Moneytree Inc., a Seattle payday lender, was hit late last week with a cease and desist order by Washington state regulators alleging the firm allowed borrowers to take out an excessive number of loans violating rescinding rules.
The enforcement action is the first to be issued to any of Washington's 109 payday lenders under a new law that went into effect Jan. 1, according to Deb Bortner, director of the division of consumer services.
The new law, passed during the 2009 legislative session, restricts the number of loans to eight that each borrower is able to take out during one year. It is the first of its kind nationwide, Bortner said.
Moneytree allegedly allowed borrowers to take out one or more small loans, then quickly rescind those loans for larger amounts, according to the cease and desist order. The smaller loans were then not counted in Moneytree's tally of loans-a violation of the new law, according to the order.
"It's really important to make sure all of our payday lenders are following the letter of the law," Bortner told the Puget Sound Business Journal. "The legislature intended to try to keep people from getting into a cycle of debt."
The firm has 59 offices, mostly in Washington State but also with outlets in Oregon and Idaho.