Banking Commissioner Announces That Settlement With Payday Lenders Recovers
More Than $3.7 Million Directly to Connecticut Borrowers.
Department’s Outreach to Borrowers Drives Unusually High Valid Claims Rate
Septmeber 10, 2014
Howard F. Pitkin, Commissioner of the Connecticut Department of Banking, announced today that as of the close of the claims period, eligible borrowers had validly claimed 84.24% of available dollars (or $3,708,130) in the restitution fund set up by an April 2014 settlement with CashCall, Inc., Western Sky Financial, LLC and Martin Webb, the owner of Western Sky Financial.
“The Department of Banking achieved extraordinary success in helping consumers receive the restitution they are entitled to as the result of these illegal business practices,” Governor Malloy said. “I would specifically like to thank Commissioner Pitkin and his team for going the extra mile by reaching out directly to these Connecticut borrowers on this issue. I encourage any Connecticut resident that may have issues with their financial services provider to contact the Department of Banking for assistance.”
“When we announced this settlement, I said that these borrowers wouldn’t have to go it alone—that we would help them make their claims,” said Commissioner Howard F. Pitkin. “In addition to the standard notices required by the settlement, our team contacted borrowers directly and held four town hall meetings around the state in order to reach as many of them as possible. They have done tremendous work. These borrowers not only helped themselves, they also sent a strong message to companies such as CashCall and Western Sky that their outrageous lending practice is not welcome in Connecticut.”
“The claims rate for this restitution fund was extraordinarily high. Funds of this sort are similar to class action settlements. A similar type class action would typically result in claims rates between 10% to 20%. The big difference here was the extensive outreach done by the Connecticut Department of Banking,” said Jeff Dahl of Dahl Administration, the fund administrator.
“Our office congratulates Commissioner Pitkin and his team for their work in not only obtaining restitution for Connecticut residents but then communicating effectively with victimized Connecticut residents,” said Acting Commissioner of Financial Regulation Gordon M. Cooley. “More than 1,200 Maryland residents who borrowed from CashCall and Western Sky Financial will have an opportunity to obtain restitution from a $1.7 million settlement fund starting in mid-September. Our office will similarly make contact with as many of the affected residents as we can locate to alert them to the availability of settlement monies, encourage them to apply, and offer to assist as we can.”
As reported in April, the Connecticut Department of Banking investigated and determined that CashCall made approximately 3,800 unsecured short-term loans (consumer loans in amounts less than $15,000) with annual interest rates ranging from 89% to 355%, which is well in excess of the 12% maximum rate allowed by law for short-term, small dollar loans made without a small loan license. CashCall was not licensed to do this type of business in Connecticut. In addition to restitution fund, CashCall, Western Sky and Martin Webb have paid a $350,000 civil penalty and an additional $50,000 to the Department of Banking to help affected borrowers make their claims and educate Connecticut consumers about consumer credit lending.
Maryland announced its settlement with CashCall and Western Sky in July 2014. Under the settlement, the lenders agreed to repay borrowers who paid interest and fees in excess of 24% for their loans, to forgive remaining loans balances which exceeded $275,000 at the time, to provide specific restitution of approximately $20,000 to 20 Maryland residents who had previously complained about these lending practices which the Maryland Commissioner of Financial Regulation found to be unlawful, and to pay a fine of $80,200 to the State of Maryland. Dahl Administration also serves as the Maryland settlement fund administrator and will mail notices to affected Maryland residents beginning in mid-September.