You will remember the North Carolina Attorney General’s lawsuit against Western Sky Fin’l, LLC. It generated an opinion from the Business Court last year in which Judge McGuire enjoined the Defendants from making further high interest loans in violation of North Carolina’s usury laws. The Defendants had claimed that as an American Indian related business, they were exempt from North Carolina’s usury laws regarding their lending operations.
Judge McGuire signed off this week on a Final Judgment in State ex rel. Cooper v. Western Sky Fin’l, LLC resolving the case, based upon the consent of all parties.
If you have questions about the terms of the Final Judgment, here are some answers:
- Can Western Sky make any more loans in North Carolina? No. Western Sky and the other Defendants are permanently enjoined from offering loans in North Carolina, unless they obtain a license to do so. (¶4)
- Can Western Sky collect on its outstanding loans? No, Western Sky is enjoined permanently from collecting on any loans that it has already made. (¶4) It must adjust any outstanding loans to a "zero balance." (¶5)
- Can Western Sky’s North Carolina borrowers get refunds of the excessive interest they paid to Western Sky? Yes, the Defendants are required to put $9,025,000 in an escrow account to provide refunds to North Carolina consumers who borrowed money from Western Sky. (¶8) The $9,025,000 is due within ten days of the date of entry of the Final Judgment. The refund amount to be paid to each eligible Borrower is based on the amount of interest paid by each borrower to Western Sky in excess of the maximum of 16% interest allowed by NC law. (¶10). But the refund amount apparently is not equal to the full amount of usurious interest paid.
- How will the refund process be handled? The refund process is to be administered by a company called Dahl Administration. The Defendants must cover Dahl Administration’s fees and expenses up to $100,000. Dahl Administration is required to notify all borrowers who may be entitled to a refund with a "Notification of Refund Eligibility" within sixty days. Any Borrower accepting a refund is required to sign a Release of the Defendants.
- Does Western Sky have to pay anything else? Yes, the Defendants must pay $250,000 to North Carolina "for the State’s costs and attorneys’ fees." (¶7).
- My inability to pay back my loan from Western Sky has hurt my credit, what can be done about that? The Defendants are required, within sixty days, to contact Equifax and Experian (two of the major credit reporting agencies in the U.S.) and to request that they remove any reporting regarding Western Sky’s loans to North Carolinians. (¶6)
- What If another State reaches a better settlement with Western Sky? It is possible that another State might strike a better deal than the one obtained by the North Carolina Attorney General. (There are multiple lawsuits pending against Western Sky in other States). But the Final Judgment protects (in ¶20) against any other State obtaining a more favorable settlement. A more favorable settlement is defined in the Final Judgment as a settlement that requires the Western Sky Defendants to pay restitution of more than $9,025,000 to borrowers in any other State and that amount is more than 40% of the amount of usurious interest collected in that other State. (I guess that 40% figure means that Western Sky is only going to have to repay 40% of the highly excessive interest it charged,)
- What If Western Sky sold my loan, am I still covered by the Final Judgment? It looks like the Final Judgment doesn’t cover loans which Western Sky sold on the secondary market. Although the Final Judgment extends to the "successors" and "assignees" of the Defendants, the Final Judgment says that "[f]or the avoidance of doubt, the terrms ‘successors’ and ‘assignees’ do not apply to parties not subject to this Final Judgment that purchased loans from Defendants." Final Judgment ¶1.
If I had needed to borrow money from Western Sky, and was despairing about the vicious debt cycle its loan had thrown me into, I would consider this a pretty good resolution by the Attorney General. The AG’s office issued a Press Release regarding the case yesterday.