Copyright 2014

Arkansas Attorney General Announces Settlement With Online Payday Lender

On June 24, 2016, Arkansas Attorney General Leslie Rutledge announced a settlement agreement with payday lender, Western Sky Financial LLC, and loan servicer, CashCall Inc., to resolve allegations that the companies conspired to offer illegal online loans to Arkansas consumers while claiming to be shielded by tribal sovereign immunity.

According to the Arkansas Attorney General, Western Sky and its affiliates violated the Arkansas Deceptive Trade Practices Act and the state constitution by charging loans with interest rates far beyond the 17 percent annual rate allowed under state law.  Arkansas residents were offered loans by the defendants ranging from $850 to $10,000, with annual percentage rates in a range between 89 percent and 342 percent, according to the statement.

Western Sky, which claimed to be affiliated with the Cheyenne River Sioux Tribe, was involved in the loan scheme in an effort to use tribal sovereign immunity to avoid state jurisdiction, according to the settlement. While Western Sky identifies itself as a tribal entity protected by sovereign immunity, it does not have that immunity because it is not owned or operated by a tribe, the state said in the statement.

Under the terms of the settlement, Western Sky Financial, CashCall, WS Funding, CashCall and WS Funding owner J. Paul Reddam, and Western Sky owner Martin A. Webb will pay $500,000 to state consumers and $250,000 to a state fund that supports consumer protection education and enforcement.  The entities may not offer, fund or collect upon any loan with an interest rate in excess of the maximum rate set out in Arkansas law.  Additionally, the settlement voids all current, delinquent, defaulted, charged-off or outstanding lending transactions entered into with Arkansans.  The deal settles a suit filed by former state Attorney General Dustin McDaniel in state court in October 2013.

The deal is one of several Western Sky and its affiliates have reached with state authorities in recent months.  In May, the state of Nebraska announced it had reached an over $1 million settlement agreement with Western Sky, CashCall and others that will require the companies to pay restitution to borrowers for charging illegally high interest rates.

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