CashCall Inc., the online consumer loan company with a checkered history, was ordered Wednesday to pay $1 million in penalties and repay thousands of California consumers $125 each, as part of a state settlement over allegedly deceptive and misleading loans.
The state Department of Business Oversight also issued a $1 million penalty against the Orange company, which has faced previous lawsuits and enforcement actions by state regulators and attorneys general in 20 states, according to the DBO.
“It was kind of bait-and-switch (tactics),” said DBO spokesman Tom Dresslar, who said the company was targeted by state officials last summer for loan practices that “unlawfully deceived and overcharged consumers.”
He said CashCall would advertise loans for “up to $2,600,” but when consumers tried to take out smaller loan amounts, they were told it wasn’t possible and were encouraged to take out larger loans. According to Dresslar, it was CashCall’s way of circumventing state law that caps interest rates at about 30 percent on consumer loans of $2,500 or less. By taking out loans above that dollar amount, there was no ceiling on CashCall’s interest rates, which ran as high as 179 percent annually.
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“They were exorbitant,” Dresslar said.
The department said CashCall also failed to withdraw automatically scheduled payments from customers’ bank accounts, which effectively lengthened the loan term and blunted any savings on interest payments.
The settlement covers an estimated 5,000 to 10,000 California consumers who took out non-mortgage consumer loans between January 2008 and August 2014. The final number of borrowers and the total amount of restitution is being determined by a third-party auditor, according to the DBO. Those affected do not need to file a claim but will be contacted by CashCall and sent their checks.
CashCall also was ordered by state officials to clearly and prominently disclose its consumer loan terms on its website and in advertising.
Phone calls to CashCall were not returned.