These cases involve the scope of the State’s authority to regulate so-called “payday loans” pursuant to OCGA § 16-17-1, et seq., which has come to be known as the Payday Lending Act. Pursuant to OCGA § 16-17-4 b, the State of Georgia, acting through the Attorney General “State” filed a complaint in Fulton County Superior Court alleging that CashCall, Inc. “CashCall”, Delbert Services Corporation “Delbert Services”, Western Sky Financial, LLC “Western Sky”, and Martin A. Webb collectively “Defendants” have violated OCGA § 16-17-2 a by engaging in a small-dollar lending enterprise that collects illegal usurious interest from Georgia borrowers. Defendants operate outside the State of Georgia and their dealings with Georgia borrowers occurred telephonically or over the Internet, and when a loan is funded, the funds are transferred to the borrower via electronic transfer to the borrower’s bank account. The State seeks civil penalties and injunctive and other equitable relief.
Initially, the trial court entered a temporary restraining order prohibiting Defendants from making loans in violation of the Act and from servicing such loans or collecting payments from borrowers. Defendants asserted that prohibiting them from servicing existing loans was beyond the purview of the Act. At a hearing addressing Defendants’ motion to dissolve or modify the temporary restraining order, the court engaged in a discussion with the parties regarding a compromise that would permit the servicing and collection of already existing loans to continue but would require Defendants to place into escrow an amount estimated to be the funds Defendants expected to collect from Georgia borrowers during the pendency of the litigation. At that hearing, a representative of Defendants stated to the judge that Defendants expected to make a “few hundred-thousand-dollars” per month during the pendency of the litigation. Accordingly, the trial court entered an interlocutory injunction prohibiting Defendants from making new loans or assigning existing loans to any third party, but not prohibiting them from servicing existing loans. The State and CashCall then entered into a joint agreement and consent order whereby CashCall was required to deposit $200,000 into an escrow account and provide quarterly summaries of all payments collected from Georgia borrowers until the claim was resolved. The order expressly contemplated a future motion to modify the amount of the escrow deposit.
