Tue December 17, 2013
North Carolina Sues Online Lending Companies
The state attorney general has filed a lawsuit against an online lending company for making predatory loans with interest rates in some cases over 300 percent. The state is one of many lining up for a piece of Western Sky.
The company claims to be an Indian tribal entity, and therefore exempt from North Carolina’s limit on interest rates. Western Sky’s owner, Martin Webb is a member of the Cheyenne tribe, but the state’s lawsuit argues he runs a for-profit company that’s not tribe-owned.
“These short term, high interest loans are illegal in North Carolina, and for good reason,” state Attorney General Roy Cooper says. “Borrowers often get trapped and can’t get out, even though they make payment after payment.”
Cooper’s office reports that about a hundred North Carolinians have filed complaints with state offices about Western Sky loans. The attorney general also argues that Western Sky is actually a front for another lending company—California-based CashCall, which buys the loans from Western Sky.
The state lawsuit predominantly targets CashCall and its owner J. Paul Reddam, who also owned last year’s Kentucky Derby and Preakness winner, I’ll Have Another.
North Carolina joins the Federal Trade Commission, the Consumer Protection Bureau, and several states in suing the lending companies. The suit asks the judge to cancel, refund, and ban the loans. Western Sky has stopped issuing loans since New York filed suit in September.
Attorneys for CashCall say the Consumer Protection Bureau lawsuit is without merit, but did not immediately comment on the others.