More relief for online borrowers
A national settlement sparked by Virginians feeling stung by online lenders is about to double in size — bringing refunds and debt cancellation totaling $866 million.
The money is coming from the venture capitalists who funded the enterprise, a debt collection firm and the online firm’s former president.
They all deny any wrongdoing. Under the settlement, venture capitalists Sequoia Capital and TCV, along with National Credit Adjusters, agreed to refund a bit more than $50 million to more than 1 million people who borrowed money from Plain Green LLC, which claimed to be owned by the Chippewa Cree Tribe of the Rock Boy Reservation in Montana; Great Plains Lending, associated with the Otoe-Missouria tribe of Oklahoma; and MobiLoans LLC, associated with the Tunica Biloxi Tribe of Louisiana.
On top of that, National Credit is canceling $383 million of loans and promised to stop trying to collect on them.
Kenneth Rees, former president of Think Finance, the firm that actually ran Plain Green, Great Plains and MobiLoans, is paying $7.3 million in cash and stock.
Jay Speer, executive director of the Virginia Poverty Law Center, said the result showed the lengths the business interests would go “to hide their ille
gal activities.”
“They became enriched and when pursued hired other professionals to hide what they had done and then hid the profits behind native American Indian tribe immunity, new corporations, partnerships and new lenders,” he added.
Winning agreement from such financial backers to refund borrowers and cancel debt is a significant development, he said.
The agreements, detailed in filings with the U.S. District Court in Richmond, follows a settlement last year with Think Finance and the three Native American firms that refunded $53 million in cash and canceled $380 million in loans.
That case grew from a class-action lawsuit filed by Virginians who had taken out loans charging interest rates as high as 448% on loans ranging in size from $300 to $3,000. One borrower paid $15,399 toward her debt before filing suit.
The Virginia-led plaintiffs went on to allege that Sequoia Capital and TCV were responsible for aiding, abetting and authorizing violations of state and federal consumer protection laws because they owned 20% of Think Finance.
The plaintiffs alleged National Credit Adjusters’ attempts to collect Think Finance loans, originated in the names of Plain Green, Great Plains and MobiLoans also violated state and federal law.
Last year’s settlement was the largest reached to resolve complaints against a high interest rate loan firm.
It also successfully challenged a business model online lenders have used — operating a loan business with a connection to a Native American operation by paying tribes a fee.
Both last year’s settlement and this year’s followup resolve claims that creditors of Think Finance filed in a Texas bankruptcy court.
Lawyers from the Newport News-based Consumer Litigation Associates and the Kelly Guzzo law firm in Fairfax brought the Virginia lawsuits and pursued the borrowers’ claims in Think Finance’s Texas bankruptcy case. They’ve been joined by a Washington firm.