MADISON, Wis. (Legal Newsline) - Wisconsin Attorney General J.B. Van Hollen announced on Friday that an Internet payday loan company has been found in contempt of a February 2010 settlement agreement.

Arrowhead Investments LLC allegedly violated the terms of the agreement by allowing third-party debt collectors to attempt to collect on loans the company had made with Wisconsin consumers.

The Consumer Law Litigation Clinic at the University of Wisconsin Law School, in conjunction with Van Hollen's office, filed a class action lawsuit against Arrowhead in 2008. The lawsuit alleged that the company violated the Wisconsin Consumer Act by issuing Internet payday loans to consumers in Wisconsin.

The lawsuit was settled in February 2010 and required significant restitution and other relief for the class members, as well as attorney fees, costs and forfeitures. Wisconsin consumers who received a loan from Arrowhead between Dec. 1, 2001, and Dec. 21, 2007, who paid more than their additional principal loan amount were given a cash payment.

Arrowhead was required to close all loans with a balance owed, which totaled more than $432,000 in loan. Arrowhead was also required to pay cost and fee forgiveness, refrain from soliciting or extending loans to any person residing in Wisconsin for five years, file satisfaction of any judgments obtained in the effort to collect outstanding Wisconsin consumer debt, refrain from selling any debt in Wisconsin to third-party collectors or buy back any debt already sold to third-party debt collectors, and to contact all agencies for credit reporting and instruct them to delete all negative credit information about consumers in Wisconsin related to Arrowhead loans.

In January, the court found that third-party debt collectors allegedly contacted class members for collection on Arrowhead loans, which was in violation of the settlement terms. The court ordered Arrowhead to contact all class members to determine whether or not they had received collection calls on debts that were supposed to be waived. In addition, the court required Arrowhead to refund any class members who made payments on Arrowhead debt that was waived.