For Release: September 7, 2010
For media inquiries only, contact: Brian J. Gottstein
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AG Cuccinelli announces settlement with Hampton auto title lender over excessive interest charges
- Cash-N-A-Flash agrees to make refunds to eligible customers –
RICHMOND (September 7, 2010) – Attorney General Ken Cuccinelli announced today that he has reached a settlement with Hampton-based automobile “title lender” Cash-N-A-Flash for charging interest rates in excess of 300 percent on its loans, in violation of Virginia’s Consumer Finance Act. The company has agreed (1) to make refunds totaling more than $16,000 in finance charges and fees to borrowers, (2) to not collect almost $100,000 in back payments and interest, and (3) to not repossess vehicles from borrowers who obtained loans under the illegal contracts.
“I am pleased we were able to reach a fair and reasonable agreement with Cash-N-A-Flash – one that will provide immediate refunds and other relief to affected consumers,” Cuccinelli said. “We appreciate the company’s cooperation in working with us to resolve the claims raised in our recent lawsuit.”
Unless exempt, the Consumer Finance Act prohibits unlicensed lenders from charging and receiving interest in excess of 12 percent per year on consumer loans. One exemption allows a lender generally to offer open-end credit and charge finance charges and other fees at an agreed-upon rate with the borrower, as long as the lender provides the borrower with a minimum 25-day grace period to repay the loan in full before incurring a finance charge.
The most significant violations occurred during the period from March 2005 to November 2006. During this time, Cash-N-A-Flash used a contract that charged its borrowers interest rates that exceeded legal limits yet that did not come within any of the exemptions to the Consumer Finance Act. The Office of the Attorney General contended that, during that period, Cash-N-A-Flash structured its title loans as closed-end credit and did not provide the required finance charge grace period. Cash-N-A-Flash’s failure to comply with the requirements for open-end credit made its loans subject to the Consumer Finance Act, which it violated by charging interest greatly in excess of 12 percent annually.
In his complaint, the attorney general also alleged that, between November 2006 and March 2009, the company attempted to resolve the grace period issue by providing consumers with an addendum which ostensibly disclosed and provided the grace period required by the Virginia open-end credit statute. During the course of the investigation, however, the attorney general’s office had reason to believe that the addendum disclosing the grace period was not provided to all borrowers that received loans during this period.
The settlement includes the following key terms for loans made by Cash-N-A-Flash:
- A permanent injunction preventing Cash-N-A-Flash from violating the Consumer Finance Act by charging interest in excess of 12 percent on consumer loans, unless Cash-N-A-Flash is otherwise exempt by statute;
- Cash-N-A-Flash agrees to make refunds totaling $16,135.31 to 148 borrowers:
- $15,771.79 in finance charges paid by 143 borrowers that took out loans between March 2005 and November 2006, and who paid their loans in full during the first two billing cycles;
- $193.52 in finance charges paid by three (3) borrowers that took out loans between November 2006 and March 2009, did not receive the addendum disclosing the grace period, and who paid their loans in full during the first two billing cycles; and
- $170 in cash advance fees paid by two (2) borrowers that took out loans after March 2009 and were improperly charged cash advance fees without application of a finance charge grace period.
- Cash-N-A-Flash agrees not to collect deficiency amounts totaling $45,810.28 owed by 58 borrowers who obtained loans between March 2005 and November 2006, later defaulted on those loans, and whose vehicles were repossessed;
- Cash-N-A-Flash agrees not to collect $52,217.80 in interest owed by 50 borrowers who obtained loans between March 2005 and November 2006, later defaulted on those loans, and whose vehicles were not repossessed;
- Cash-N-A-Flash agrees not to repossess vehicles belonging to borrowers who obtained problematic loans from the company; and
- Cash-N-A-Flash agrees to pay $15,000 for reimbursement of the state’s attorney’s fees and costs.
Consumers who have questions about the settlement may contact Cash-N-A-Flash directly at (757) 726-2274. Under the settlement, Cash-N-A-Flash must accept settlement-related collect calls from consumers residing outside of the local calling area.
“I want to thank Senior Assistant Attorney General David Irvin and Assistant Attorney General Mark Kubiak, both from our Antitrust and Consumer Litigation section, for working out this settlement with the company. The settlement will provide immediate refunds and other relief to affected consumers while preventing these issues in the future,” said Cuccinelli.
CNC Financial Services, Inc. is the company doing business as Cash-N-A-Flash. This agreement will resolve the lawsuit filed by the attorney general in the Richmond Circuit Court on May 18. The civil settlement is in the form of a Consent Judgment that has been filed with the Richmond Circuit Court for approval.
Since 2007, the Office of the Attorney General of Virginia has successfully negotiated seven settlements with nine automobile title lenders. These settlements have provided total relief to consumers in the following amounts:
- Approximately $477,000 in refunds to nearly 2,800 borrowers;
- Approximately $2.02 million in forborne deficiency collection from approximately 3,000 defaulting borrowers who had their vehicles repossessed; and
- Approximately $5.24 million in forborne interest and/or principal collection from over 9,800 borrowers
Information on the original suit can be found at http://www.vaag.com/Media and News Releases/News_Releases/index.htmlPRESS_RELEASES/Cuccinelli/51810_Cash_N_A_Flash.html
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