Virginia AG Reaches $243,000 Settlement with Online Payday Lenders and Servicers

On February 23, 2018, the Office of the Attorney General of Virginia (“Virginia AG”) announced that it had entered into a settlement agreement with several affiliated online payday lenders and debt collection companies (the “Defendants”).  According to the Virginia AG, the Defendants, all out-of-state organizations, provided short-term, small-dollar loans to borrowers in Virginia over the internet and, if necessary, implemented debt collection procedures.  The Virginia AG alleged that, in making loans to borrowers, the Defendants imposed “service fees” that when combined with the contractual interest rate resulted in effective interest rates higher than the statutory limit of 12%.  The Defendants also allegedly charged finance fees within a statutory “grace period,” in which such fees may not be charged.

The Virginia AG further claimed that these loans included wage assignment provisions not entered into in compliance with Virginia law, and that the Defendants attempted to seek wage garnishment from the borrowers’ employers.  The Virginia AG asserted that the Defendants misrepresented to borrowers that these loans and debt collection practices were legal within Virginia.

The settlement resolved potential charges under the Virginia Consumer Protection Act.  While the Defendants denied any liability, they agreed to permanent injunctions prohibiting them from practicing within Virginia.  The Defendants also agreed to consumer relief in the amount of approximately $148,000, reflecting a refund of all interest and fees paid above the statutory rate of 12% and forgiveness of all outstanding debt remaining for affected borrowers.  The Defendants further agreed to pay a total of $105,000 in civil penalties and attorneys’ fees.