On June 3, 2013, Virginia Attorney General Kenneth T. Cuccinelli, II brought this action against Advance, LLC d/b/a Advance "Til Payday" to petition to the Court pursuant to violations of the Virginia statutes governing consumer finance companies, Va. Code 6.2-1500 through 6.2-1543.
Cuccinelli II alleges that the Defendant, Advance, LLC d/b/a Advance "Til Payday" during the period from approximately December 1, 2008 to February 6, 2013, Advance required its borrowers to execute a Line of Credit ("LOC"). By executing the LOC Agreement, customers of Advance obligated themselves to repay the principal amount loaned along with cash advance fee amounting to 15% of the principal balance, and, if the principal balance and cash advance fee were not paid in full by the close of the initially billing cycle (typically twenty-five (25) days or more from the date of the cash advance), periodic interest on the remaining principal balance at an annual rate of 249.99%
Cuccinelli II alleges that during the period from at least December 1, 2008 to February 6, 2013, by charging and receiving interest well in excess of 12% annually in the form of cash advance fees on consumer loans without application of a finance charge "grace period" in violation of the open-end credit requirements of 6.2-312, Advance, LLC violated the interest rate prohibitions of the consumer finance statues.
Cuccinelli II also alleges that at all relevant times, Advance, LLC did not hold a consumer finance license issued by the SCC pursuant to 6.2-1501 of the consumer finance statues and was not otherwise exempt from the provisions of those statutes. During the relevant period, Advance, LLC was not exempt from the consumer finance statutes by virtue of extending open-end credit as described in 6.2-312. Although Advance, LLC presented its loans during this period as a form of open-end credit, it did not satisfy the open-end requirements set forth in 6.2-312. Section 6.2-312 prohibits lenders from imposing a "finance charge" before application of a grace period of at least 25 days. The cash advance fee that Advance, LLC charged its borrowers immediately upon their execution of the loan during this period, without application of any grace period, is and was a "finance charge." Advance's failure to comply with open-end requirement's of 6.2-312 renders the loans it made during this period subject to the consumer finance statutes.
Cuccinelli II request that the Court declare that all loans made by the Defendant during the period from approximately December 1, 2008 to February 6, 2013 violate 6.2-1501 and 6.2-303 of the Code of Virginia, and are null and void pursuant to 6.2-1501 and 6.2-1541 (A) of the consumer finance statues; Permanently enjoin the Defendant from any attempt to collect any moneys from borrowers to whom loans were made or contracted to be made in violation of 6.2-1501 and 6.2-303 of the Code of Virginia; Grant judgment to the Commonwealth, as trustee, for the use and benefit of all borrowers of the Defendant during the period from approximately December 1, 2008 to February 6, 2013, in an amount equal to the aggregate of their repayments of principal and interest, pursuant to 6.2-1541 (B) of the consumer finance statues; and lastly to grant judgment to the Commonwealth for it's attorneys fees and costs pursuant to 6.2-1537 (D) of the consumer finance statutes.
On June 3, 2013 The Defendant was permanently enjoined from violating Virginia's consumer finance statutes as now in effect or later amended, or any regulations promulgated there under, by lending any amounts for personal, family, household, or other non-business purposes, and in connection with such loans, charging, contracting for, or receiving interest or other charges in excess of 12% per year, without first having obtained a consumer finance license from the State Corporation Commission under Virginia Code 6.2-1501, as now in effect or later amended, if not exempt. The parties agree and acknowledge that, as of the Effective Date, credit extended in the manner described in Virginia Code 6.2-312 us exempt from Virginia Code 6.2-1501 and 6.2-303.
The Defendant agrees to provide the Attorney General's office with a verified spreadsheet containing the name, address, principal amount advanced, date of advance, advance payoff date, total cash advance fees charged, and total interest charged, for all borrowers who received cash advance in full by close of the second billing cycle, and who were charged a cash advance fee incident to the extension of the credit. Within 30 days of entry of this Consent Judgment, the Defendant shall set aside in an escrow amount sum of $19,895 one half of the total of $39,790.00 potentially required for restitution to consumers.
Within 60 days of the Effective Date, the Defendant shall issue claim forms to the Restitution Eligible Consumers explaining this settlement and stating that such consumers are entitled to a refund in the amount of cash advance fees they paid during the first or other applicable billing cycle. Within 120 days of the effective date, the Defendant's attorney or third party mailing house shall issue refund checks to any Restitution Eligible Consumers who return signed claim forms and any required releases to Defendant.
The Defendant shall pay to the Commonwealth the sun of $10,000.00, pursuant to 6.2-1537 (D) of the consumer finance statutes, for reimbursement of its reasonable expenses, costs and attorney's fees in investigating, resolving, and monitoring the compliance phase of this matter. Any amount paid and collected shall be deposited into the Attorney General's Regulatory, Consumer Advocacy, Litigation and Enforcement Revolving Trust Fund.