Experian agrees to pay $24M for letting payday loans hurt customers’ credit

Gwinnett woman was lead plaintiff in 2016 class-action lawsuit
Is Bank of the Ozarks making overly risky loans?

Is Bank of the Ozarks making overly risky loans?

Experian has agreed to settle with 56,000 Americans who had their credit reports tainted by data from a beleaguered online payday lender.

The $24 million settlement comes in response to a federal class-action suit filed in 2016 by a Gwinnett County woman who, like the others, saw her credit report suffer because of a delinquency from Western Sky Financial. The South Dakota-based company sold more than 18,000 loans in Georgia with interest rates as high as 340%, according to the Georgia Attorney General’s office.

Attorneys for Demetra Reyes of Lawrenceville, the lead plaintiff, asked the judge in the case to grant preliminary approval to the settlement on Dec 31. A hearing is set for Jan. 27.

The lawsuit claimed Experian continued reporting delinquent debts on predatory loans from the company, which has been widely and publicly discredited for its practices across the country. In its settlement filing, Experian pointed out that a judge hadn’t found evidence that Experian “willfully” failed to comply with the Fair Credit Reporting Act.

Experian is expected to set up a claims website to inform those victims how to collect if the settlement gets final approval in court.

Experian's decision to settle with Reyes' suit — filed in U.S. District Court in California, where the credit monitoring company is based — is the latest development in the decade-long fallout over Western Sky's lending practices in Georgia.

Three Georgia attorneys general have tangled with the company, which officials accused of predatory and illegal lending. In 2013, officials from various states and the federal government cracked down on the company, leading to tens of thousands of loans being voided.

>> READ | Payday lender to fork over $40 million in Georgia

Because Western Sky was owned by a member of the Cheyenne River Sioux Indian Reservation, the company maintained that it wasn’t subject to state or federal laws. In fact, the lawsuit said, the company was an LLC organized under South Dakota law, not tribal law, making it subject to the same laws as any lender. Between early 2010 and late 2013, Western Sky sold loans in states where it wasn’t licensed to lend, including Georgia.

Payday loans of $3,000 or less in Georgia are void if the lender has no license.

Western Sky agreed in 2017 to pay Georgians $23 million in restitution and forgive all $17 million it had in outstanding loans in the state. Western Sky's loans ranged from $850 to $10,000, but most were for $2,600. Reyes' class-action suit said a customer who borrowed $2,600 would pay $13,840 over a 47-month payment plan.

Reyes’ lawyers said on Friday she wasn’t available for comment.