2 "payday" lenders fined for violations of state lending limits

State regulators levied a record $1.2 million in penalties against two "payday" lending companies Thursday and moved to ban the owners from doing business in Washington after investigators alleged they had violated state lending limits more than 400 times.

The Department of Financial Institutions accused the owners of Zippy Cash and Advance Til Payday with exceeding the state's $700 maximum loan limit for outstanding short-term, high-interest loans to a single person.

The companies, which together operate 33 lending stores in Washington, skirted the law by allowing customers to obtain thousands of dollars in loans from different branches, often on the same day, according to the state's charging papers.

The state said one customer borrowed $2,100 in a single day by taking out three $700 loans from three Advance stores. In several cases, customers took out several loans the same day they paid off others, turning short-term loans into long-term debt with triple-digit interest.

Under state law, lenders can charge interest fees as high as $95 for each $700 loan. For a typical two-week loan, for example, a customer could pay $285 to borrow $2,100.

"The larger the amount of the loan, the more it becomes a long-term loan and a more expensive loan for the borrower," said Deb Bortner, the Department of Financial Institution's acting director of consumer services.

Advance Til Payday, which was fined $557,800, is owned by Loren C. Gill and Daniel Van Gasken. Zippy Cash, which was fined $471,600, is owned by Van Gasken. As part of the penalties, the companies also were assessed investigative costs.

The companies can request a hearing on the charges.

Efforts to reach the companies' owners were unsuccessful.

During the investigation, the state discovered that Gill — who operates under the name of WCS Loans — had been banned from the small-loans business in Virginia in 1993. He also was convicted of assault in July 2005 in Pierce County Superior Court. He failed to disclose either action to the state as required, according to the statement of charges filed against him.

Payday loans have burgeoned in recent years, driven by the cash needs of typically lower-income people who don't have access to banks or credit unions. In most cases, customers write a postdated personal check for the loan. The lender either cashes the check or collects cash from the customer when the loan is due.

Critics says the industry gouges vulnerable people with high fees that keep them in a cycle of indebtedness. Others say it provides an economic lifeline.

The state's investigation, initiated on Oct. 16, 2006, focused on company locations in Olympia; Puyallup; Tacoma; Lacey, Thurston County; and Shelton, Mason County.

Customers whose loans were targeted in the investigation will get at least $39,000 in fees refunded to them, according to the state.

Susan Kelleher: 206-464-2508 or skelleher@seattletimes.com.