Payday loan company to pay fine of $100,000

RICHMOND — The nation’s second largest payday lender has agreed to pay Virginia $100,000 for violating numerous state laws regulating the industry.

The State Corporation Commission (SCC) cannot disclose which laws Check ’n Go violated because such reports are confidential, but a commission spokesman said an examination of the company by the commission’s Bureau of Financial Institutions revealed “numerous violations that the bureau considered excessive.”

“Clearly, it’s safe to say this is, if not the largest, one of the largest settlement payments made by a licensed financial institution” in Virginia, spokesman Ken Schrad said yesterday.

The maximum fine for each violation is $1,000. The company, owned by Eastern Specialty Finance Inc. out of Ohio, waived a hearing and offered instead to pay $100,000. The settlement was finalized Jan. 10.

Check ’n Go spokesman Yancy Deering also refused yesterday to disclose which laws were violated when the bureau examined the company on June 29, 2007.

“We consider it a regulator supervisory issue,” Mr. Deering said. “We’ve paid the fine and moved on.”

If the company would have chosen to fight the bureau’s findings, more information would have been made public, Mr. Schrad said.

Check ’n Go’s settlement comes as payday lenders fight for their existence in the Virginia legislature.

As of yesterday, legislators had filed more than a dozen bills to either cap the interest rate on payday loans at 36 percent or repeal the 2002 law that opened Virginia’s doors to payday lenders.

“I suppose Check ’n Go realized that they were going to have charges finalized against them, and I think that they were terrified of that happening during this fight in front of the Assembly,” said John LaCombe, executive director of CapAmerica, an anti-payday loan group that includes several former Check ’n Go workers.

One of the those, former Check ’n Go manager William Harrod, wrote to legislators in July detailing how he was trained to always push the maximum loan on customers, threaten those who did not pay and hack into borrower’s bank accounts using their personal information.

Mr. Harrod and at least one other industry whistleblower provided information to the SCC, Mr. LaCombe said.

Mr. LaCombe said he was satisfied with the $100,000 settlement.

“It really doesn’t seem like a whole lot of money considering what they make off the backs of the poor and minority folks that live in Virginia, but I will say that it is a lot if you look at statutory penalties,” he said.

Virginia isn’t the first state to have issues with Check ’n Go.

In 2006, the company agreed to pay $157,000 in fines and restitution after a Washington State Department of Financial Institutions investigation revealed that the company collected multiple checks from borrowers to secure single loans, charged excessive fees and collected personal identification numbers without borrowers’ knowledge.

Last year, the Texas attorney general ordered Check ’n Go to enact measures to protect sensitive personal and financial information after finding that the stores discarded business records containing customers’ names, addresses, Social Security and driver’s license numbers and checking account information in easily accessible trash cans.