Washington State Department of Financial Institutions

News Release

Friday, January 21, 2011


Lyn Peters, Director of Communications
PH (360) 902-8731 lyn.peters@dfi.wa.gov

Deborah Bortner, Director, Division of Consumer Services
PH (360) 902-0511 dbortner@dfi.wa.gov


Department Of Financial Institutions Issues Immediate Cease And Desist Order For Checkmania, Inc. To Stop Making Illegal Loans

Washington State DFI alleges Checkmania, Inc., d/b/a Checkmate, developed a “Retail Installment Loan Program” to evade legislatively imposed limitations on making payday loans

OLYMPIA – The Consumer Services Division of the Washington State Department of Financial Institutions (DFI) entered a temporary cease and desist order (PDF) against Checkmania, Inc., d/b/a Checkmate, and a related Internet company, Checkmate Express Corporation, d/b/a Checkmate Express (Checkmate). The cease and desist order requires Checkmate to immediately cease offering and selling their new “Retail Installment Loan Program” to Washington residents. In addition, Checkmate must immediately stop making loans to Washington borrowers that exceed the statutory loan limits in the law.

Deb Bortner, Director of DFI’s Division of Consumer Services, noted that this is not the first time the Department has taken action to stop a payday lender from attempting to evade the law.

Last year the Washington State Legislature passed a law limiting the number of payday loans licensees could make to borrowers.

“Ever since, companies within the industry have attempted to evade these limitations by structuring loans to appear as if they were not payday loans,” Bortner explained.

In this case, Checkmate promoted loans for borrowers to purchase $100 gift cards from select retailers, charging an annual percentage rate of up to 391 percent for a 15-day loan. The loans were due on the borrower’s next payday, and were specifically marketed to borrowers to whom Checkmate was not permitted to make another payday loan because the borrower had reached their eight-loan limit.

“Of the 43 loans made to borrowers at one branch, almost 90 percent exceeded the statutory limitations passed by the Legislature,” Bortner noted. “DFI’s investigation into Checkmate’s new loan program continues, and any Washington borrowers who believe they have been harmed through dealings with Checkmate should contact the Department.”

“The Department intends to look to the substance, not the form, of a loan, and immediately step in to stop violations of the law,” Bortner added.

The Temporary Cease and Desist Order names Checkmania, Inc., d/b/a Checkmate and a related Internet company, Checkmate Express Corporation, d/b/a Checkmate Express. Both companies have headquarters in Carlsbad, Calif. In addition, owners Susan D. Bassford, President, and owner Linda S. Sonder, Vice President, were named as respondents. Checkmate and Checkmate Express operate from approximately 20 Washington branches and over the Internet. All four respondents have the right to request a hearing on the Order.

About DFI
www.dfi.wa.gov ▪ 360.902-8700 ▪ 877.746-4334
The Washington State Department of Financial Institutions regulates a variety of financial service providers such as banks, credit unions, mortgage brokers, consumer loan companies, payday lenders and securities brokers and dealers. The department also works to improve financial education throughout Washington through its outreach programs and online clearinghouse www.dfi.wa.gov/financial-education. In addition to posting information about licensees and administrative actions, DFI uses the Web and social media to provide financial education information: http://www.twitter.com/FinEd4All, www.twitter.com/DFIConsumers, www.finlit.blogspot.com, www.youtube.com/user/WADFI, www.homeownership.wa.gov.

About the Division of Consumer Services
www.dfi.wa.gov/cs ▪ 360.902-8703
The mission of the Division of Consumer Services is to protect consumers from illegal and fraudulent lending practices. The division accomplishes its mission through licensing, licensee examinations, investigations, and enforcing selected state and federal statutes and rules. Consumer Services regulates the business activities of consumer loan companies, mortgage brokers, money transmitters and currency exchangers, as well as check cashers and sellers, also known as "payday lenders." The Division is entirely self-supporting, with funding provided by licensing, auditing, and policing of regulated businesses and individuals. No money is received from the state General Fund or other public revenue source.