Blog
Consumer Finance Insights
January 21, 2020

Massachusetts AG Settles with Online Company for $1.25 Million for Allegedly Charging Illegal Interest Rates

On January 21, 2020, the Massachusetts attorney general’s office (Massachusetts AG) announced that it has secured $1.25 million from one of the country’s largest online lending companies to resolve allegations that the company charged excessive interest rates to Massachusetts borrowers in violation of M.G.L. ch. 93A and Massachusetts’ Small Loan Statute, M.G.L. c. 140 s. 96, which prohibits any personal loan where the amount retained by the borrower is $6,000 or less.

According to the assurance of discontinuance​, since 2011, the company facilitated loans to Massachusetts residents wher​e, although the face amount of the loan was more than $6,000, the actual amount retained by the borrower was $6,000 or less due to the upfront imposition of a loan origination fee, which ranged from 1% to 6% of the total loan amount.  The Massachusetts AG alleged that the loans were subject to the statutory interest rate cap under Massachusetts’ Small Loan Statute.

Under the terms of the settlement, the company will pay $1.25 million to the Massachusetts AG, to be used for monitoring, investigation, and/or amelioration efforts.  The company is also prohibited from making or facilitating “Small Loans” to Massachusetts residents with an interest rate or APR in excess of 23% if made as a licensed small loan company or 12% if made as a non-licensed small loan company.