The online lender Western Sky and the online loan servicer CashCall agreed to pay $1.5 million in penalties and stop collecting interest on outstanding loans to New York borrowers in a proposed settlement with New York Attorney General Eric Schneiderman.

Schneiderman sued Western Sky, CashCall and their owners, Martin Webb and J. Paul Reddam, in August, charging them with violating New York's usury and licensed lender laws by making loans with annual interest rates between 89% and 355%. New York law prohibits most nonbank lenders from charging annual interest rates above 16%. 

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