For Immediate Release - October 20, 2010

Attorney General Coakley Bars Two More Payday Lenders From Operating in the Commonwealth

BOSTON - Two more Internet based payday lenders that were selling high interest loans to Massachusetts consumers will be barred from doing business in the state under separate settlements filed by Attorney General Martha Coakley's Office.

The settlements, filed today in Suffolk Superior Court, prevent payday lenders Nationwide Cash and Paragon Funding ("Paragon") from offering high-interest "payday" loans to Massachusetts consumers and require the lenders to return to consumers all interest charges and fees paid by Massachusetts consumers beyond the principal loan amount. Nationwide Cash and Paragon are also required to forgive all outstanding balances on the illegal loans. The Attorney General's Office has already identified more than $24,000 in fees and interest owed to consumers by Nationwide Cash and Paragon, and the two lenders have agreed to pay any additional borrowers identified by the Attorney General who are entitled to restitution. Nationwide Cash will also pay $10,000 to the Commonwealth; Paragon, which made fewer loans in Massachusetts, will make a payment of $5,000 to the Commonwealth. The payday lenders will also cease all collection efforts, insist that credit reporting agencies remove these transactions from consumer credit records, and will not distribute promotional and marketing materials to Massachusetts consumers.

"Payday lenders often prey on residents who are already under a great deal of financial stress, and who may have no idea that these interest rates violate Massachusetts law. These loans can have a devastating impact on an individual's bank account and credit report in a very short amount of time," said AG Coakley. "Massachusetts has strong laws in place to protect consumers from high-interest loans. Lenders cannot hide behind the guise of an out-of-state website to break the law."

Nationwide Cash, a Delaware-based lender, and Paragon, a Nevada-based lender, use the Internet to offer small, short-term loans (known as "payday" loans) to consumers. The loans, generally granted for a few hundred dollars or less, must be repaid within two to four weeks, and the lenders used consumers' bank accounts to secure repayment of the amount borrowed. If consumers were unable to repay the loan principal, fees, and interest, Nationwide Cash and Paragon extended the loans, and added additional fees to the consumer debt. According to the settlement, both lenders charged an unfair interest rate on these loans, which rose as high as 1095% annually in the case of Paragon and was frequently more than 700% annually for Nationwide Cash borrowers. The excessive interest rates charged by Nationwide Cash and Paragon are in violation of state law which provides that unlicensed lenders of small loans may only charge 12% interest.

The agreements reached with Nationwide Cash and Paragon are part of an ongoing investigation by the Attorney General's Office into payday lenders that are circumventing Massachusetts loan laws by using the Internet to make illegal loans to Massachusetts consumers. In addition to the high interest rates, Internet payday lending is of great concern to the Attorney General's Office because when applying for a payday loan over the Internet, consumers must provide significant personal information, such as bank account numbers, social security numbers, personal references and employer contact information. Consumers should be advised that in addition to potential threats to their financial privacy and security, the payday lender then has direct access to the consumer's bank account from which to withdraw fees and interest, and sometimes will contact employers, friends or family members in later efforts to collect on any unpaid loan amounts.

The Attorney General's Office reached a similar settlement with the Internet payday lender FastBucks last spring after conducting an investigation which found that FastBucks was charging Massachusetts consumers up to 600% interest on its high-interest payday loans offered over the Internet. Under that settlement, FastBucks was required to reimburse Massachusetts borrowers for the illegal fees and interest it charged them, totaling approximately $35,000.

Consumers who have a complaint or concern with an Internet payday lender are encouraged to contact the Attorney General's Insurance and Financial Services Division at (888)-830-6277.

This matter is being handled by Assistant Attorney General Amy Gwiazda and Legal Analyst Sarah Bookbinder with the assistance of Economist Bryan Lincoln, all of Attorney General Martha Coakley's Insurance and Financial Services Division.

##########