An online payday lender will begin refunding borrowers in New York up to $20 million in what regulators call "illegally high interest" rates.
Western Sky Financial was a prominent online lender that offered short-term loans at triple digits interest rates. New York sued along with several other states with strict usury laws that cap interest rates. In New York the interest rate cap is 16%.
Officials say the users of the site who register with settlement manager will get refunds based on the difference between the legal interest rate and the rate charged.
"The amount of money is what's significant," says Karla Sanchez, New York's Deputy Attorney General for economic justice. “Usually in a big, large settlement you hear about consumers getting $10 or 5 cents. Here we expect the average to be around a $1000 and we expect many to get more than that.”
Western Sky Financial is owned by a member of the Cheyenne River Sioux Tribe and claimed to be subject only to tribal laws, not state laws. Lawyers for Western Sky did not immediately return phone calls.
Currently the federal government, Minnesota, Colorado, North Carolina, and Georgia all have pending lawsuits. Their settlements will likely resemble the one offered in New York.