CashCall, an online loan servicer, reached a $1 million settlement with California's Department of Business Oversight on Thursday.
The settlement resolves allegations that the company deceived consumers and regulators about how much they would be charged for personal loans, according to a press release from the department.
"CashCall engaged in a large-scale predatory lending scheme," Jan Lynn Owen, commissioner of the oversight department, said in a press release. "This settlement holds the company accountable for its unlawful conduct and compensates the victims of these unscrupulous practices."
Borrowers covered by the settlement's terms will receive $125 each. A third-party auditor will determine who qualifies for the settlement by examining CashCall's files, though the department said a preliminary review has shown thousands qualify. The servicer must provide restitution within 90 days.
California accused CashCall of exceeding interest rate caps set on nonbank lenders and then lying to state regulators, including Owen. California state law typically caps interest rates for loans of $2,500 or less to about 30%. The Anaheim-based company did not make clear to consumers that it could charge much higher interest rates, ranging from 135% to 179% on an annual basis, on loans of $2,600 or more, the department said. It advertised personal loans of $2,500 or more but only offered ones of $2,600 or more, which are not covered by the interest rate cap, the department said.
CashCall also allegedly failed to withdraw scheduled payments from bank accounts of its customers, lengthening their loans and the amount of money they owed the lender.
In addition to the monetary aspect of the settlement, CashCall will have to disclose in a "clear and conspicuous manner" in all ads to Californians for nonmortgage and nonauto loans that its minimum loan amount is $2,600. CashCall will also be required to inform consumers who want to borrow less than $2,600 that the company does not offer loans that small, as well as the fact that the capped rate for loans less than $2,500 in California is about 30%, lower than what CashCall charges.