Rhonda and Greg Wood fell on hard times in 2010. Greg’s pay at a local company was reduced to 60 percent when he came down with an illness, and Rhonda didn’t make enough money as a waitress to cover their expenses. Soon they had trouble making their mortgage, car loans and credit card payments.
In desperation, Rhonda turned to a company that advertised easy cash loans. When she called Western Sky looking for $2,600, company officials assured her that all she had to do was fax her checking account information to their office and they would deposit the money in her account.
The money was deposited in the Thetford couple’s bank account, but soon after, Western Sky billed her $298.74 a month to pay back the loan, with interest. Through 2013, Rhonda says she has made more than $7,000 in payments to the lending company.
The Western Sky loan with the Woods was illegal, according to Bill Sorrell, the Vermont attorney general.
Sorrell has sued Western Sky/CashCall Inc., and three other predatory lending companies on behalf of 1,600 Vermonters and settled with the businesses for $1 million. The Vermont attorney general came to agreements with Government Employees Credit Center Inc., Sure Advantage LLC and T$$$ LLC. Sorrell says he is also pursuing lending violations that have been perpetrated by PBT Loan Services, Cash in a Wink and Intercept Corp.
Sorrell says the victims of the predatory lending schemes will receive checks or direct credits to their bank accounts over the next three to six months.
The lawsuits were possible because the Vermont Legislature passed legislation last year that cracks down on predatory lending. Under state statute, the attorney general can go after third party loan processors.
House Speaker Shap Smith was a proponent of the legislation. “We often ask ourselves what are we doing that will matter to Vermonters’ lives,” Smith said. “This bill passed in 2012 will make a difference.
“We need to be vigilant,” Smith said. “There are people from out of state who will take advantage of Vermonters in need.”
Only 15 states restrict payday loans; Vermont has banned payday loans and limits annual interest rates, including fees, at 12 percent to 24 percent, according to a fact sheet from the Attorney General’s Office.
There are 81 illegal lenders that have conducted business in Vermont, Sorrell said, and many of them are online or advertise in local media outlets.
Sorrell estimates that 5,000 to 8,000 Vermonters have borrowed from so-called “payday” online lenders since 2009. The average loan amount is $375, and many Vermonters have multiple loans.
His office this week sent letters to broadcasters, cable and satellite TV companies, and online search engine companies to stop hosting ads for illegal lenders.
Sorrell said many Vermonters hold mortgages and have borrowed money for cars, but “few if any of us here have loans where the effective interest rate is 100 percent or on average 300 percent.”
“Making illegal loans is big business and it’s a significant problem,” Sorrell said.
Both Sorrell and Susan Donegan, the commissioner of the Department of Financial Regulation, urged Vermonters to file complaints with the state when they hear about loan deals that sound too good to be true.
Sorrell said too few Vermonters call the consumer protection division.
Donegan said lenders must be licensed with the state, and if consumers are worried about whether a company is legitimate, they can call the banking division of her department with complaints.
“Give us a call. Come forward. Because we can help,” Donegan said.
