Lender accused of 'loan sharking' Kash-2-U is said to charge up to 780%

Regulators

August 16, 1996|By Alec Matthew Klein | Alec Matthew Klein,SUN STAFF

Calling it "nothing but old-fashioned loan sharking," the state accused B&S Marketing Enterprises Inc. and its owners of violating state consumer protection and consumer credit laws by charging interest rates as high as 780 percent on short-term loans to desperate customers in need of fast cash.

That's 747 percentage points higher than the annual interest rate that small lenders are allowed to charge in Maryland.

"They forgot there's an attorney general who's going to make sure they don't get around the law," Maryland Attorney General J. Joseph Curran Jr. said yesterday.

B&S Marketing, which does business in Baltimore as Kash-2-U-Leasing, allegedly circumvented state regulations with what it calls a "sale-leaseback" program.

Curran described it as a "sham" -- and relatively new to Maryland. Authorities are not pursuing criminal penalties because the violations would net no more than a misdemeanor under consumer protection laws. But the attorney general is seeking to shut down the operation, return hundreds of thousands of dollars in interest to 10,000 to 12,000 borrowers and impose civil penalties that could amount to $10 million.

"We're looking to stop them from doing what they're doing," Curran said.

Frank A. Brown Jr., Kash-2-U's general manager and a 25 percent owner, said yesterday, "Obviously, we do disagree with them but due to the fact that this is currently under litigation, it's not appropriate to comment."

Louis R. Seo Jr., the company's 75 percent owner, was unavailable for comment. Stephen Goldberg, the owners' attorney, could not be reached for comment.

With Kash-2-U, the attorney general said, a consumer would borrow $200 by pretending to sell for the same amount some kind of personal property, such as a television set and a VCR. The consumer would then pay $60 in interest every 15 days -- called "rent" by Kash-2-U -- until the $200 loan was repaid, which the company termed a "buy back."

Curran, however, said the transaction is simply "designed to hide the illegal loan," deceiving consumers about the terms of the deal.

In Maryland, lenders who make small loans may charge no more than 33 percent in annual interest, and they are required to obtain a license from the state commissioner of consumer credit.

A public hearing on the case is scheduled Nov. 18 before an administrative law judge at the Office of Administrative Hearings, Administrative Law Building, Green Spring Station in Lutherville.

Pub Date: 8/16/96

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