Online Lender Western Sky Sued by N.Y. Over Rates

A South Dakota Internet lender and two other companies were sued by the state of New York over allegations they illegally charged interest of as much as 355 percent a year for a personal loan.

Western Sky Financial LLC, Anaheim, California-based CashCall Inc. and its subsidiary WS Funding were sued by New York Attorney General Eric T. Schneiderman today in state court in Manhattan.

Schneiderman’s office accuses the companies of scheming to make high-rate loans in Western Sky’s name and collect through CashCall and WS Funding LLC.

“These loans are very burdensome for consumers,” lawyers for the attorney general’s office said in the petition. Customers borrowing $2,525 can owe as much as $14,132 over four years, according to the filing.

Western Sky has made at least 17,970 loans to New York customers, according to the petition. New York customers who borrowed a total of $38 million from Western Sky now owe almost $185 million including interest and fees, according to the petition.

The South Dakota lender says it’s owned by a member of the Cheyenne River Sioux Tribe, according to its website.

Western Sky said today in a statement it and owner Martin Webb, who is also a defendant in the case, dispute Schneiderman’s allegations.

Tribal Jursidiction

The company, located on the tribe’s reservation, isn’t a “so-called payday lender” and its underwriting guidelines are “designed to ensure that loans are made only to borrowers who can repay them,” according to the statement.

“Western Sky’s transactions with borrowers are governed by the laws of the Cheyenne River Sioux Tribe, and any issues arising out of Western Sky’s operations are subject to the jurisdiction of the tribe,” the company said.

In a separate statement, WS Funding and CashCall said the companies aren’t affiliated with Western Sky and that the attorney general’s suit is “baseless.”

Under New York law, lenders not licensed by the state may not charge interest greater than 16 percent a year, according to the petition.

The case is People of the State of New York v. Western Sky Financial LLC, Supreme Court for the State of New York, County of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in New York, federal court at csmythe1@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net

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