Lawsuit uncovers seedy business practices from California payday lender

Inside Subprime: April 3, 2018

By Lindsay Frankel

In January, Los Angeles-based Judge John F. Walter issued a penalty for California payday lender CashCall, which had accrued more than a few complaints of predatory lending since 2003, when the company began to offer payday loans to California residents. But the penalty is a drop in the bucket for CashCall, and many in the state are calling for more action to be taken.

The penalty was issued as a result of a lawsuit, brought last August by the Consumer Financial Protection Bureau (CFPB). At that time, Judge Walter seemed to finally be putting a stop to the company’s seedy practices, which had been harming borrowers with bad credit for years. But while the CFPB sought $287.2 million in penalties, Walter announced in January that CashCall would only receive a $10.3 million penalty, a low-tier punishment typically reserved for cases in which the law is broken without the offender’s knowledge. However, it’s clear from CashCall’s sordid history that key players used unethical practices to take advantage of borrowers in California and other states, raking in millions and causing financial harm to many low-income families.

CashCall made a killing by offering loans with interest rates of up to 355 percent. They used shady tactics to get around usury laws in many states, and even informed borrowers in the lending agreement that “Neither this Agreement nor Lender is subject to the laws of any state of the United States of America,” a practice which underlines why potential borrowers should always read the find print before signing. CashCall was also reprimanded for harassing borrowers, discussing borrowers’ private financial information with others, and falsely advertising lower interest rates than were available to the general public.

For many individuals, CashCall seemed like a great option for a no credit check loan in California. But their schemes teach us an important lesson, and that it is that many payday lenders in California are not motivated by the best interest of their customers. Instead, they count on making a fortune when borrowers get stuck in a cycle of debt without the financial means to pay back what they owe.

Unfortunately, the $10.3 million penalty is unlikely to have a deterrent effect on other companies that wish to use similar tactics. Judge Walter’s decision was – in part – based on the theory that borrowers should have been aware of the high interest rates because of the disclaimer in the loan agreement.

It seems the responsibility lies on the consumer to thoroughly understand the terms of a payday loan and their own financial ability to pay it back. CashCall was able to get away with unethical business practices for years, so it’s important to realize that, while there are laws in place to protect consumers from these kinds of predatory lenders, there are also legal loopholes available to companies seeking to profit from the misfortune of their borrowers.

To learn more about payday loans in California, check out these related pages and articles from OppLoans:

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIn