THE BLOG

17
Jul

California Lenders: New Calif. Department of Business Oversight Survey & Developments

California DBO Announces Its Presence with Authority: Respond to this Survey Now!

On June 26, 2013, the California Department of Business Oversight (which has absorbed the former Department of Corporations) sent out a 10-page survey to all CDDTL licensees requiring regarding CDDTL activity from Jan12 to May13. The Survey responses are due on July 24, 2013. Responses must be provided on-line: paper responses are not an acceptable alternative.

(NOTE: Our friend and top California “legal eagle” Paul Soter Esq. was kind enough to share this important California development with our readers.)

The survey calls for the following information requests:

• Multiple Transactions: Total number of customers obtaining multiple DDT’s (1-10) in 2012 and 2013.
• Customers’ Income: Customers’ income figures for same time period.
• Internet-Based Lending: Number of customers and DDT’s, and dollar amounts of internet DDT’s. Use of lead generators: Number of leads, fees paid, and customer data      provided by LG’s.
• Active Duty Military Customer Transactions: Number of customers and DDT’s, and dollar amounts of military DDT’s
• Funding Mechanisms: For loan proceeds: Number of customers and dollar amounts of loan disbursement broken down by cash, check, ACH or card credits for 2012        and 2013; For payments: Number and dollar amount of repayments broken down by cash, check, ACH or card credits for 2012 & 2013
• Collection Procedures: Payment Plans: Number offered and made for 2012 and 2013 Collections: In-house and outside practices
• Customer Complaints: Existence of complaint process, number of complaints and resolutions
• Use of Independent Agents for Loan Referrals: Information on use and licensing status of such agents.

Based on inquiries received by the trade association and industry attorneys, it appears that many CDDTL licensees do not have all this data easily retrievable or may need significant database query programming to obtain some of the information requested. CFSP’s efforts to obtain relief in the form of a delay or rethinking of the survey have been unsuccessful. Instead, the DBO has directed licensees who have timing or data assembly issues to contact the DBO individually.

The DBO has stated that it will consider granting extensions on a case-by-case basis if the request is timely made prior to the July 24th due date. Requests for extension should be directed to Louise.Amegin@DBO.ca.gov. Licensees requesting an extension should be prepared to explain specifically why they are unable to meet the July 24th due date. If a request for extension is granted, it will only be until August 23rd, 2013. No further extensions will be granted.

Licensees who are having difficulty with the survey form can obtain technical assistance by contacting survey@dbo.ca.gov. Any questions concerning the Survey’s content may be directed to CDDTL Special Administrator Frankie Hornick at Frankie.Hornick@dbo.ca.gov.

Licensees are urged to raise their concerns and questions to the DBO as soon as possible. The DBO is somewhat skeptical of the industry’s claims of hardship, so they need to hear from you.

Paul Soter
Law Offices of Paul Soter
149 San Felipe Avenue
San Francisco, CA 94127
Tel: (415) 333-3193
Cell: (415) 867-9484
http://www.lawofficesofpaulsoter.com/
psoter@sonic.net

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16
Jul

Federal Govt. Sues Western Sky, Butch Webb & CashCall -Cheyenne River Sioux Tribe’s Sovereign Status as a Shield

By Jer Ayles-Ayler at Trihouse. A portion of the class action lawsuit filed: (Link to entire filing available below):

Plaintiff Sonja Curtis is a resident of Texas and applied for a loan from Western Sky in that state. Ms. Curtis borrowed $5,000 from Western Sky on August 8, 2011. The loan
carried an APR of 116.73 % and a fee of $75.00. Finance charges on the loan are $36,172.61 for a total payment of$41,172.61 on a $5,000 loan. She has paid approximately $5,737.34 in interest and $4.12 in principal to Defendants to date.

Plaintiff Chad Martin Heldt is a resident of Minnesota and applied for a loan from Western Sky in that state. Mr. Heldt borrowed $9,925 from Western Sky on April 24, 2013. The loan carried an APR of 89.68 % and a fee of $75.00. Finance charges on the loan are $52,676.49 for a total payment of $62,601.49 on a $9,925 loan. He has paid approximately $891.82 in interest and principal to Defendants to date.

Plaintiff Christi W. Jones (nee Trusevich) is a resident of Texas and applied for a loan from WesternSky in that state. Ms. Jones borrowed $2,525 from Western Sky on July 19, 2011. The loan carried an APR of 139.13 % and a fee of $75.00. Finance charges on the loan are $11,441.37 for a total payment of $13,966.37 on a $2,525 loan. She has paid approximately $3,635.07 in interest and $45.20 in principal to Defendants to date.

