CHARLESTON, W. Va. - The only payday lender left in West Virginia settled with Attorney General Darrell McGraw Wednesday.
McGraw says he has reached an agreement with Valued Services of West Virginia, doing business as First American Cash Advance, resolving his investigation of its payday lending practices. He says First American is the state's last payday lender.
Approximately $616,000 in loans allegedly owned by 2,700 West Virginians will be forgiven, and FACA will pay $200,500 to the state for "consumer protection purposes," McGraw's office said.
Also, $22,000 will be paid to distribute to approximately 400 consumers who paid interest charges on payday loans after May 31, 2006.
Payday loans are short-term loans, typically for 14 days, that are secured by a post-dated check or by an agreement authorizing an electronic debit for the full loan amount, plus fees, from the consumer's account.
"My office has long been concerned about the spiral of debt that often results when already cash-strapped consumers turn to payday lenders for help," McGraw said. "Consequently, I am pleased that FACA has decided to discontinue operations in West Virginia. I also commend FACA for acknowledging our concerns about payday lending and for its cooperation with our office."
FACA had 11 locations in West Virginia before shutting down in July 2006.
Also settling with McGraw was Community State Bank of South Dakota, which charged interest rates that were permissible in the state it was headquartered, South Dakota. Those rates were not legal in West Virginia.
When the Federal Deposit Insurance Corp. decided it would not allow that to take place, the bank decided it would no longer issue loans through FACA at its West Virginia locations, resulting in FACA's closure.