N.Y. Sues Western Sky Over ‘89% to More Than 355%’ Interest Rates

N.Y. Sues Western Sky Over '89% to More than 355%" Interest RatesNew York officials are not letting online lenders get away with violating the state’s interest rate caps — and the latest target is Western Sky, which offers fast cash in commercials with sky-high interest rates expressed in fine print.
The fine print isn’t enough to get by state officials, who recently cracked down on payday lenders.
New York Attorney General Eric T. Schneiderman announced Monday that the state has filed a lawsuit against Western Sky Financial, LLC, CashCall, Inc., WS Funding, LLC, and their owners, Martin Webb and J. Paul Reddam, for violations of New York’s usury and licensed-lender laws.
The companies charged annual rates of interest from 89 percent to more than 355 percent to thousands of New York consumers, Schneiderman said.
For example, consumers that received loans of $1,000 were charged an interest rate of more than 234 percent, and had to repay as much as $4,942 in interest and principal over just two years.
In addition to penalties and a stop to the sky-high rates, New York officials are seeking restitution to New Yorkers for interest paid above the legal limit of 16 percent.
The companies, located in South Dakota and California, “targeted vulnerable New York consumers through television and Internet advertising that promised ‘fast cash’ to consumers in urgent need of money,” the attorney general’s office said in a statement.
New York’s civil usury law prohibits most non-bank lenders that are not licensed by New York State from charging more than 16 percent interest on small, unsecured loans. Lenders that are licensed by New York cannot charge more than 25 percent under New York’s criminal usury laws.
Lenders that set up shop out of state, overseas, or on tribal lands in an attempt to evade state regulation are still subject to New York laws when lending to New York consumers.
That’s a key point in the case of Western Sky, a lender that claims it operates “within the exterior boundaries of the Cheyenne River Sioux Reservation” in South Dakota. It has argued that the tribal affiliation puts Western Sky beyond the reach of state regulators, but that claim is not deterring New York officials, including Schneiderman.
“Western Sky and CashCall charged exorbitant interest rates on their loans to scam New Yorkers out of millions of dollars,” Schneiderman said. “With this case and others, my office will continue to fight to protect New Yorkers from illegal business practices and stop companies that seek to prey upon consumers facing tough economic times.”
Since 2010, the companies have made at least 17,970 loans to New York consumers, lending more than $38 million in principal. New York consumers owed more than $185 million on these loans in finance charges alone.
The AG’s lawsuit — which is based on an investigation that began last fall — seeks a court order prohibiting the companies and individuals from engaging in further illegal lending or enforcing existing usurious loan contracts, cancellation of all outstanding loans, restitution for New Yorker borrowers of all interest collected above the legal limit of 16 percent interest, and disgorgement of profits.
The lenders also face penalties of up to $5,000 per violation for deceptive acts and practices.

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