Calif. regulator settles with lender accused of evading rate cap
The California Department of Business Oversight has reached a $900,000 settlement with California Check Cashing Stores LLC, alleging that the company encouraged borrowers to take out higher loan amounts to avoid the state's interest rate cap.
The consent order, which was issued Tuesday, is part of a broader crackdown by the department on lenders trying to evade interest rate limits on small-dollar loans. The department's investigations have resulted in separate settlements with Speedy Cash, Advance America, Check Into Cash of California Inc. and Quick Cash Funding LLC.
The department alleges California Check Cashing Stores steered borrowers into loans above $2,500. California law limits interest on loans of up to $2,499 at between 20% and 30%, but there is no cap for loans of $2,500 and larger. The state regulator also found that the company made false statements in its advertising, claiming to offer loans of "up to $5,000," even though minimum loan amounts were $2,501.
“Steering consumers into higher-cost loans to circumvent statutory interest rate caps is abusive,” Jan Lynn Owen, the commissioner of the department, said in a statement. “Consumers deserve protection and access to lending markets that are fair, transparent and comply with the law.”
The settlement requires California Check Cashing Stores — which has about 118 locations in the state — to refund consumers about $100,000 from roughly 1,200 consumer loans, and to pay $105,000 in other costs and penalties.
The company will also have to deliver refunds of approximately $700,000 for 3,000 payday loan transactions in which California Check Cashing Stories collected charges twice, allowed borrowers to take out a new loan before a previous loan was paid off and deposited checks before dates specified in loan agreements.
“We disagreed with the findings of this but we agreed to the settlement so we can move beyond this and get back to serving our customers in California,” said Patrick Crowley, a spokesman for Community Choice Financial, the Ohio-based company that owns California Check Cashing Stores.