CHARLESTON, W.Va. -- A Kanawha County judge has penalized a California debt collection agency more than $13 million, along with a slew of other penalties, after finding that it used predatory lending practices on its West Virginia clients.
Kanawha Chief Circuit Judge Duke Bloom released two orders Monday, finding that CashCall Inc., owned by J. Paul Reddam, used a federally regulated bank in South Dakota to bypass West Virginia lending laws and dupe consumers into paying skyrocketing interest rates on their loans.
The judge also found that after CashCall essentially depleted borrowers' bank accounts with automatic payment withdrawals, the company's collection agents would start harassing them with dozens of phone calls a day. Investigators in the West Virginia attorney general's office said that some consumers received as many as 1,000 phone calls during one collection campaign.
Reddam owned the thoroughbred colt that won this year's Kentucky Derby and Preakness Stakes. The horse, I'll Have Another, retired in June with a tendon injury, missing its chance to win the Belmont Stakes and become the first Triple Crown champion in 34 years. In July, Reddam sold I'll Have Another to a Japanese farm for $10 million.
National media outlets reported that along with his troubles in West Virginia, Reddam has faced legal action in California and Maryland for similar lending-law violations in those states.
Bloom, according to his order, levied a penalty of at least $13 million on CashCall on claims that the company violated provisions of West Virginia consumer-protection laws. The attorney general's office will be required to put a large portion of the award into a trust fund, which will then be distributed among those affected by the company's lending practices.
The attorney general's office said it is still deciphering the details of the orders and could not provide a breakdown of the massive award as of Monday evening.
Bloom also ordered that CashCall cancel all existing debts that its West Virginia consumers still owe and pay court costs to the attorney general's office.
The attorney general's office began investigating CashCall in 2007, after several people came forward with complaints about the company.