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New York State Cracks Down on Illegal Internet Payday Loans

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Albany, NY: Payday lending is already illegal in New York State, as it is in more than a dozen other states in the US. But that hasn’t stopped a myriad of Internet payday lenders from attempting to circumvent state laws by plying their trade online. What online payday lenders may not realize, or perhaps don’t care to know, is that Internet payday loans are just as illegal as making a payday loan in person, in the State of New York.

New York State Cracks Down on Illegal Internet Payday LoansAnd Governor Andrew M. Cuomo has had enough. On August 6 of this year, Cuomo’s office issued cease and desist communiques to no fewer than 35 online payday loan companies currently plying their trade illegally in the state.

One of those lenders is Plain Green, LLC - the proprietor of Plain Green Loans.

Online payday lenders have come under fire for issuing short-term loans to individuals in need of a quick infusion of cash to get them through to their next paycheck. These are individuals who may not have the best credit rating, and may not be in a position to secure a loan by traditional means. And not lost on critics is the inherent convenience of doing everything online from the comfort of one’s own home, without the need to actually go into a bank with hat in hand.

But in exchange for that convenience, or the willingness to extend loans to individuals with poor credit histories, interest rates tend to be extremely high. Some say, exorbitant.

Plain Green Loans, for example - one of the companies named in Governor Cuomo’s cease and desist order - charges annualized interest rates for short-term loans as high as 379 percent. According to American Banker (7/23/13), that’s the APR (annual percentage rate) for a Plain Green Loans client who borrows $250 for a period of 16 weeks. At the end of the term, $440 will be due. For a larger loan of $2,000 borrowed over a period of 76 weeks, the APR is about 160 percent. In terms of actual dollars, $5,206 will be paid back.

In other words, that $2,000 loan will cost the borrower $3,206 in interest and financing charges.

Spotloan, a product of ZestFinance, issues low-tech payday loans that appear to come in with an average APR of 390 percent. According to American Banker, Spotloan’s loans range from $300 to $800 with terms ranging from three to eight months. ZestFinance has been lauded for observing complete transparency and disclosure in its fee structure, but critics continue to decry the cost when compared to more traditional financing. Citing an example issued by American Banker, a $500 Spotloan issued over a five-month term would cost the consumer $1,058 in total interest and finance charges due at the end of the term.

As with the previous example, the interest and financing charges are more than the original principle.

And that’s not the half of it, according to Cuomo’s office and an investigation undertaken by the New York State Department of Financial Services (DFS). Not only were the Internet payday loan vendors breaking New York State laws by issuing payday loans in the first place, some loans carried an APR as high as 1,095 percent.

“Illegal payday lenders swoop in and prey on struggling families when they’re at their most vulnerable - hitting them with sky-high interests rates and hidden fees,” said Governor Cuomo, in the statement. “We’ll continue to do everything we can to stamp out these pernicious loans that hurt New York consumers.”

It should be noted that ZestFinance and Spotloan were not named in Cuomo’s communique.

In his crackdown on illegal Internet payday loans, Cuomo announced that the Office of the Superintendent of Financial Services issued letters to 117 banks with regard to the Automated Clearing House Network. The idea is to withdraw automated access to consumer bank accounts in New York State - access that is integral to the success of the online Internet payday loan vender.

In the statement from the Governor’s office, it was revealed that often an Internet payday lender will debit only interest and finance charges on a regular basis from a borrower’s account - leaving the borrower with the mistaken belief that a portion of the principle is also being paid. In most cases, according to the release, the consumer must make the first move and actually contact the lender to make arrangements to include debits to pay off the principle as well.

Section 340 of the New York Banking Law prohibits unlicensed non-bank lenders from making consumer loans of $25,000 or less with an interest rate greater than 16 percent per annum. Along with New York, Internet payday loans are illegal in Arizona, California, Ohio, Montana, Arkansas, Pennsylvania, West Virginia, Georgia, New Hampshire, Vermont, Massachusetts, Connecticut, New Jersey, Maryland and the District of Columbia.

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READER COMMENTS

Posted by
Stephanie Milliren
on
I made the mistake of borrowing from a pay day lender last June. I barrowed $500 from a lender known as My Cash Advance, which I did not intend to use all at once but did. I found myself unable to pay it back.
So, then I had to agree to their terms and conditions, until I could no longer pay any more, then they renegotiated a final payment of $500 at the end of last November. This inconvenienced me so much that I almost lost my apartment in December of 2013.

Posted by
patrice Bradshaw
on
Hi. I reside in Rochester, Ny. My daughter. was recently attacked in the face by a pitbull dog. Parts of her face still needs surgery. Im unemployed right now due to my pending surgery in my back. Anyway, medical copayment is $427.05. I really need the money.

Posted by
mcruz
on
since it is illegal in nys, can they come after me to payback more than the principal? I paid loan consolidation company to settle my accounts, and they still are harassing me.

