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Financial Services Law Insights and Observations

Virginia AG reaches $1.2 million settlement with internet lender

State Issues State Attorney General Enforcement Consumer Lending

State Issues

On September 29, the Virginia attorney general announced a roughly $1.2 million settlement with a Nashville-based online lender to resolve allegations that it violated the Virginia Consumer Protection Act by misrepresenting the method through which consumer disputes would be resolved. According to the AG, the lender offers short-term loans in the form of open-end cash advances carrying periodic interest rates as high as 360 percent. The contracts borrowers sign require the lender to resolve disputes through either arbitration or small claims court; however, the AG claimed that the lender hired counsel, filed nearly 2,000 collection cases against borrowers in general district courts throughout Virginia, and obtained default judgments and accepted payments from garnishees. Under the terms of the settlement, the lender—which does not admit liability—is required to (i) pay restitution of approximately $359,000; (ii) credit “attorney’s fees and costs awarded as part of the judgments, which total in excess of $830,000”; and (iii) pay $10,000 in civil penalties and $10,000 in attorney’s fees. The lender has also agreed to a permanent injunction to prevent the occurrence of future violations.

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