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A US District Judge in LA Founds CashCall Inc. Guilty of Illegally Issuing Payday Loans

A U.S. District Judge in Los Angeles, CA had ruled a decision in favor of the Consumer Financial Protection Bureau (CFPB) that had lodged a case against CashCall Inc – an online payday loan company. The decision stated that the company was ‘true lender’ of payday loans that were illegally issued into 16 states in the US where payday loan lending is not allowed.

The judge had rejected the argument of the payday loan company that another firm known as Western Sky is based on a Native American reservation in South Dakota was solely responsible for the loan.

CashCall was considered the real lender as it had bought loans issued by Western Sky Financial LLC, and made monthly payment of $110,000.

After the judge handed down the ruling, he stated that loans should be governed by state laws where the customers took out the loan. Since CashCall serviced and offered loans to the consumer, the ruling said, so it was responsible for the lending.

Complicated Structure of the Loan Deceived Customers

The complicated structure of the Western Sky payday loan that was offered through the CashCall platform made it difficult for the consumers to know about legality of the loan. According to Judge Walters, loan offered by the payday loan lending company was not governed by the Cheyenne River Sioux Tribe where Western Sky was located.

Instead, the loan was governed by the local state laws where they were issued.

As a result, the ruling sided with the stance of CPFB that CashCall was the true lender and that it had illegally issued loans to the consumers. Judge Walter stated that CashCall’s founder Mr. J. Paul Reddam could be held personally liable for the illegal issuance of the loan.

The case against CashCall and WS Funds LLC was launched during the end of 2013 by CFP for violating the provisions of Consumer Financial Protection Act. The case named as Consumer Financial Protection Bureau v. CashCall Inc. et al., was filed by CFPB in the US District Court located in Los Angeles California.

It was alleged that the loans issued to the consumers were void because the loan exceeded the state caps on interest rate. Moreover, it was stated in the suit that WS Funding had offered funds to Western Sky for issuance of payday loans, and then used Delbert and CashCall to collect the loans.

CashCall in turn accused CPFB of improperly establishing a national test to ascertain the true lender of the loan thereby putting the lending company on the spot. However, CashCall’s plea in the court was rejected by Judge Walters and stated that it was responsible for the issuance of the said loan, and that the loans were not governed by the tribal law applicable in Cheyenne River Sioux. Instead, the loans were governed by the laws in 16 states where the loans were issued. As a result, CashCall was a guilty party in the case involving payday loans.