CashCall gets stay for appeal in AG McGraw's case, pays $14M bond

CHARLESTON – A California Internet lender ordered to pay $15 million to West Virginia consumers in September has filed a motion to stay the proceedings in its case and will pay a $13.8 million appeal bond.

On Oct. 8, 2008, West Virginia, by way of state Attorney General Darrell McGraw’s office, sued CashCall for allegedly pushing predatory loans with interest rates of up to 99 percent APR on West Virginia consumers least able to afford them.

When West Virginia consumers inevitably defaulted, CashCall engaged in collection abuse and harassed and threatened consumers, McGraw claimed.

McGraw’s office alleged that CashCall entered into a “sham” relationship with First Bank & Trust of Milbank, S.D., for the purpose of using the bank’s charter to evade the State’s usury laws. McGraw claimed that although the loans obtained by West Virginia consumers were made to appear as if they were issued by the South Dakota bank, CashCall was actually the true lender because it bore the entire economic risk of the loans.

The lawsuit was originally filed in Kanawha Circuit Court with CashCall and its president and CEO J. Paul Reddam as the defendants.

On Nov. 17, 2008, CashCall removed the action to federal court and the State subsequently filed a Motion to Remand. CashCall also filed a Motion to Dismiss, citing that the State’s first, second, third, fourth and six Causes of Action should be dismissed pursuant to Federal Rule of Civil Procedure 12(b)(6).

The State’s Motion to Remand was granted by West Virginia District Court Chief Judge Joseph R. Goodwin on March 11, 2009, and the case was moved back to Kanawha Circuit Court. CashCall’s Motion to Dismiss was denied as moot.

The trial took place on Oct. 31 and Nov. 1, 2011, and concluded on Jan. 3. During the first two days, Bloom received evidence on the State’s debt collection claims. On the final day, the Court heard testimony on McGraw’s claims that CashCall—not First Bank & Trust of Milbank, S.D.—was the true lender.

On Sept. 10, Bloom entered two orders finding in favor of the State and ordered CashCall to pay $15 million in civil penalties, refunds and canceled debts to the 292 West Virginia consumers who obtained loans and to the State.

On Oct. 24, CashCall and Reddam presented their motion to stay the proceedings. On Nov. 20, the Court granted the motion for stay conditioned upon the posting of a bond in the amount of $13.8 million. The proceedings will be stayed pending resolution of an appeal.

The State, through McGraw, is being represented by Norman Googel and Jill L. Miles of the AG's office. CashCall and Reddam are being represented by Charles L. Woody and Bruce M. Jacobs.