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State regulators start proceedings against payday lender

August 16, 2006 - Seattle, Washington

In what it characterized as its largest-ever case against a payday lender, the state Department of Financial Institutions on Wednesday filed a statement of charges against Check 'N Go of Washington Inc. and said it intends to revoke the company's license.

The department accused Check 'N Go, a Cincinnati-based company that operates 15 payday-loan stores in Washington, of illegally collecting multiple checks from payday-loan borrowers, charging excessive fees and collecting borrowers' personal identification numbers without their knowledge, according to a press release issued Wednesday.

Like most payday lenders, Check 'N Go specializes in issuing short-term cash advances, typically at high interest rates. DFI said it intends to revoke the company's business license and impose fines of $333,700.

Check 'N Go spokesman John Rabenold could not be reached for comment. State regulations allow Check 'N Go to request a hearing to contest the charges.

According to the release, a DFI investigation discovered that Check 'N Go stores in Puyallup, Tacoma and Lacey required borrowers to write multiple checks to secure a single payday loan. For instance, borrowers seeking a $500 loan were required to submit two post-dated checks, for $250 each, as security.

State regulations dictate that payday lenders may collect only a single check per payday loan, according to DFI spokesman Scott Kinney.

The requirement doubled the costs faced by borrowers if those checks bounced, because borrowers were then forced to pay insufficient funds fees on each check. Under Washington law, payday lenders may charge only a one-time, $25 fee for returned checks on a single payday loan.

Check 'N Go also collected and stored the personal identification numbers to customers' bank accounts without their knowledge, exposing them to potential identity theft, the DFI said.

News Source

Puget Sound Business Journal, Justin Matlick, Staff Writer

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