CashCall Inc., an online "fast-money" lender known for its splashy TV, radio and Web ads, was slapped with a court order this week to pay a $1 million fine and halt its "loan shark" debt collection tactics.
The Anaheim, Calif.-based company, was accused by state Attorney General Jerry Brown of deceptive advertising and making "excessive and verbally abusive" phone calls to consumers, some of whom pay interest rates as high as 139 percent.
"Their activity was egregious," said Scott Gerber, spokesman for Brown's office, which investigated CashCall for more than a year.
Preying on people who are "desperate to get quick cash," Gerber said, CashCall used abusive tactics when people couldn't afford to repay.
According to the attorney general's complaint, the lender phoned delinquent consumers "at all hours of the day and night"; discussed borrowers' private financial information with their friends, colleagues and neighbors; and ignored requests to cancel automatic bank withdrawals.
In addition to paying $1 million in penalties, CashCall is required to record all phone calls with current and prospective borrowers, train its employees at least four times a year to ensure compliance and keep a log of consumer complaints.
The case took about 18 months to reach a settlement.
"It's about time," said El Dorado Hills, Calif. resident Len Umina, whose daughter, then 24, took out a $2,300 loan from CashCall in 2006.
After about a year of monthly $200 payments, she was even deeper in debt than when she started -- owing roughly $2,800. That's when Umina discovered the interest rate she was being charged: 99.6 percent.
CashCall didn't get fined for charging high interest rates, however. That part of its business is perfectly legal. In this case, the lender was accused of using illegal and abusive collection tactics.
Because CashCall and other so-called "finance lenders" don't take deposits as a bank does, their assets are not federally insured or regulated by federal banking laws. They are, however, licensed in California by the state Department of Corporations.
On loans of less than $2,500, the state limits the interest rates charged by such lenders to 30 percent, according to the department. Loans of $2,500 or more are not subject to rate caps but must meet other restrictions.
In a statement Monday, CashCall CEO J. Paul Reddam said "CashCall is happy to have reached agreement to resolve this matter. ... CashCall remains committed to complying with all applicable laws as it continues to make credit available to California consumers."
Reddam, who also founded and then sold DiTech mortgage company in Southern California, is well known in Sacramento horse racing circles through his involvement in the harness racing scene at Cal Expo.
Since its inception in 2003, CashCall has originated about 300,000 loans, according to the company. The average loan amount is $3,000. Its well-known TV ads, which appear on YouTube, featured former child actor Gary Coleman.
CashCall attorney Dan Baren said in an e-mail Monday that all CashCall loans carry prominent warnings that interest rates are "very high" and that better terms could be available elsewhere. "Borrowers are warned to pay the loan back as soon as they can," he said.
If you have a complaint about a finance lender, contact the California attorney general's public inquiry unit, online at www.ag.ca.gov or by phone at (800) 952-5225
E-mail reporter Claudia Buck at cbuck(at)sacbee.com.
(Distributed by Scripps Howard News Service, www.scrippsnews.com.)
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