In an agreement with New York Attorney General Eric Schneiderman, online payday lender Western Sky Financial LLC agreed to a $1.5 million fine. Schneiderman accused the firm, as well as affiliates CashCall Inc. and WS Funding LLC, of charging triple-digit interest rates and violating New York lending laws. The settlement also requires the firms to stop collecting interest on loans to New York borrowers and to refund any interest that it charged beyond the state's 16 percent cap. That stipulation could provide up to $35 million in relief for New York consumers.
A growing number of states are banning payday loans, prompting lenders to operate online on the grounds that they are not subject to state requirements because they do not have physical stores there. Western Sky also has been targeted by Colorado, Maryland, and Georgia but claims immunity from state action because its owner, Martin "Butch" Webb, is affiliated with an American Indian tribe and operated the firm on tribal reservation land in South Dakota.
In a multi-state crackdown on online payday lenders, regulators have been working around loopholes by targeting third-party companies, including banks and payment processors, that facilitate loan payments and provide other services to the lenders.