Bryan Cohen Oct. 25, 2012, 6:10pm

CHARLESTON, W.Va. (Legal Newsline) - West Virginia Attorney General Darrell McGraw announced a settlement on Thursday with a South Dakota-based Internet payday lender after a ruling that the company was not entitled to Indian tribal immunity.

Under the terms of the agreement, Payday Financial LLC, doing business as Lakota Cash, and Martin A. Webb, the company's owner, agreed to permanently stop making Internet payday or other usurious loans in West Virginia. The defendants also agreed to pay $135,000 as full refunds of excess fees to 120 consumers in West Virginia.

Payday Financial and Webb also agreed to pay $5,000 to the state for general consumer protection and educational purposes.

The defendants purported that the payday loans the company made with West Virginia consumers originated on the Cheyenne River Indian Reservation in South Dakota and were subject to tribal laws. Kanawha Circuit Court Judge Louis H. Bloom ruled that Payday Financial was not an Indian tribe and was not entitled to tribal immunity.

Bloom ruled that the loans with West Virginia borrowers were governed by laws in West Virginia. Payday Financial challenged the ruling, but the West Virginia Supreme Court of Appeals let the ruling stand. Payday Financial continued to decline compliance with a subpoena by McGraw's office, leading up to contempt proceedings scheduled to start on Oct. 11.

Payday Financial and Webb signed the agreement on the eve of the contempt hearing.

"I am glad that Payday Financial and Webb decided to respect the ruling of our West Virginia court," McGraw said. "Although it took a long battle to get to this point, I commend Payday Financial and Webb for their decision to refund all unlawful fees collected from West Virginia consumers and to permanently refrain from making such loans in our state."

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