payday loans

CFPB Proposes New Payday Lending Rules

June 3, 2016 by David Klein

June 3, 2016

On June 2, 2016, the Consumer Financial Protection Bureau (“CFPB”) released a statement regarding proposed new rules aimed at the payday lending industry. The proposed rules seek to protect consumers from what the CFPB refers to as “payday debt traps” and may impose stricter requirements on such payday lenders. The CFPB is soliciting comments on the proposed payday lending rules, which must be received by the CFPB no later than September 14, 2016.

What are the Proposed New Payday Lending Rules?

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New York Expands Payday Lending Industry Investigation to Focus on Marketers

December 6, 2013 by David Klein

As we previously blogged and in light of of recent regulatory action by the Federal Deposit Insurance Corporation (FDIC) regarding short term loans (also referred to as “payday loans” and “cash advances”), New York Governor Andrew Cuomo has increased enforcement efforts against payday lenders and recently widened the net of potential defendants to include marketers of payday loans, in addition to the payday lenders themselves.

Complying with New York State Law

Payday loans have been illegal in New York State for many years – as are any loans on amounts under $250,000 with an interest rate above 16% – but online payday lending operations have been lending to New York residents despite the prohibition. While many payday lenders and marketers believe (or argue) that New York’s ban on payday lending does not apply if the loans are offered or advertised over the Internet, this belief is mistaken. According to Governor Cuomo, the use of the Internet as a medium for offering and/or marketing payday loans does not relieve the companies of liability.

In order to avoid prosecution, payday lenders must at all times ensure that their lending practices comply with all state laws applicable to individuals that obtain the loan products and services. Entities that fail to comply with the requirements of applicable law may find themselves facing regulatory action from not just the New York Attorney General, but from numerous other state attorneys general, which could result in significant fines and court-directed changes to business practices.

Recent Crackdown on Payday Loan Marketers

In an effort to curtail further disregard for payday lending laws, Governor Cuomo sent 16 subpoenas to online lead generation companies that are suspected of engaging in deceptively marketing illegal payday loans in New York. The list of payday marketers which were subpoenaed can be found here.

According to the New York Department of Financial Services, the payday marketers are not only engaging in marketing illegal services, but are also collecting and selling New York consumers’ personal information to third party payday lenders and other companies.

If you are interested in learning more about this topic, or need to review your payday loan or cash advance marketing practices based on recent regulatory action, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Google Bans AdWords Ads for Payday Loans

CFPB Proposes New Payday Lending Rules

Major Payday Lender Settles Lawsuit

New York State Reaches Settlement with Payday Lenders

October 2, 2013 by David Klein

Following recent regulatory actions undertaken by the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency regarding short term loans (also referred to as “payday loans” and “cash advances”) and the thirty-five (35) cease and desist letters issued in August 2013 by New York’s Department of Financial Services to online payday lenders, New York Attorney General Eric Schneiderman’s office stated on Monday that it had reached settlement agreements with five (5) payday lending companies that allegedly violated New York’s lending and usury laws.

Complying with New York State Law

Payday loans are illegal in New York State – as are any loans on amounts under $250,000 with an interest rate above 16% – but online payday lending operations have been lending to New York State residents despite the prohibition. Additionally, these online payday lending companies often charge annual interest rates of between 100% to 650% or more, in violation of New York State law.

Payday lenders must at all times ensure that their lending practices comply with all state laws applicable to individuals that obtain their loan products and services. This mandate applies to Internet-based lenders, as well as brick-and-mortar operations. Entities that fail to comply with the requirements of applicable law could find themselves facing regulatory action from numerous state attorneys general, which, as in this case, could result in significant fines and court-directed changes to business practices

New York State Settlement

According to New York Attorney General Eric Schneiderman’s office, the following five (5) companies repeatedly violated New York State law by offering online payday loans with exorbitantly high interest rates: V&R Recovery D/B/A Alexander & Stefano; RJA Capital Inc.; Westwood Asset Management LLC; Erie Mitigation Group LLC and Northern Resolution Group LLC.

Pursuant to the terms of the settlement, these companies agreed to pay a total of $279,606 in restitution and $29,606 in penalties for violating New York State law. All five (5) of these companies have agreed to indefinitely discontinue their payday lending operations within the State of New York. Additionally, one of the companies agreed to prohibitions barring it from collecting on its outstanding $3.2 million in payday loans within the State of New York.

If you are interested in learning more about this topic, or need to review your payday or cash advance lending practices based on recent regulatory action, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

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New Rules for Payday Lenders

April 24, 2013 by David Klein

New Regulations Coming for Payday Lenders

According to multiple sources, the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency are expected to issue new guidelines this week governing certain aspects of short term loans (also referred to as “payday loans” and “cash advances”), as well as the way that these financial products are marketed to consumers. In addition, the Consumer Financial Protection Bureau (CFPB) issued a report that is highly critical of the payday lending industry, and announced that it intends to use its authority to help protect consumers from the potential debt traps and other economic hardships that these types of loans can help create.

It is expected that federal regulators will require, among other things, that lenders determine a consumer’s ability to repay a loan prior to offering that consumer a payday loan or cash advance. Lenders will also be required to wait thirty days before offering a consumer a payday loan – with this cooling off period designed to prevent consumers from taking out a series of loans to help pay off prior loans that are due. In addition, lenders will have to provide clearer information regarding the interest rates associated with the cash advance loans.

Complying with the New Regulatory Framework

Payday lenders must at all times ensure that their marketing and lending practices comply with all applicable state and federal laws and regulations, including the anticipated guidelines to be issued by the FDIC and the Comptroller of Currency. This mandate is especially relevant given the CFPB’s stated intention to focus on the payday lending industry, as well as recent actions by the Federal Trade Commission (FTC).

Entities that fail to comply with the requirements of applicable law could find themselves facing regulatory action from numerous regulatory bodies, which could result in significant fines and court-directed changes to business practices.

If you are interested in learning more about this topic, or need to review your payday or cash advance lending practices based on these shifts in regulatory guidance, please contact us at your convenience.

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