Plaintiff Cheryl Annette Martin is a resident of Virginia and applied for a loan from Western Sky in that state. Ms. Martin borrowed $1,500 from Western Sky on December 30, 2011. The fee on the loan was $500, and so Ms. Martin received $1,000. The loan carried an APR of233.91 %. Finance charges on the loan are $3,768.98 for a total payment of $4,768.98 on a $1,000 loan. She has paid approximately $1,616.47 in interest and $179.53 in principal to Defendants to date.

Defendant Payday Financial, LLC (“Payday Financial”) does business as Lakota Cash and Big Sky Cash. It is a limited liability company chartered under the law of the state of South Dakota as an ordinary business entity. Its principal place of business is 612 E Street, Timber Lake, South Dakota. Upon information and belief, Payday Financial caused the State of South Dakota to charter defendant Western Sky Financial and has served as the managing member of the entity. Payday Financial advertises and offers its loans to Minnesota, Texas, Virginia and other consumers through Internet web sites including www.lakotacash.com. Payday Financial transacts business in South Dakota, Minnesota, Texas, and all other states in which it offers consumer loan products. The Lakota Cash website describes the company as follows:

 http://www.lakotacash.com (accessed June 12, 2013). The typical visitor to the website is an African American female between the ages of 18 and 34, with children, and income of less than $50,000 per year, and no college education. See https:llwww.quantcast.comllakotacash.com (accessed June 24, 2013). On February 9, 2011, Defendant Webb filed a Statement of  Dissociation stating that Defendant PayDay Financial, LLC is dissociated from Defendant  Western Sky Financial, LLC.

Defendant Western Sky Financial, LLC, is a South Dakota limited liability company with its principal place of business at 612 E Street, Timber Lake, South Dakota Western Sky advertises and offers loans to consumers by television advertisement and through a website accessible at www.westernsky.com.

Defendant Martin A. “Butch” Webb resides in South Dakota. Webb is the owner and president of Payday Financial and the owner of Western Sky. He is the registered agent of Payday Financial, Great Sky, Western Sky, Red Stone, Management Systems, 24-7 Cash, Red River, and High Country. Webb is the organizer, managing member, and registered agent of Financial Solutions.

Defendant CashCall is a California corporation with principal place of business at 1600 S. Douglass Road, Anaheim, California. CashCall is engaged in the business of making or arranging high-interest loans to consumers over the Internet and then servicing the loans it made or arranged. On information and belief, CashCall has arranged with the Lending Defendants (or entities affiliated with them) to process the loans from their inception or otherwise purchase loans made by the Lending Defendants shortly after they are made, or to receive the loans for collection or servicing. Upon information and belief, CashCall is aware of the terms of the loan agreements, including its exculpatory clause, and approved of those terms.

Defendant CashCall owns or operates the web servers used by the Lending Defendants to market and form the loan agreements. Upon information and belief, CashCall operates and/or funds WS Funding, which is the entity that provides the money the Lending Defendants use to fund consumer loans.

The relationship between the Lending Defendants and defendant CashCall IS close. All three entities host their public websites on TW Telecom servers based in Corona, California. Both websites became active on the TW Telecom servers within one day of each other. The servers run the same operating system and web serving software.

The websites cross-market each other. The site located at www.westernsky.com (which is owned by defendant Payday Financial, Inc.) includes keywords “Gary Coleman cash call” and “Gary Coleman cash loans”-referring to a 2007 ad-campaign run by defendant Cash Call that featured actor Gary Coleman.

The Lending Defendants use a website application co-developed by defendant CashCall and Cogility Software to manage the loan process. Upon information and belief, the CashCall system used by the Lending Defendants is comprehensive and includes: underwriting and decision-making, employment verification process, management of incoming voided checks and pay stub faxes through a fax queue, digital certificate generation, document creation, web­ based tools for loan agents and administrator[s], access to loan account information, security services, e-mail generation, loan servicing, and phone system configuration and interface requirements.

None of the Defendants is owned, operated, or chartered by the Tribe.

FACTUAL BASIS 

The Lending Defendants offer high interest rate unsecured consumer loans of $300 to $10,000 through Internet websites, including to individuals throughout Minnesota,
Texas, and Virginia. The APR on the loans range from approximately 89.68 % to 342.86 %. The Lending Defendants have offered such loans since at least mid-2007. Upon information and belief, Defendant CashCall has entered into agreements with the Lending Defendants to collect debts and service the loans made by the Lending Defendants.

