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Founder, CFP® Joel Ohman

UPDATED: Oct 30, 2012

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In Charleston, West Virginia, Attorney General Darrell McGraw has won a settlement with an online payday loan lender.

Payday loans, while illegal in West Virginia, can be lent and marketed by lenders with tribal affiliations due to tribal legal immunity. Under the masquerade of being tribal-owned, Payday Financial LLC conducted operations under the name Lakota Cash within West Virginia.

The owner of Payday Financial LLC, Martin Webb, claimed that his business’ payday loans originated from an Indian Reservation and thus were only held accountable to tribal law, not state law. Unfortunately for Webb, Judge Duke Bloom ruled that Payday Financial was not an Indian tribe nor was it eligible for tribal immunity. Payday Financial tried to appeal to the state Supreme Court but failed.

After Payday Financial failed to comply with the ruling, a contempt hearing was scheduled. Webb and Payday Financial finally agreed to comply and stop making payday loans within West Virginia. It agreed to pay $135,000 in refunds to over 100 of its customers in West Virginia. Additionally, the lender will give the state $5,000 towards consumer protection educational services.

McGraw was joined by several Payday Financial borrowers at his office in the state Capitol.

“I’m pleased to say we’ve experienced many victories against wrongdoers. Payday loans are illegal in West Virginia, and we did not stand for this. Instead, we stood up and fought it. I am glad that Payday Financial and Webb decided to respect the ruling of our West Virginia court. Although it took a long battle to get to this point, I commend Payday Financial and Webb for their decision to refund all unlawful fees collected from West Virginia consumers and to permanently refrain from making such loans in our state,” said McGraw at a press conference in the state Capitol, according to the West Virginia Record.

This is not the first lending-related victory McGraw has won. He has also forced a settlement with another online payday lender from Florida which was forced to cancel debts for West Virginian borrowers. McGraw’s office claims that since it has begun pursuing payday lenders, it has obtained 117 settlements leading to $3 million in cash refunds or cancelled debts for thousands of West Virginians.

“We’ve added another victory to our long list of achievements,” said McGraw.