State Orders Payday Loan Firm to Alter Debt Collection Practices

West Virginia Attorney General Darrell McGraw announced a settlement agreement with four affiliates of the nation’s largest payday lender, Advance America, Cash Advance Centers, Inc. (“Advance America”) of Spartansburg, South Carolina. The companies agreed to cease engaging in certain debt collection practices that concerned McGraw’s office.

In the agreement, Advance America agreed to permanently discontinue its practice of contacting consumers in person at their homes in West Virginia, and its practice of leaving “door hangers” for consumers when they are not home when attempting to collect debts in West Virginia. Advance America also agreed to refrain from contacting third parties about alleged debts, including persons listed as “references” on loan applications, except when it has a legitimate basis to seek location information about consumers who may have moved.

Payday lending is not allowed by West Virginia law, forcing consumers to travel to surrounding states. The Advance America affiliates that signed the agreement operated branch offices in Kentucky, Ohio, Pennsylvania and Virginia that were located within fifty miles of the West Virginia border.

The complaints alleged that Advance America attempted to coerce payment by threatening to bring criminal charges, making unauthorized collection calls to various third parties, including persons listed as “references” on loan applications, and by making personal visits to consumers at their homes in West Virginia. The complaints were brought by consumers who had defaulted on loans.

The Attorney General did not comment on the fact that no complaints were received by the thousands of satisfied consumers who continue to leave West Virginia and obtain legal, short term loans elsewhere.

During the investigation, McGraw’s office learned that Advance America had in place a comprehensive employee training program as well as formal policies and procedures intended to ensure that its collection practices comply with West Virginia law. Thus, the conduct alleged by the complainants, if true, violated Advance America’s policies. Nonetheless, Advance America agreed to discontinue certain debt collection practices that concerned the Attorney General.

Attorney General McGraw stated, “I commend Advance America for agreeing to discontinue certain collection practices that my office found objectionable, even though it maintained that such practices were not unlawful.”