Consumers who require a payday loan from Defendants visit one of several websites run by the Lending Defendants. Consumers apply for a loan through an online form or by calling a toll-free telephone number.

Defendants quickly provide money to the consumer. Shortly thereafter the Lending Defendants transfer the loan note to Defendant CashCall. In essence, the Lending
Defendants act as a broker of Cash Call loans under the guise ofan American Indian Internet loan company.

If a consumer does not pay back a loan on time, Defendants attempt to collect the debt. Among other things, Defendants make negative reports to credit bureaus, call consumers multiple times per day, contact consumers’ employers, and engage in other aggressive-and often intimidating-tactics.

All Defendants knew or should have known that the loans they made to Plaintiffs and the class contained interest rates that are unenforceable because they violate Minnesota, Texas, and Virginia usury statutes.

Defendants inform consumers-including Plaintiffs and members of the class-­that the Indian Commerce Clause of the United States Constitution bars application of their
states’ laws. But the Indian Commerce Clause provides no such immunity-it narrowly grants the United States Congress the authority to “regulate Commerce … with the Indian tribes.” U.S. Const. Art.! § 8. It does not state, as Defendants would have consumers believe, that American Indians are free to violate state laws without repercussion.

Notably, the Lending Defendants refuse to offer loans to members of the Tribe or to residents of South Dakota where the tribe is located.

All consumers must sign a loan agreement form to indicate they accept the terms ofthe loan. There is a reasonable question of whether a consumer sees the entire term of the loan or arbitration clause before they accept the loan.

The loan agreement includes, among other things, the following statements:
This Loan Contract is subject solely to the exclusive laws and jurisdiction of the Cheyenne River Sioux Tribe, Cheyenne River Indian Reservation. By executing this Loan Agreement, you, the borrower, hereby acknowledge and consent to be bound to the terms of this Loan Agreement, consent to the sole subject matter and personal jurisdiction of the Cheyenne River Sioux Tribal Court, and that no other state or federal law or regulation shall apply to this Loan Agreement, its enforcement or its
interpretation.

Governing Law. This Agreement is governed by the Indian Commerce Clause of the Constitution of the United States of America and the laws of the Cheyenne River Sioux Tribe. We do not have a presence in South Dakota or any other states of the United States. Neither this Agreement nor Lender is subject to the laws of any state of the United States of America.

The loan agreement takes a “belt and suspenders” approach to depriving consumers of their state law rights. The agreement also contains an arbitration provision that requires, among other things:
“Arbitration shall be conducted in the Cheyenne River Sioux Tribal Nation by a panel of three Tribal Elders and shall be conducted in accordance with the Cheyenne River Sioux Tribal Nation’s consumer rules and the terms of this Agreement.”

The document continues:
“THIS ARBITRATION PROVISION IS MADE PURSUANT TO A TRANSACTION INVOLVING THE INDIAN COMMERCE CLAUSE OF THE CONSITITUTION OF THE UNITED
STATES OF AMERICA, AND SHALL BE GOVERNED BY THE LAW OF THE CHEYENNE RIVER SIOUX TRIBE.”

Further, “The arbitrator will apply the laws of the Cheyenne River Sioux Tribal Nation and the terms of this Agreement.”

Contrary to the representations of the Lending Defendants in the loan agreement, there is no such thing as arbitration in the Cheyenne River Sioux judicial system. Further, “Cheyenne River Sioux Tribal Nation’s consumer rules” do not exist. In response to a request for information regarding the Tribe’s arbitration procedure, a Tribal MediatorlMagistrate stated, “the Cheyenne River Sioux Tribe, the governing authority does not authorize Arbitration as defined by the American Arbitration Association (AAA) here on the Cheyenne River Sioux Reservation located in Eagle Butte, SD 57625.” (Exhibit A.)

The “belt and suspender approach” of placing exclusive jurisdiction of disputes with the Cheyenne River Sioux Tribe, but at the same time, requiring arbitration pursuant to
nonexistent arbitration rules, creates a conflict within the loan agreement. This dispute cannot simultaneously be subject to the jurisdiction of the Cheyenne River Sioux Tribe judicial system and a panel of non-judicial arbitrators who are chosen solely by the Defendants and who are members of the Tribe. This violates the Federal Arbitration Act. (Exhibit 8.)

