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Western Sky/CashCall barred from making, collecting on loans in NC

Release date: 9/1/2015

Court finds lender charged excessive interest rates, cannot use tribal affiliation to evade law

Raleigh: An online fast cash lender that charged North Carolinians oppressive interest rates is now barred by court order from making or collecting on loans in North Carolina, Attorney General Roy Cooper said today.

“Consumers in need of quick cash got stuck with loans they could not pay off,” Cooper said. “These kinds of loans are illegal in North Carolina because they bury struggling borrowers even deeper in debt and that’s why we’re fighting to keep them out of our state.”

Cooper and the North Carolina Office of the Commissioner of Banks filed suit in December 2013 against Western Sky Financial, CashCall, and related companies for violating North Carolina laws that ban excessive interest rates on small consumer loans. As alleged in the complaint, financially strapped North Carolina consumers who took out personal loans of $850 to $10,000 from the defendants faced annual interest rates from 89.68 percent to 342.86 percent, far in excess of what is allowed under state law. 

Under a preliminary injunction ordered by Special Superior Court Judge Gregory P. McGuire, the defendant companies are now barred from:

  • Advertising, offering or entering into contracts to make loans to North Carolinians.
  • Soliciting or collecting payments from North Carolina consumers for loans.
  • Selling or transferring any loans made to North Carolina consumers.
  • Destroying, altering or concealing any records related to loans made to North Carolina consumers.

The injunction will remain in place while the lawsuit moves forward. Cooper is asking the court to cancel Western Sky’s illegal loans, order refunds for North Carolina consumers, and permanently ban the defendants from collecting on the loans and making any future illegal loans to North Carolinians.

Western Sky, based in South Dakota, tried to argue that it is exempt from state laws that ban its loans in North Carolina because it claims to be an Indian tribal entity. The court found that Western Sky is not protected by the fact that it is owned by a Native American. Cooper contends that Western Sky is really a for-profit company owned by an individual who happens to be a member of an Indian tribe, and is not owned or operated by or for the benefit of any tribe. 

More than 300 North Carolina consumers have filed complaints with Cooper’s Consumer Protection Division or the Commissioner of Banks’ Office about the defendants’ loans. Many of these consumers complained that they made loan payments for months only to learn that nearly all of their payments had gone toward interest and very little toward paying off the principal. 

Payday and other high interest rate loans are against the law in North Carolina, and Cooper and the Office of the Commissioner of Banks have fought for many years to shut down illegal storefront lenders that used a variety of ruses to try to keep operating in North Carolina. The last storefront payday lenders were forced from the state in 2006, but lenders outside of North Carolina continue to try to reach North Carolina consumers through the Internet and advertising.

For more tips or to report an online payday loan, contact the Consumer Protection Division at 1-877-5-NO-SCAM toll-free within North Carolina or online at www.ncdoj.gov.

Contact:  Noelle Talley

Phone:     919/716-6413