Tuesday, August 25, 2009
Brown, Lender CashCall Settle Charges of Predatory Lending
By a MetNews Staff Writer
A Los Angeles Superior Court judge yesterday approved the settlement of a suit by Attorney General Jerry Brown charging that CashCall, Inc., a money lender well known as a result of its ubiquitous television advertising, violated consumer protection statutes.
Judge Amy D. Hogue entered a stipulated judgment under which CashCall, whose advertisements featured former child television star Gary Coleman, agreed to pay the state $1 million in penalties and costs and to alter business practices the attorney general condemned as predatory.
CashCall agreed to the settlement with no factfinding by the court and no admission of wrongdoing. But Brown made it clear in a statement that he found the company’s conduct despicable.
“CashCall preyed on consumers desperate for cash, charging triple digit interest rates and using loan shark tactics to collect on their debts,” Brown said. “This judgment forces CashCall to stop harassing its customers and should serve as a warning to consumers to be wary of fast-money lenders.”
The company responded in a statement released by its Anaheim-based attorney, Dan Baren:
“CashCall is happy to have reached agreement to resolve this matter. We worked closely with the Attorney General’s office to address its concerns. CashCall remains committed to complying with all applicable laws as it continues to make credit available to California consumers.”
Among other things, the state charged in its complaint, the company—owned by Paul Reddam, founder and former owner of DiTech mortgage company—called debtors at all hours, threatened to garnish wages or contact police if they did not pay what they owed, subjected borrowers to bank fees by attempting automatic withdrawals it knew would not be covered, and disclosed confidential financial information to neighbors and other third parties without authorization.
Brown also charged that the company’s ads falsely suggested that low interest rate loans were available to all borrowers, when in reality, the rates advertised were only offered to some borrowers, usually members of the military who are protected from higher rates by federal law.
Other consumers, the attorney general said, were typically charged close to 140 percent annual interest on a $2,600 loan, so that with payments of principal and interest of $298.94 monthly over 36 months, the total interest would exceed $8,000.
The stipulated judgment enjoins the company from, among other things:
•Advertising interest rates not available to the general public “without clearly and conspicuously” explaining who qualifies for them;
•Calling a borrower more than once per day about a delinquent payment or more than once about an upcoming payment, or contacting a borrower before 8 a.m. or after 9 p.m., or calling the borrower at work if the borrower’s employer prohibits such communication;
•Communicating about the loan with unauthorized persons for the purposes of debt collection, unless a judgment has been entered against the borrower, or with the intent to obtain confidential information;
•Making false and misleading statements to borrowers, including claims that failure to pay will result or has resulted in reports to police, child protective services or immigration authorities;
•Using “field chasers”—employees or agents who make contact with a borrower in person other than at company offices—other than to locate a borrower or deliver correspondence;
•Withdrawing fees from borrower’s bank accounts without 48 hours prior notice; or
•Attempting to collect payments from a borrower’s bank account more than twice in any 30-day period after the account is shown to lack sufficient funds to cover the payment, or failing to stop using automatic withdrawals when the debtor requests.
The company is also required to:
•Train its employees within 30 days and not fewer than four times per year thereafter to ensure compliance with the judgment;
•Terminate any officer, director or employee who violates the terms of the judgment;
•Record all telephone calls made to, or received from, prospective and current borrowers; and
•Maintain a detailed log of all consumer complaints.
The case is People v. CashCall, Inc., BC420115.
Copyright 2009, Metropolitan News Company