On November 3, the Minnesota Attorney General (AG) announced that it had settled a 2013 lawsuit it had filed against a California-based online personal loan lender. The AG alleged that the lender used a front company that falsely claimed to be affiliated with a Native American tribe and originated loans whose terms were unlawful under Minnesota’s usury, lending, and licensure laws. The lender would use an alleged “front company” to originate the loans, which would then immediately transfer the loans to the lender. The lender would then proceeded to charge and collect interest rates as high as 342 percent. The AG identified at least 6,000 Minnesota consumers affected by this practice.
Pursuant to the terms of the settlement, the lender is prohibited from doing business in Minnesota unless it complies with the state’s usury, lending, and licensure laws. The settlement also will provide approximately $11.7 million in relief to Minnesota borrowers, including $4.5 million dedicated to restitution. Any outstanding loans still held by the lender were discharged and forgiven under the settlement, and the lender is required to request that credit reporting agencies remove any reporting of these loans from their records.