On February 9, the Georgia Attorney General’s Office issued a press release announcing that it reached a settlement with online payday lenders Western Sky Financial, CashCall and affiliates (Defendants). The settlement resolved the Georgia AG’s multi-year legal battle with the California-based online lender for charging illegal interest and fees under an alleged “rent-a-tribe” scheme.

According to the press release, the Georgia AG began working on the case in 2013 when it filed a lawsuit alleging violations of Georgia’s Payday Lending Act. The complaint alleged that CashCall employed a “rent-a-tribe” scheme, using Western Sky Financial’s purported tribal affiliation to avoid Georgia’s usury, payday lending and licensing laws. After the loans were originated, Western Sky Financial would sell the loans to CashCall who allegedly funded the loans and provided customer support. The complaint alleged that CashCall was the “true” lender of the loans and used the “rent-a-tribe” scheme as a device to make unlawful and usurious loans under Georgia law.

In October 31, 2016, the Georgia Supreme Court declared that out-of-state Internet lenders are subject to Georgia’s Payday Lending Act. That law prohibits lenders from offering loans of $3,000 or less with interest rates greater than 10%. According to the press release, the defendants made over 18,000 loans to Georgia borrowers with interest rates ranging from 140% to 340%. The defendants collected more than $32 million in interest and fees from those consumers since 2010.

Under the terms of the settlement, the defendants must provide over $40 million in financial relief to Georgia consumers. That relief includes $23.5 million in consumer restitution, and ceasing all collections and forgiving all outstanding loans which will result in an additional $17 million in loan relief to Georgia borrowers. The defendants must also pay a $1 million civil penalty to the State of Georgia and $500,000 for attorneys’ costs and fees. Finally, the defendants are barred from engaging in any further lending activities that are not in compliance with Georgia law.

The Georgia AG noted in the press release that this is the largest monetary settlement with the lender in the nation to date.