If you’ve recently looked for a loan from online lender Western Sky Financial, you might be under the impression that the company’s still in business.
Western Sky supposedly shut its doors in 2013, soon after state regulators cracked down on its sky-high interest rates for personal loans. The company didn’t call itself a payday lender, but it offered consumers loans at annual rates of more than 300%. As a result, it faced legal battles in at least five states and was completely banned in dozens more. In the summer of 2015, Western Sky was in the news again because it was forced to refund consumers millions of dollars through legal settlements.
But its website is functional and appears to be soliciting borrowers today, two years after the company closed up shop. There’s an “Apply” button, and if you call a phone number listed on the site, it connects you to one of a variety of third-party lenders offering personal loans.
Welcome to the world of small-dollar lending, where the company that lent you money may legally disappear tomorrow, but still be around to collect your payments as its website trolls for new borrowers.
Remember that there are cheaper alternatives to companies like Western Sky if you’re looking for a personal loan, including local credit unions, community banks and online lenders.
Some lenders are moving targets
Dial the number on the Western Sky website and you’ll get an automated menu that asks for basic personal information — including your ZIP code and the last four digits of your Social Security number — then routes you to a lender.
But search for Western Sky’s phone number and you’ll find multiple options, many of which are no longer in service. One that is appears to belong to White Hills Cash, another online lender.
A telephone operator at White Hills said that the company can still service borrowers’ Western Sky loans. But a representative for White Hills says that it isn’t affiliated with Western Sky in any way.
The Western Sky case is unclear, but payday lenders often move to new states or resurface in different forms in order to evade consumer protection laws, says Diane Standaert, director of state policy at the North Carolina-based Center for Responsible Lending.
White Hills, or Island Financial LLC, offers customers loans with more than 600% APR, according to its website. The company is incorporated on tribal land in Montana’s Fort Belknap area, a common practice among payday lenders who argue that the arrangement exempts them from state lending laws. White Hills is already featured on consumer complaint databases.
These companies may not identify themselves as payday lenders, but their interest rates make it clear that borrowing from them still comes at a heavy price.
What was wrong with Western Sky, anyway?
Western Sky, also known as Great Sky Cash, Big Sky Cash and Red Stone Financial, presented itself as the squeaky-clean alternative to payday lenders. In 2013, its website promised borrowers no upfront fees, repayment terms between 12 months and seven years, and a typical APR of 139% on a $2,600 loan — cheap compared with traditional payday loans. Borrowers’ cash was deposited within hours of the application.
But Western Sky only pretended not to charge an upfront fee. Here’s how it worked: Imagine that you wanted $500. You might have had to take out a $850 loan, from which Western Sky took $350 upfront.
You then had 12 months to pay off your debt, which their website said would cost you $150.72 a month — or more, if you had bad credit. At the end of the day, your APR was 343%, similar to the amount payday lenders charge in many states.
Borrowers could indeed get their cash quickly deposited into their bank accounts. But Western Sky could withdraw repayments out of that same bank account just as easily, as borrowers opted in to automatic payments when they accepted the loans. Those with insufficient funds or late payments faced $29 fees, plus whatever penalties their banks levied.
You can do better than 300% APR
If you need cash quickly, you still can get rates much better than those offered by Western Sky and similar lenders. Here are a few alternatives:
- Many credit unions offer loans of $200-$1,000, with APRs no higher than 28%. You can learn more here or find a credit union here.
- Many community banks offer affordable payday loan alternatives; find one in your area.
- State and local governments sometimes have short-term loan programs, such as those in Pennsylvania and San Francisco. You can find more by searching for “payday loan alternatives in [your city or state]”.
- Consider a credit building institution that will improve your credit and give you reasonable terms.
Don’t let yourself be bled dry by high fees and finance charges. Look at the alternatives and find fast cash the affordable way.
Anisha Sekar contributed to this article.
Updated on October 14, 2015.