Judge Bloom Finds California-Based Internet Lender, CashCall, Abused West Virginia Consumers, Violated State Usury Laws. $15 Million Returned to WV

In a much-anticipated ruling likely to have national implications, Kanawha Circuit Judge Louis H. Bloom entered two lengthy orders yesterday finding in favor of the State on all its claims and ordering Internet lender, CashCall, of Anaheim, California, to pay $15 million in civil penalties, refunds, and cancelled debts for the 292 West Virginia consumers who obtained the loans and to the State.

The Orders issued by Judge Bloom reflect the Court’s ruling on the suit filed by Attorney General Darrell McGraw’s office against CashCall in 2008.

In the suit, McGraw’s office alleged that CashCall had entered into a “sham” relationship with the First Bank & Trust of Milbank, South Dakota, for the purpose of using the bank’s charter to evade the State’s usury laws. McGraw’s office alleged that although the loans obtained by West Virginia consumers were made to appear as if they were issued by the South Dakota Bank, in fact, CashCall was the “true lender” because it bore the entire economic risk of the loans. Judge Bloom agreed.

McGraw’s office also alleged that CashCall engaged in a wide range of abusive debt collection practices, including severe telephone harassment (calling some consumers 20 – 25 times per day), and unjustifiably calling and sometimes disclosing alleged debts to various third parties, including friends, family members, co-workers, and persons that consumers listed as “references” on their loan applications. McGraw’s office also alleged that CashCall repeatedly contacted consumers at work, subjecting them to embarrassment and humiliation before their co-workers, after consumers had asked that such calls stop.

McGraw’s suit against CashCall garnered national prominence earlier this year after it was learned that CashCall’s founder and owner, J. Paul Reddam, also owned the horse “I’ll Have Another” that was in line to be the first Triple Crown winner in 34 years after it won the Kentucky Derby and the Preakness Stakes. The connection between CashCall and “I’ll Have Another” was brought to light when national reporters delved into Reddam’s background.

Attorney General McGraw stated, “I am proud of my Consumer Protection staff for making West Virginia the only state to successfully challenge CashCall’s “sham” business model that was designed to evade laws intended to protect West Virginia consumers from excessive interest rates. It has been the mission of my office from the beginning to protect West Virginia consumers from predatory lending and abusive debt collection practices. Although the road to this goal may sometimes be long and marked by many obstacles, the rulings issued by the Court yesterday send a clear message that West Virginia laws will be enforced and penalties will be imposed against those who willfully violate them.”

The three day trial of Attorney General McGraw’s suit against CashCall took place on October 31 and November 1, 2011, and concluded on January 3, 2012. During the first two days Judge Bloom received evidence on the State’s debt collection claims. On the final day, January 3, the Court heard testimony on the Attorney General’s claims that CashCall and not the bank was the true lender. A summary of the civil penalties, consumer restitution and other relief granted by the Court in its two rulings to the State and to West Virginia consumers is attached.

Read the full story at Office of the West Virginia Attorney General – Press Releases.