'Cash Call' suddenly stops quick cash loans

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You may have heard the ads all over TV and radio: If you need quick cash, "just make the cash call."

You may have heard the ads all over TV and radio: If you need quick cash, "just make the cash call."

Perhaps you also noticed those ads have suddenly stopped.

Cash Call has stopped offering consumer loans, according to customer service agents answering the company's toll-free number. The Cash Call website no longer includes the online personal loan application.

Cash Call owners and attorneys did not return calls for comment. But the shutdown comes after a key ruling in a class action lawsuit by more than 130,000 Cash Call borrowers.

They claim the company charged them "unconscionably high" interest rates and imposed oppressive terms that plunged them deep into debt.

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Now they are demanding all of their money back.

"This involves hundreds of millions of dollars Cash Call has collected from these borrowers,'' class action attorney James Sturdevant said.

He just won a key victory in the state Supreme Court. The justices ruled that interest rates can be too high, and therefore illegal, even if they don't fall under a specific statute regulating interest rates.

Sturdevant said the ruling came after a pointed question to Cash Call attorneys in the high court hearing.

"One of the justices asked if the law allows Cash Call to charge one-million percent interest,'' Sturdevant recalled. "Cash Call said yes, they could legally charge that much. They just didn't. It's outrageous."

Cash Call relied on a state law setting specific limits on interest rates -- but only for loans less than $2,500. Cash Call only offered loans higher than that, presumably to steer around those statutory limits.

It then set rates as high as 135 percent interest. Sturdevant said the company counted on reaching consumers so despearate for money they had no choice but to pay high rates.

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"The people Cash Call targeted for more than a decade are people in financial trouble,'' Sturdevant said. "People who lost their job, going through divorce, suddenly facing big medical bills. This only added to their financial turmoil."

Among them was Eduardo De La Torre of East Palo Alto. He was a student at UC Davis in 2006 when he ran low on funds and heard the Cash Call commercial.

"I was their target audience,'' said De La Torre, now a teacher's aide in East Palo Alto. "At that time, I was a 21-year-old kid, I didn't realize what I was getting into, and I just needed a little bit of money. It ended up haunting me for year after year after year."

De La Torre said he only needed to borrow a few hundred dollars, but Cash Call insisted he take out at least $2,600. He claims the company told him he could pay back most of the loan the next day to avoid racking up debt- but when he tried, Cash Call would not process his payment.

Cash Call charged him the extraordinary rate of 96 percent interest. It also took automatic debits from his bank account as a condition of the loan.

It wasn't long before De La Torre ran out of money. His bank account went into the red. Cash Call kept demanding payment. And De La Torre said the company even began calling colleagues at his campus job. He finally just stopped paying.

De La Torre then became a lead plaintiff in the class action lawsuit.

Though state law does not set specific rates for loans over $2,500, Sturdevant says it doesn't mean lenders can charge whatever they please. Instead, he says the state's "unconscionability" statute rules. That law is interpreted to mean loans are illegal they come with "shocking" interest rates and harsh terms - such as requiring automatic debits from a borrower's bank account.

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Aggressive marketing and unfair collection tactics also can be factors making them illegal.

Sturdevant says that Cash Call set up a business model based on the assumption that at least 40 percent of borrowers would default.

"They squeezed as much blood out of a turnip as they could, draining their bank accounts with automatic debits,'' he said. "Once they got all their money, and borrowers defaulted, Cash Call would sell the loans for pennies on the dollar to a debt collector and make even more money."

The Cash Call founder, J. Paul Reddam, and company attorneys did not return numerous calls and emails seeking comment on the claims. They also did not respond when asked about the shuttering of the once giant consumer loan business.

However, Cash Call court briefs claim the company acted in good faith and within the law. The company also countersued saying the plaintiffs defaulted on their loans and still owe money to the company.

The case now goes back to federal court for a trial to decide if the Cash Call rates were illegally high. The borrowers are seeking a refund of all interest payments and late fees.

Cash Call is still offering mortgages but when asked about the consumer loans, the customer service agent referred a caller to another quick-cash company.

"This was a partial victory,'' De La Torre said of the Supreme Court ruling. "But it's not enough. Cash Call still has all those profits. Millions of dollars. I think they should pay it back."

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