Jefferson City, Mo. – Attorney General Chris Koster announced today that he has obtained an agreement with eight online payday loan operations to shut down payday loan operations in Missouri, provide $270,000 in consumer restitution, and erase all loan balances for Missouri consumers.
Koster said Martin A. “Butch” Webb acted through numerous business entities operating from a Native American reservation in South Dakota, including Payday Financial, Western Sky Financial, Lakota Cash, Great Sky Finance, Red Stone Financial, Big Sky Cash, Lakota Cash, and Financial Solutions, none of which were licensed to do business in Missouri. These businesses sold short-term loans with exorbitant fees and forced consumers to agree to have their future wages garnished without going through the court system as required by Missouri law.
The Attorney General’s Office received 57 complaints from consumers who were collectively charged approximately $25,000 in excess fees. The Attorney General’s investigation subsequently discovered as many as 6,300 other Missourians who may have also been charged excessive fees. One Missouri consumer was charged a $500 origination fee on a $1,000 loan, which was immediately rolled into the principal of the loan. She was charged 194 percent APR and eventually paid more than $4,000.
“These predatory lending businesses operated in the shadows, taking advantage of Missourians through outrageous fees and unlawful garnishments,” said Koster. “Webb may have thought that by operating on tribal land he could avoid compliance with our state’s laws. He was wrong.”
Under Missouri law, a payday lender cannot charge “origination” or other such fees in excess of 10 percent of the loan, up to a maximum of $75.
The judgment obtained by Koster permanently prohibits Webb or any of his businesses from making or collecting on any loans in Missouri, and it cancels existing loan balances for his Missouri customers. Webb must also instruct credit reporting agencies to remove all information previously supplied to them about specific consumers. In addition, Webb must pay $270,000 in restitution to consumers and $30,000 in penalties to the state.
Consumers who, while living in Missouri, paid excess origination fees to one of the companies listed above—even if the loan was later sold to a third party—may be eligible to receive restitution under the terms of the judgment. The Attorney General’s office will be contacting eligible consumers.
“My hope is that every Missouri consumer who took out a short-term loan with these companies gets back what they were charged in excess of Missouri law,” said Koster. “The message to online payday lenders is clear: follow Missouri law or you won’t be doing business in our state.”