West Virginia Attorney General Darrell McGraw launched another volley recently in his office’s campaign to stop usurious Internet payday loans in West Virginia, seeking $3.9 million in penalties from Government Employees Credit Center, Inc., (GECC) and the Dollar Financial Group for making and collecting illegal payday loans in contempt of a court order.
Attorney General McGraw and his Consumer Protection Division sued Delaware-based GECC, its owner Vincent Ney, and related companies who continued to collect GECC’s loans in West Virginia after the Circuit Court of Kanawha County ordered them to stop in February, 2007. The suit also named the now-defunct shell company PD Recovery, Inc., its parent corporation Dollar Financial Group of Pennsylvania, and their owner Jeffrey Weiss, for collecting GECC’s accounts in West Virginia in violation of the February 2007 court order. Attorney General McGraw’s complaint further notes that none of the companies are licensed to do business in the State of West Virginia.
In November, 2006, Attorney General McGraw’s office first sued 14 Internet payday lenders – including GECC – after the companies refused to disclose their account records in response to investigative subpoenas. Following a hearing on February 5, 2007, the Circuit Court of Kanawha County ordered GECC to comply in full with the Attorney General’s subpoenas and to cease making and collecting loans in West Virginia. GECC instead defied the court order, prompting McGraw’s office to charge GECC with contempt. At a hearing on November 20, 2007, Kanawha Circuit Judge Zakaib set a fine of $3,000 per day until GECC complied.
McGraw’s lawsuit seeks a judgment against GECC and its owner, Vincent Ney, for $3.9 million in fines that have accrued since the original contempt citation in November, 2007. The suit also asks that all of GECC’s loans be voided; that all payments collected be returned to West Virginia consumers; and that GECC’s collection agencies – PD Recovery and Dollar Financial Group – return all payments collected and be similarly penalized for collecting debts without a license in violation of the November 2007 injunction.
“Payday loans” are short-term loans or cash advances usually secured by a post-dated check that must be repaid in full with steep interest within 14 days. Internet payday loans, such as the ones made by GECC, are secured by an agreement authorizing an automatic electronic debit for the full loan amount plus interest from the consumer’s account. Consumer complaints filed with McGraw’s office disclose that GECC charged a fee of 25 percent to borrow money for two weeks, equal to an annual percentage rate of 650 percent.
Last week McGraw’s office sued two other collection agencies – Ezell, Williams and Associates dba D & R Recovery, of Bolling Brook, Illinois, and owners, Charles L. Dickey and Charles L. Dickey, III, plus Frontier Financial Group of Henderson, Nevada, and owners Salvatore Mazzara, Shane F. Donofrio, and Paula Englebrecht – for collecting Internet payday loans without a license and for ignoring the attorney general’s investigative subpoena. Both companies collected Internet payday loans originated by a now-defunct company, Money and More, that signed a settlement agreement on April 17, 2009, with the Attorney General agreeing to void all of its loans.