Virginia Group leads $1 billion settlements with online lenders
DAVE RESS Richmond Times-Dispatch
A handful of Virginians, stung by triple-digit interest rates, have fought a series of class action lawsuits that will net nearly $1 billion to more than a million borrowers across the country.
Virginians borrowed money from online lending companies that claimed to be owned by three Native American tribes, but were actually operated by a Texas company, Think Finance, which sought to take advantage of the tribes’ exemption from the laws on state wear and tear after regulators shut down a former online lending program.
A settlement with Think Finance investors was approved by the U.S. District Court in Richmond this week. He broke new ground in reaching the pockets of Think Finance investors as well as a Think Finance company set up to protect itself from impending regulatory crackdowns.
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These investors and the shield company will pay $44.5 million. The regulations prohibit them from returning to the company.
The court has already approved settlements totaling more than $870 million with Think Finance, the three tribal shell companies – Plain Green LLC, created by the Chippewa Cree Tribe of the Rock Boy Reservation in Montana; Great Plains Lending, created by the Otoe-Missouria Tribe of Oklahoma; and MobiLoans LLC, created by the Tunica Biloxi Tribe of Louisiana, along with a debt collection company and venture capital funds that backed the deal. The companies were incorporated by tribal governments, but were funded and primarily operated by Think Finance, which received the bulk of the profits.
Previous settlements include repayments of amounts borrowers paid to lenders totaling more than $103 million and the cancellation of more than $763 million in loans. The former chairman of Think Finance is contributing an additional $7.3 million.
They all deny any wrongdoing.
The Virginians who led the class action lawsuits had taken out loans at interest rates of up to 448% on loans ranging from $300 to $3,000. A borrower paid $16,210 on a loan bearing interest at 448%, court records show. Almost all the money went to pay ever-increasing interest, so the principal was not repaid and the debt was never repaid.
The lawsuits claimed that these loans were illegal because they exceeded the 12% cap on most loans in Virginia, or even the 36% cap set by the General Assembly for payday loans, securities loans and car and open-ended lines of credit, including Virginians. organize online. The caps, which came after decades of campaigning by consumer advocates, ended the triple-digit rates Virginians were paying on these loans.
Payday loans are very short-term borrowing – the idea is to bring in a future paycheck in exchange for less than that check. Car title loans are secured by the surrender of a vehicle title, so if the borrower misses a payment, the lender can repossess the car or truck. Open lines of credit are essentially like credit cards, allowing the borrower to pay only a minimum monthly balance. This creates a kind of double impact: the principal amount is never repaid and any interest due beyond the borrower’s minimum payment is added to the debt, so the total monthly interest due continues to increase. in a kind of vicious circle.
“Virginia strengthened its lending laws in 2020,” said Jay Speer, executive director of the Virginia Poverty Law Center.
“We kicked out payday lenders and car titles and brought a better lending market to Virginia,” he said, referring to the departure of many high-interest loan companies after the State enacted the loan reform measure.
Think Finance had argued that Virginia laws did not apply because the loans were made under tribal law.
The settlements the Virginians won are, collectively, the largest reached to resolve complaints against a high-interest loan company.
They also successfully challenged a business model used by other online lenders – running a lending business tied to a Native American operation by paying fees to tribes.
Last year’s settlement and this year’s follow-up resolve claims that Think Finance’s creditors have filed in a Texas bankruptcy court. In a separate lawsuit, the US Consumer Finance Protection Bureau won a Montana court order barring Think Finance and six subsidiaries from offering or collecting consumer loans in 17 states – Virginia is not one of them. – if the loan violates state loan laws. and prohibiting them from assisting others to engage in such conduct.
Earlier this year, another group of Virginians, some of whom took issue with Think Finance, reached a settlement with other online payday loan companies that were charging up to 919% interest.
This settlement is for $489 million to repay some 555,000 borrowers. That lawsuit, also filed in federal court in Richmond, alleged that Golden Valley Lending; Silver Cloud Financial, Inc.; Mountain Summit Financial, Inc.; and Majestic Lake Financial, Inc., all formed under the laws of the Habematolel Pomo Tribe of the Upper Lake Tribe in California, violated federal racketeering laws as well as Virginia’s usury and credit licensing laws to consumption.
He also named three Kansas City, Missouri businessmen whose companies processed the loans, provided the capital the tribal societies used to make the loans, and collected the bulk of the company’s profits.
Companies advertised online loans of up to $1,000 with the promise that borrowers could be approved in seconds.
One of the Virginians who sued paid a total of $1,127 on three loans, with interest rates of 636%, 722% and 763%. Another, Steven Pike, paid $1,725 on his loan with an interest rate of 744%, while Elwood Bumbray paid $1,561 on a loan with an interest rate of 543% and Lawrence Mwethuku paid $499.50 on a loan with an interest rate of 919%.
“While these class action lawsuits have driven most illegal internet lenders away from Virginia, a few continue to target Virginians,” Speer said.
“Borrowers should never do business with a lender unless they are licensed in Virginia,” he added.
People can check to see if a company is licensed, and under Virginia law, with the State Corporation Commission or by contacting the SCC Bureau of Financial Institutions at 804-371-9657.
Attorneys from Newport News-based Consumer Litigation Associates and Fairfax County law firm Kelly Guzzo filed the lawsuits.