court of Appeals in Pasadena will hear an appeal by loans provider CashCall urging the court to overturn a lower court ruling that ordered the company to pay $10 million for offering high-interest loans through a tribe-linked firm in states where payday loans are barred.

CashCall, which provided loans online and over the phone, is seeking to undo a California federal court’s decision in January 2018 that it must pay a $10 million fine.

In a cross-appeal, the Consumer Financial Protection Bureau (CFPB), which filed the lawsuit in December 2013, is contesting the lower court’s position that CashCall didn’t have to pay more than $200 million in restitution for the loans.

While the court agreed with the CFPB with regard to the $10 million fine for violation of the Consumer Financial Protection Act, it denied the bureau’s bid to assess $287 million in restitution and penalties.

In its initial complaint, the CFPB claimed CashCall had engaged in “unfair, deceptive, and abusive acts and practices,” citing the fact that most CashCall office were shuttered when the CFPB and several states began investigations, and yet the lender continued to take payments from consumers.

The bureau said the CashCal loans ranged from $850 to $10,000, and typically had upfront fees, lengthy repayment terms, and annual interest rates ranging from about 90 percent to 343 percent.

“For example, a consumer borrowing $2,600 was required to pay a total of about $13,840 over a four-year repayment period. Or, in another example, a consumer borrowing $10,000 was required to pay about $62,450 over a seven-year repayment period – more than six times the amount borrowed,” a CFPB statement said.

It was the first CFPB enforcement action against an online lender. The bureau has jurisdiction over a broad array of companies, including online lenders, loan servicers, and debt collectors.

The CFPB statement said the lawsuit is a “significant step in the Bureau’s efforts to address regulatory-evasion schemes that are increasingly becoming a feature of the online small-dollar and payday lending industry.”

“In filing this suit today, the Bureau has worked closely and collaboratively with state attorneys general and banking regulators,” the statement said. “Some of these state officials are also filing their own lawsuits and announcing formal investigations today; others are already in litigation.”

The lawsuit included WS Funding, Delbert Services, and J. Paul Reddam, who owns CashCall and the other two businesses.

Oral arguments have been scheduled at the Pasadena appeals court this fall.

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