The state of West Virginia is now officially free of payday lenders.
As a result of a settlement with Attorney General Darrell McGraw, Valued Services of West Virginia, LLC, d/b/a First American Cash Advance, has agreed to pack up and leave the state.
Under the terms of the agreement, approximately $616,000 in defaulted loans allegedly owed by nearly 2,700 West Virginia consumers will be forgiven.
FACA agreed to pay $200,500 to the State of West Virginia for consumer protection purposes, and approximately $22,000 for the State to distribute to approximately 400 West Virginia consumers who paid interest charges on payday loans after May 31, 2006.
Payday loans are short-term loans or cash advances, typically for 14 days, that are secured by a post-dated check or by an agreement authorizing an electronic debit for the full loan amount, plus fees, from the consumers account.
The bank is a South Dakota state-chartered bank regulated by the Federal Deposit Insurance Corporation (FDIC) and the South Dakota Division of Banking. Federal law allowed the bank to charge interest rates that were permissible in the state where it was headquartered, South Dakota, even though these rates exceeded the maximum rates permissible in West Virginia.
In March 1, 2005 the FDIC issued a Payday Lending Programs Revised Examination Guidance that stated in part:
The FDIC initially issued guidance on payday lending in July 2003 because payday lending is a high-risk activity that presents significant safety and soundness and consumer protection concerns. The FDICs concerns about payday lending have been heightened as it has observed payday lending conducted in a manner that is inconsistent with prudent lending practices.
In 2006 the FDIC urged its supervised institutions to exit the payday lending industry and, as a result, the bank decided it would no longer issue loans through FACA at its West Virginia locations. That decision resulted in the closure of FACAs West Virginia locations in July of 2006.
My office has long been concerned about the spiral of debt that often results when already cash-strapped consumers turn to payday lenders for help, McGraw said. Consequently, I am pleased that FACA has decided to discontinue operations in West Virginia.
