Minn. sues Calif. online lender CashCall

State officials on Thursday filed a lawsuit against a California-based online lender accused of charging Minnesota consumers exorbitant interest rates and origination fees for loans.

The lawsuit filed in Hennepin County claims CashCall is financing the loans through a company called Western Sky, which has been advertising to Minnesota consumers. The lawsuit said the company claims affiliation with an American Indian tribe in South Dakota and therefore doesn't have to follow Minnesota lending laws.

Attorney General Lori Swanson said consumers in Minnesota and other states have applied for the loans to help make ends meet only to find themselves buried in debt.

"You take out let's say a $1,500 loan from this outfit, they strip out $500 as an origination fee, so now you get $1,000 but then you're paying that $1,000 back at triple-digit interest rates," Swanson said. "At that rate quickly a $1,000 loan just starts mushrooming on you."

Swanson said consumers should read a lender's terms carefully and can go to the state Commerce Department's website to find out if a lender is licensed in Minnesota.

The lawsuit is the latest in a series of actions targeted at unlicensed online lenders. "The Internet is literally flooded with these unlicensed lenders, and people need to know when companies are unlicensed, then that means they're not following Minnesota state laws, not following state interest rate laws," Swanson said.

CashCall did not immediately respond to a request for comment.