Federal judge gives preliminary settlement approval for online predatory lending victims
The World Wide Web can be a fraught place, especially for people looking for quick cash. All kinds of companies are trying to skirt Virginia's law against predatory lending.
A federal judge in Richmond is giving preliminary approval to a class-action settlement providing almost $500 million in relief to victims of an online predatory lending scam. Jay Speer at the Virginia Poverty Law Center says online payday lenders were trying to use Indian tribes as a shield to avoid Virginia law capping interest rates at 36%. The victims were charged more than 600% interest.
"They were claiming that because it's an Indian tribe making the loan that they have sovereign immunity, and they don't have to follow Virginia law," Speer says. "But it turns out that the Indian tribes are not actually making the loans and they're just a front for these other companies."
This is not the first time this has happened in Virginia. In fact, Andrew Guzzo at the law firm of Kelly Guzzo has worked on several of these kinds of cases.
"One of the crucial questions in these cases is whether a loan made over the internet is considered on the reservation activity or off the reservation activity," explains Guzzo.
In the latest case, the preliminary settlement comes after three years of litigation. Under the terms of the preliminary settlement agreement, victims will get debt cancellation and cash payments.