LoanMe stops offering personal loans in Wisconsin following Times report
LoanMe, a high-interest lending company in Anaheim, has stopped making personal loans in Wisconsin after a Times report that drew connections between the company and a legally troubled firm that was not permitted to make loans there.
LoanMe no longer advertises loans to Wisconsin residents on its website, and customer service representatives confirmed that the company recently ceased offering loans there.
Heather MacKinnon, chief legal counsel for the state’s Department of Financial Institutions, confirmed that LoanMe is no longer offering loans in Wisconsin but said regulators were not involved.
“It was a business decision of their own, not a requirement imposed upon the company,” she said.
Jonathan Williams, a LoanMe executive and owner, did not return calls for comment.
The company, which still lends in California and eight other states, specializes in personal loans that typically charge interest rates higher than 100%. Last year, the company made nearly 32,000 loans in California, the vast majority with triple-digit APRs.
The Times published an article in September that examined the company’s financial and operational ties to J. Paul Reddam, a lending industry veteran who founded LoanMe as well as mortgage lender DiTech Funding and personal lender CashCall Inc.
CashCall, which was sued by several states and federal regulators over its high-interest loans, applied for a lending license in Wisconsin in 2013. But state officials let the application sit unapproved for nearly two years because of pending lawsuits against CashCall and Reddam.
LoanMe, though, was able to get a Wisconsin lending license a few months after it applied in 2014 — shortly after Reddam sold the company to three close associates. Reddam also lent money to LoanMe and its new owners and owns another company, Ralis Services, that provides key business services to LoanMe.
Several former CashCall employees, some who later went on to LoanMe, said they were told by managers that LoanMe was created specifically because of CashCall’s problems. And consumer advocacy groups had questioned whether Reddam was still in control of LoanMe and whether the sale was a legal fiction.
MacKinnon previously told The Times the department knew LoanMe was run by former CashCall executives but that the department had no reason to deny the company a lending license.
Reddam has declined to comment on his connections to LoanMe.
Peter Skopec, director of the Wisconsin Public Interest Research Group, applauded LoanMe’s decision to stop lending in the state.
“I think this is really good news for people in Wisconsin. One fewer predatory lender is a good thing,” said Skopek, who had called on regulators to scrutinize Reddam’s connections to LoanMe.
The pullback in Wisconsin comes amid other problems for LoanMe and CashCall.
Reddam and CashCall remain the subject of ongoing litigation with the Consumer Financial Protection Bureau. The bureau won a judgment against the company in January but has appealed, saying a federal judge erred by not forcing the company to pay hundreds of millions of dollars in refunds to customers over loans that violated state rate caps.
In July, the California Department of Business Oversight accused LoanMe of using unlicensed brokers. CashCall, meanwhile, has gotten out of the consumer lending business altogether and suffered a recent legal setback.
Despite a California law that sets no limit on the interest rates lenders can charge on loans of $2,500 and up, the California Supreme Court ruled in August that rates on those loans can be so high that they are “unconscionable” and therefore illegal. The ruling came in a long-running case against CashCall brought by borrowers paying upward of 90% interest.
The ruling could upend the state’s high-cost lending industry — an industry in which Reddam and CashCall were pioneers.
Before Reddam founded CashCall in 2003, large, high-interest loans were relatively rare in California and state regulators didn’t even track loans with rates topping 100%. Now, lending at triple-digit interest rates is a big business.
Last year, state-licensed lenders made $1.1 billion in loans with triple-digit rates. The swift growth of the market has sparked new interest among consumer advocates and lawmakers to change the state’s lending code.
Bills in the state Legislature that would have set an interest rate cap on now-unregulated loans failed in each of the last two years, but lawmakers are likely to raise the issue again in 2019. Consumer advocates also say they may push for a ballot measure that would set a rate cap.
Times staff writer Andrew Khouri contributed to this report.
Follow me: @jrkoren
