Payday lender to settle fee-practices probe
The payday lender Advance America has agreed to pay $160,000 to the state of California to settle a probe into its rates on installment loans.
The Spartanburg, S.C., company will refund $82,000 to borrowers who were overcharged and will pay a $78,000 fine, according to the California Department of Business Oversight.
The state accused Advance America of improperly adding Department of Motor Vehicle fees to the amount of its installment loans. The practice boosted the loans’ total to over $2,500, allowing the loans to avoid the state’s interest rate caps.
“California consumers deserve a zero-tolerance policy when it comes to lender practices that cause borrowers to pay higher interest rates than they should under state law,” the commissioner of the department, Jan Lynn Owen, said in a Monday press release.
The settlement also resolves allegations that Advance America paid lead generators to acquire customers, which is banned in California.
"Advance America is committed to compliance with all regulations, and while we disagree with the DBO determinations, this settlement resolves the matter amicably without a hearing or other litigation," said Jamie Fulmer, Advance's senior vice president of public affairs.
California is the Mexican-owned company’s largest market; it operates 235 stores in the state.
California regulators also settled two similar cases in December against other payday lenders: Cleveland, Tenn.-based Check Into Cash and Quick Cash Funding in Gardena, Calif.
The state of Florida may approve a new category of loans this year that would allow payday lenders to offer long-term installment loans with triple-digit interest rates. Florida’s move is designed to sidestep a Consumer Financial Protection Bureau rule that reduces the prevalence of two-week payday loans. Other states, although not California, last year considered approving the new loan category.
Kate Berry contributed to this article.