Brought to you by Payday Loan Industry and Payday Loan University

Link to the actual filing: http://turtletalk.files.wordpress.com/2013/07/heldt-complaint.pdf

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12
Jul

Minnesota AG Attacks CashCall and Rent-a-Tribe Payday Loan Model

The Minnesota AG accuses CashCall and its subsidiaries, WS Funding and WS Financial, of operating while unlicensed, charging illegally high interest rates and unjust enrichment. The AG  also accuses them of fraudulently claiming loans are immune to Minnesota usury laws because Western Sky Financial –  the entity actually making these loans to Minnesota residents – is subject to tribal sovereign immunity because Western Sky  is owned by an America Indian tribe member (Butch Webb). The loans are  sold to CashCall and its subsidiaries.

For loans less than $350, Minnesota law caps the fees that may be charged on a sliding scale as follows: $5.50 for loans up to $50; 10 percent of the loan amount plus a $5 fee on loans between $50 and $100; 7 percent of the loan amount (minimum of $10) plus a $5 fee on loans between $100 and $250; and 6 percent of the loan amount (minimum of $17.50) plus a $5 fee on loans between $250 and $350.

Per legal counsel for CashCall, highly respected attorney Claudia Callaway, “While it would be inappropriate to comment on pending litigation, we look forward to correcting the record in this matter.”

Tribe owned eCommerce businesses have  evolved significantly in just the past 24 months.  Sophisticated collaborations between experts in sovereign nation law, capital formation and lending operators have blossomed. However, state attorneys general and the majority of the media, are still straining to comprehend the “tribe lending model” and continue to refer to all tribal owned Internet lenders as “rent-a-tribes.”  If you repeat a “theme” frequently enough, people will eventually believe it.

For more insight and analysis of the “tribe model,” visit:
1) Tribe Payday Loan Sovereign Nation Model

2) Minnesota AG Attacks Cash-Call Article

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10
Jul

Complaints About Payday Loan Companies-The Real Story

October 1 2011 through September 30, 2012, 2.34 million payday loans transpired in Missouri. Total complaints? 135. That’s correct! 135 complaints were received by the Missouri Division of Finance out of 2,340,000 payday loans. And, of the 135 complaints received, 54 were made against LICENSED Missouri payday loan lenders! 81 were against unlicensed Internet payday loan lenders.

Can you guess how many “renewals” were issued to Missouri payday loan consumers? 1.5! Yes, in spite of all the bull shit the media and the consumer advocates claim, the REAL – DOCUMENTED DATA, as reported by Richard Weaver, Commissioner of Finance for Missouri, reveals the truth!

The average loan was $306.12, the average interest rate was 454.62% and the average fee for a 14 day payday loan was $53.38. Defaults? 5.23%.

Want the facts? Or, you’re willing to allow the competition to continue to spread the lies? Here is the Missouri Report.

What’s all this mean? Our industry does a PATHETIC job of getting the truth out. We simply are not as well organized as the competition. It’s rare to hear testimonials from the real consumers who use our  products to extricate themselves from a short-lived financial challenge. (Of course, who in their right mind wants to come forward and publicly exclaim they use and LOVE payday loans? ) Instead, we’re barraged on a daily basis by stories of abuse; the single mom with multiple children trapped in a never ending cycle of debt.

At the risk of offending a few of you, I will point out a few successes.  The Borrow Smart Team does a good job as well as the Texas CAB Association. And FISCA, OLA, CFSA and others do devote a portion of member dues to protecting consumers, short-circuiting negative legislation and providing industry resources. Of course, everyone, including ME :o) has an agenda. Just follow the money…

Bottom line? I don’t embrace data bases but there are a multitude of states having implemented data bases that reveal a much different interpretation of payday loan consumer behavior than reported by our opponents. We ALL need to spread the word at every opportunity!

PaydayLoanUniversity.com
Jer@TrihouseConsulting.com

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08
Jul

Motley Fool-Big Banks Payday Loans Biggest Competitor

'Stop your AG's sellout to banks' photo (c) 2011, DonkeyHotey - license: http://creativecommons.org/licenses/by/2.0/The big banks salivate every time The WSJ, NYT, Bloomberg… attack the payday loan industry. Few people realize that Wells Fargo, US BankFifth Third Bancorp, Regions Finance and many other banks offer payday loan styled products. The real scoop is that these big banks are at the front of the line when a consumer is paid. The banks get their money FIRST!   Lacking a bank account and direct deposit, a consumer cannot qualify for a “Direct Deposit Advance.” 

Rich Duprey at The Motley Fool has an interesting piece:  Article.

“Now, if we can just get the banks to publicize the APRs on the other fees they charge. The FDIC notes that, if you overdraw your account by $20, and the bank charges you $27 for doing so (the average these days), that’s equal to an APR of $3,520%! And that $2 fee for withdrawing $20 from the ATM works out to a 260% APR. “

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