North Carolina AG Announces $9 Million Settlement with Online Lenders

On June 21, North Carolina AG Roy Cooper, together with Commissioner of Banks Ray Grace, announced a $9,375,000 settlement with two online lenders to resolve allegations that they violated state usury laws. According to the complaint, the lenders offered North Carolina consumers personal loans of $850 to $10,000 and charged annual interest rates of approximately 89 to 342 percent, significantly exceeding the rates allowed under state law. In 2015, Special Superior Court Judge Gregory P. McGuire issued a preliminary injunction to ban the companies from making or collecting loans in North Carolina. In addition to permanently barring the companies from collecting on loans made to North Carolina borrowers, the consent judgment requires the companies to (i) cancel all loans owed by North Carolina consumers; (ii) have the credit bureaus remove negative information on consumers’ credit reports related to the loans; (iii) pay $9,025,000 in refunds to North Carolina consumers, with the remaining $350,000 of the settlement allocated to covering the costs of the investigation, lawsuit, and administering the settlement; and (iv) cease unlicensed lending in North Carolina. The settlement represents North Carolina’s first successful action to ban an online payday-type lender that used affiliation with an Indian tribe in an effort to evade state usury laws.


New York AG Settles with Auto Dealership over Alleged Deceptive Practices

On June 21, New York AG Eric Schneiderman settled with a New York-based auto dealership to resolve allegations of deceptive sales and advertising practices. Specifically, AG Schneiderman alleged that the company charged consumers up to $5,000 for warranties and service contracts without their authorization and convinced consumers to purchase and finance vehicles on terms they could not afford, falsely promising to refinance the loans on more favorable terms in the subsequent months. In addition, the AG’s office received a number of consumer complaints alleging that the company (i) engaged in various bait and switch tactics, including crediting consumers for less than previously agreed on vehicle trade-ins; (ii) charged consumers a greater price for a vehicle than promised; (iii) charged consumers a higher interest rate on the auto loan than promised; (iv) falsely promised lower yearly mileage limits for lease contracts; and (v) forged consumer signatures on contracts. Pursuant to the settlement agreement, the company must pay restitution ranging from $198 for alleged illegal fee charges to more than $4,000 for unauthorized warranties and services contracts, for a total of more than $101,000 to 119 consumers. The settlement further requires that the company “pay restitution to other consumers who come forward within the next three months and who were subjected to the deceptive and illegal practices uncovered by the investigation, with a cap of $50,000.”

AG’s Schneiderman’s settlement comes after the New York State Police completed a raid and seizure of the company’s business records in May 2012. The company’s finance manager was subsequently arrested for second-degree Scheme to Defraud and third-degree Criminal Possession of a Forged Instrument.


New York Senate Confirms Maria Vullo as Superintendent of NYDFS

On June 15, the New York State Senate confirmed Governor Andrew Cuomo’s nomination of Maria Vullo as Superintendent of the NYDFS. Replacing former Superintendent Benjamin Lawsky, Vullo will be responsible for the regulation of more than 1,500 insurance companies and almost 1,600 banking and other financial institutions. Prior to joining the NYDFS as Acting Superintendent in February 2016, Vullo was a litigation partner in private practice, and formerly served as Executive Deputy Attorney General for Economic Justice Division in the New York AG’s office. Commenting on her role, Vullo noted that she is “committed to strengthening New York’s status as the financial capital of the world, protecting consumers, and ensuring that everyone follows the law.”

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NYDFS Issues Virtual Currency License to XRP II, LLC

On June 13, the NYDFS announced that it approved XRP II, LLC’s application for a virtual currency license. Before approving the company’s August 2015 application, NYDFS conducted a “rigorous review” of the company’s anti-money laundering, capitalization, consumer protection, and cybersecurity standards. To date, NYDFS has received 26 BitLicense applications; two companies, including this one, have been approved for BitLicenses and two have received state trust charters. NYDFS further noted that it recently denied two applications for a virtual currency license; the companies in receipt of the denial letters were ordered to stop any New York operations.


Michigan AG Announces Default Judgment against Auto Title Loan Company

On June 8, Michigan AG Bill Schuette announced that a Michigan court entered a Default Judgment and Final Order for Permanent Injunction against an auto title loan company, several associated alias companies, and the company manager. The Judgment and Order found the defendants in violation of Michigan law for: (i) engaging in consumer lending without requisite authority or license in Michigan; (ii) charging or receiving interest on title loans in excess of 36%; (iii) misrepresenting in communications with borrowers the status of legal action taken or threatened to be taken in violation of Michigan’s Regulation of Collection Practices Act; (iv) engaging in conduct deemed unlawful under the Michigan Consumer Protection Act during the course of soliciting, selling, and collecting upon unauthorized title loans with illegal interest rates; and (v) transacting business in Michigan without a certificate of authority since at least June 28, 2013. Under the court’s judgment, the company is prohibited from, among other things, (i) making loans in Michigan without proper licensure; (ii) making, servicing, or collecting on any title loans sold or issued to certain Michigan consumers; (iii) accepting title loan interest or other payments made by certain Michigan consumers; (iv) engaging in any collection activities on title loans issued by defendants for certain Michigan consumers; (v) asserting a security interest in any vehicles allegedly pledged as security for repayment of a title loan; and (vi) selling or otherwise transferring interest in any motor vehicle associated with a title loan. The company must also pay a total of $2,208,698, $790,050 of which will be paid to the State and $1,418,648 of which is allocated for consumer restitution.