RICHMOND, Va. (Legal Newsline) - Virginia Attorney General Ken Cuccinelli on Thursday announced a settlement with Management Services Inc., doing business as CashPoint, resolving alleged violations of consumer finance laws.
CashPoint will pay close to $600,000 in refunds to eligible customers in the settlement after allegedly violating Virginia laws related to motor vehicle title loan lenders, consumer finance companies and the Virginia Consumer Protection Act.
CashPoint allegedly tried to repossess vehicles from customers who received loans that the company lent during a period without a license.
"I am pleased we were able to reach a fair and reasonable agreement with CashPoint that provides refunds and other relief to hundreds of affected Virginians," Cuccinelli said in a statement. "The company self-reported that it made loans before receiving its license after legal claims were brought to its attention. They also cooperated with us throughout our investigation."
CashPoint makes loans to consumers that are secured by motor vehicle titles. It operates out of 14 locations throughout the state, including locations in Woodbridge, Winchester, Warrenton, Vienna, Stafford, Richmond, Manassas, Leesburg, Front Royal, Fredericksburg, Charlottesville and Alexandria.
Before Oct. 1, 2010, Cashpoint operated its business in accordance with laws that expired on Sept. 30 of that year.
While CashPoint filed an application for a motor vehicle title loan license on Sept. 27, 2010, it did not receive that license from the State Corporation Commission until Dec. 2, 2010.
Between Oct. 1 and Dec. 1, 2010, CashPoint allegedly operated without a license and made closed-end loans to 913 consumers secured by the consumers' motor vehicle titles.
During this time, the interest rates it charged its borrowers allegedly greatly exceeded the legal limits of the state. The rates allegedly did not come within any exemptions of the state statutes applicable to motor vehicle title loan lenders or consumer finance companies.
Unless a company is licensed or otherwise exempt, the statutes prohibit lenders from receiving and charging interest in excess of 12 percent per year on loans to consumers. Copies of loan contracts from CashPoint's unlicensed period allegedly disclosed annual percentage rates of 190.62 percent and 243.02 percent.
Under the terms of the settlement, CashPoint agreed to: make refunds of more than $592,000 to more than 850 borrowers representing the amount the borrowers paid and the principal amount of their loans; not collect interest or any other fees or amount more than the initial principal loan amount borrowed from a borrower who received a loan during the unlicensed period; and return vehicle titles and appropriate lien releases to any borrower who received a loan during the unlicensed period and later made payments that equaled or exceeded the initial principal amount of the loan.
In addition, CashPoint agreed not to repossess vehicles that belong to borrowers who obtained loans during the period in question, to pay Cuccinelli's office $25,000 for reimbursement of the state's reasonable expenses, costs and attorney fees and a $10,000 civil penalty, and to a permanent injunction preventing CashPoint from future violations of the state statutes.