An online lender that attempted to claim tribal jurisdiction to avoid enforcement action can no longer issue loans in Iowa and must pay $1.5 million in restitution after a settlement with regulators in the state.

CashCall, based in Anaheim, Calif., allegedly charged borrowers interest rates of up to 169%, far above the legal maximum of 36% in Iowa, according to an investigation by the Iowa Superintendent of Banking. In response to questioning by the Attorney General’s Consumer Protection Division, CashCall disclosed that one borrower was charged an annual percentage rate of 340%.

CashCall operated a subsidiary, Western Sky Financial, and argued the loans were originated by that company on the Cheyenne River Indian Reservation in South Dakota, which is beyond Iowa’s jurisdictional reach. Western Sky is owned by a Cheyenne River Sioux tribal member. CashCall claimed the arrangement meant Western Sky had sovereign immunity and only had to abide by the laws and jurisdiction of the tribe.

But the Iowa Superintendent of Banking and Attorney General's office this week rejected that argument, following the lead of other states, and revoked CashCall's state license.

"We allege that CashCall exploited Iowans by setting up a sham corporate structure designed to skirt our state lending laws that protect Iowans," Iowa Attorney General Tom Miller said.

The settlement requires the company to stop lending in Iowa and repay more than 3,400 loans made to Iowa consumers. CashCall also must reset the interest rates on any outstanding loans to 4%.

CashCall neither admits nor denies wrongdoing under the settlement.

An estimated 20 states and the Consumer Financial Protection Bureau have pursued lawsuits and actions against CashCall and Western Sky.

The CFPB sued CashCall late last year.

In August 2013, Western Sky agreed to stop funding loans amid rising legal battles with authorities in several states.

Western Sky has been the subject of several lawsuits challenging its lending in states with strict usury laws that cap interest rates on loans. New York, Michigan and Georgia sued the company in the summer of 2013. The Federal Trade Commission filed a lawsuit against Western Sky in 2011, alleging illegal collection practices.

A year ago, Western Sky cited "unprecedented government interference" as the reason for laying off the majority of its employees in Timber Lake, S.D. and its decision to close its office in Eagle Butte, S.D.

In October 2013, Western Sky owner Martin A. Webb and the company were among the defendants sued by Arkansas Attorney General Dustin McDaniel's office.

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