Maryland Commissioner of Financial Regulation Announces $2 Million Settlement with Western Sky Financial, CashCall, Inc. and Others
BALTIMORE, MD (June 23, 2014) – The Maryland Department of Labor, Licensing and Regulation’s (DLLR) Commissioner of Financial Regulation, Mark Kaufman today announced a consent agreement to address abusive payday lending and collections activities involving Western Sky Financial, CashCall, Inc., their controlling shareholders and several related entities. The settlement terms are valued at approximately $2 million. Moreover, Western Sky, CashCall and the other respondents are permanently prohibited from engaging in any financial services related activities in Maryland that require licensing, including originating, brokering or servicing any mortgage, consumer or other loan involving Maryland consumers.
Through investigating a series of complaints, the Maryland Department of Labor’s Division of Financial Regulation determined that Western Sky and CashCall partnered to issue unsecured consumer loans with interest rates far above the state’s usury cap which is 24 percent to 33 percent, depending on loan size. In one case, loan documents revealed an Annual Percentage Rate of more than 1,800 percent. The loans were made via the internet and through call centers located outside the state of Maryland. During 2010 and early 2011, the respondents originated more than 1,200 such loans to Maryland borrowers.
Based on the Division’s investigation, Commissioner Kaufman issued a Cease and Desist Order in February 2011 against Western Sky, owner Martin Webb and numerous related parties for violation of state law prohibiting high rate, “payday” loans. Maryland was one of the first states to challenge the Cheyenne River Sioux Reservation-based Western Sky, which asserted it was exempt from state consumer protection laws due to tribal immunity. The order stopped lending activity in Maryland. Since then, the entities have been the targets of numerous additional actions by other states and at the federal level.
“I applaud Commissioner Kaufman, Assistant Attorney General Tom Laurie and their entire staff for their willingness to take prompt and aggressive action in a complex case involving multiple parties, tribal immunity and related issues,” said Leonard Howie, Maryland Secretary of Labor. “Their prompt action limited damage in Maryland and sends a clear message to other potential lenders who may seek to flout Maryland law.”
“Western Sky Financial and CashCall worked together to charge outrageous rates to vulnerable citizens in a time of great economic distress,” said Commissioner Kaufman. “They sought to structure around longstanding statutory prohibitions and to deny borrowers protections to which they are legally entitled. I am proud that we were able to act aggressively and halt their lending activities in 2011, and now I am pleased that we can deliver meaningful redress to Marylanders who have been harmed.”
As a result of the settlement agreement;
- More than 1,200 Maryland residents who have been victimized are eligible to receive restitution of more than $1.7 million, based upon prior payments. The $1.7 million fund will be administered by Dahl Administration under the oversight of Circuit Court for Baltimore City. Dahl will contact eligible borrowers within 90 days of the effective date of the settlement and will establish a website through which consumers can claim refunds of sums repaid in excess of 24 percent per year.
- The remaining balances on any loans by Western Sky, Great Sky, Payday Financial Red Stone, Red River Management Systems, Webb, or any other entity owned or operated by Webb, directly or indirectly, to a Maryland borrower are canceled, and all parties are prohibited from selling, assigning or collecting on any loans going forward made. More than $275,000 in remaining loan balances will be forgiven.
- The respondents will pay a fine of $80,200 to the Commissioner of Financial Regulation and pay specific restitution of approximately $20,000 to the 20 identified borrowers who previously filed complaints, related to this case, with the Commissioner.
The Maryland Department of Labor, Licensing and Regulation (DLLR) is committed to safeguarding and protecting Marylanders. We're proud to support the economic stability of the state by providing businesses, the workforce, and the consuming public with high-quality, customer-focused regulatory, employment, and training services. For updates and information, follow DLLR on Twitter (@MD_DLLR), Facebook and visit our website.