Posted by
Tamar
on
What gives NYS to make personal decisions for people who need a little help, when a financial institute will not. Sometimes we need help with extra bills or emergencies that happen in the family or personal situations. I'm a little upset about this, because if it wasn't for Payday Loans, I wouldn't been able to catch up with something's. Maybe the interest is more than you want to pay, but I rather pay a little more than have a bank tell you face to face, loan company tell you no, because your credit stinks. Thank you Albany for screwing me up and taking away the only financial institute that was willing to help me in trouble times.

Posted by
Mrs Derek Sivers,
on
I NEVER THINK I WILL SUCCEED IN GETTING A LOAN FROM THE INTERNET Good day, My Friends be very carefull, I am an American who base in the United Kingdom, i am so confidence to say that one's in my life time i can experience legitimacy in loan company on the Internet world, if i was directed by somebody else to this company, i wouldn't have written them because i have been fooled several times by online loan firm on the Internet and i decided stay off applying for loan online until a time came when i was having financial problem due to the predicament i had in my place of work that leads to my sack off in my place of work and i have nobody to run to, my credit was very low, my rent was approaching it expiring dates and my kids have to been in school but due to my ex-sense spending before i got sack off from place of work i have nothing solve all this problem. I have no other option than to come online looking for online loan firm that will help me out of my financial problem and i came across a loan firm and i was scammed of 4,500 in my attempt of obtaining a loan from them and i almost committed suicide and i ask my self is the end of my life because i am a dieing mother of 4 kids to take care of, where will i get money to finance their education and pay my bills? all this are the questions that kept running inside my mind and became frustrated in the process of doing that and a words of encouragement came into me instantly saying it is not over yet, keep trying and you will definitely got in touch with your helper very soon and i stood up and said i will give this a last try and if nothing happens that means their is know hope for me any longer. And i went online that very moment and i came across a post by one saying that he has never seen a real loan firm and instantly i consulted the loan firm by the email which he place on the post and in that same day i got response from the manager and he forward to me all the Rules and Regulations that is guiding the company which will enable me to obtain the loan from them and i ask him how long will it take me to finish the process of my loan because i am planning of getting into business after i lost my job and he said it will take us four or five days if i am fast in replying their message. I as him, hope i am not going send any money to them because i was told here in my country that i shouldn't send any money in getting a loan and he replied by saying that it surprise him when i said that because their is no loan firm online who will render service to a loan seeker without him/her paying anything upfront. It sound very hurt to his hearing and he took it as a pain and explained everything to me and when i have a rethink about it i discovered it was true and that was were those false loan firm took advantage in defrauding people of their had earn money and he gave me his words that i should go on with them and he will took me by surprise that they are truly for real and i went on and apply for a business loan of $90,000.00 USD for the duration of 6years and i paid all the charges that are needed to be paid and like he said he is going to surprise me, that was what he did, it was then i knew that there are still real loan company on the internet otherwise i wouldn't have known. Thanks

Posted by
aida
on
I took a pay day loan 3 years ago, I went into a payday consolidation company 2 years ago and the payday loan company refuse to pick up the phone. Now 3 years have gone by I am am getting harrassed via e-mail that the lender is filing 3 charges charges against me. 1. violation of federal banking law 2. collateral check fraud 3.theft by deception. Threats of notiifying my employer of what I have done. They claim they have the right to contact credit bureaus, employer, FBIi. ft and banks about fraud. I was told by OIG that it is illegal to do payday loans in New York.
What do I do now?

Posted by
Linda
on
I don't have credit cards and live pay check to pay check. When things come up like an expensive car repair (and they are all expensive) or some urgent need arises I would use a pay day loan company. Some have very high interest rates or charge you a large sums if you don't make the full payment ASAP but there are others that didn't bleed you try. So, now I have nothing to help me if something goes wrong. It is not up to New York State to make this decision for us, it is our choice!

Posted by
Erick
on
So what happens if you already have loans and live in NY? I actually consolidated all my PDL's but now cannot make payments for about a month and a half. Can they legally come after me?

Posted by
Jen
on
I use to borrow from Mycashnow; those loans helped me out a lot when it came rent, car payment. I didn't know they were illegal. I wonder if the lender would give back the fees?

Posted by
Keema
on
This is amazing, a couple days after the news brook I got a call from Cash Jar asking me if I wanted a loan to get rid of some bills.. I took it but know I find out about that its illegal, I just want to pay them off ASAP.

Posted by
Damian
on
I use to use 24/7greenstreetloan.com and it sucks that made it illegal in New York. Those loans helped out a lot and i wasn't charge the much. i.e $100 and I had to paid back $122. It wasn't so bad. What can you do, I guess!

Posted by
Ron
on
Advertising pays for this whole thing and adwords and places ads based on keywords in the articles........nonetheless pretty ironic.

Posted by
Trish
on
The banner revolves around searches you did on the internet. its part of the tracking lol

Posted by
Chris
on
What is really awesome about this article is the banner ad that appears above the article title.... advertising an online payday loan.

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