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Internet Payday Loans

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Banks and smaller financial institutions have been accused of becoming involved in Internet payday loans, short-term loans offered over the Internet that carry high interest rates. Although the banks themselves do not offer Internet loans, they may be allowing companies that do offer the loans to engage in predatory online loan activity, possibly in violation of consumer protection laws. Meanwhile, some Internet payday loan companies are accused of either operating in states where they are illegal or operating in states in which they do not have the proper licenses. Others are accused of charging interest at rates far higher than state laws allow.

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Internet Loans

paydayloanshandsmoneyarticle.jpg Internet payday loans are illegal in some, but not all, states. Customers can apply for the loan online—often with quick approval and no credit check—but the expectation is that the loan is paid back with the customer's next paycheck. In some cases, however, interest rates can be exorbitant, sometimes above 500 percent. Further, if the customer does not indicate he or she wants to pay back the entire loan, the lender might renew the loan to the next month, withdrawing the interest payment only. There may also be other finance charges and fees associated with the loan. Combined with the interest, the finance charges and fees could tack on thousands of dollars to what started as a relatively small loan.

Payday lending is either fully illegal or illegal without a proper license in Arizona, California, Ohio, Montana, Arkansas, New York, Pennsylvania, West Virginia, Georgia, New Hampshire, Vermont, Massachusetts, Connecticut, New Jersey, Maryland and the District of Columbia.

Because the payday loans are obtained online, however, lenders may be illegally lending money to customers in those states. Some states also cap interest rates, making it illegal to charge above a certain interest rate, which Internet payday loan companies may be violating.

Internet Payday Loans and Banks

According to a New York Times article (2/23/13), major banks including JPMorgan Chase, Bank of America and Wells Fargo may enable payday loan lenders access to borrowers' bank accounts in order to make withdrawals. So while the banks themselves do not provide the payday loans, they provide the means for the payday loan companies to do business.

Furthermore, companies that offer Internet payday loans might also automatically withdraw money from the customer's bank account, pushing the customer into overdraft and triggering overdraft and insufficient funds fees. In some cases, banks are alleged to have allowed these lenders to continue withdrawing money, even when the customer has asked them to stop, in violation of federal law. According to a Pew Payday Lending in America report, "How Borrowers Choose and Repay Payday Loans" (2/20/13), 27 percent of payday loan borrowers were forced into bank account overdrafts during 2012.

Officials are now investigating the role major banks play in online payday loans and whether the banks make it possible for such lenders to offer loans in states where they are illegal. Banks may be profiting off allegedly illegal activity if the automatic loan withdrawals push the customer into overdraft, resulting in bank fees being charged.

Even though major banks do not offer the loans themselves, if they allow Internet payday companies to withdraw money from customers' accounts, especially after the customer has requested they stop, the banks could be violating consumer protection laws.

Meanwhile, regulators and attorneys are investigating Internet payday loan companies as well, to determine if they use illegal, misleading or unethical practices.


Internet Payday Loan Lawsuits

Some Internet payday loan lawsuits have been filed against companies alleged to have violated consumer protection laws. In 2010, one such lawsuit against Arrowhead Investments was settled, with the company agreeing to pay $100,000 in restitution and forgiving an additional $432,000 in outstanding loans. The lawsuit alleged Arrowhead violated state consumer law and had unreasonable loan agreements. Arrowhead did not admit to any wrongdoing in the settlement.

Consumers who live in states where payday lending is illegal may be eligible to file a lawsuit against the lender. Customers who have requested their banks stop the automatic withdrawals but have still had the money withdrawn from their accounts may also be eligible to file a lawsuit.

Internet Payday Lending State Laws

Although there are concerns about the high interest rates and fees associated with the loans, another concern about the Internet payday loans is that because they are offered online, they are available to consumers in states where such loans are illegal or where the company may not be properly licensed.

States in which Internet lending is illegal or in which companies must be properly licensed are Arizona, California, Ohio, Montana, Arkansas, New York, Pennsylvania, West Virginia, Georgia, New Hampshire, Vermont, Massachusetts, Connecticut, New Jersey, Maryland and the District of Columbia.

Internet Payday Loans Legal Help

If you or a loved one has suffered similar losses from an Internet Payday Loan, please click the link below and your complaint will be sent to a Consumer Fraud lawyer who may evaluate your claim at no cost or obligation.

Last updated on May-7-15

PAYDAY LOANS LEGAL ARTICLES AND INTERVIEWS

Respected Non-Profit Reports Problems with Internet Payday Loans: Survey
Respected Non-Profit Reports Problems with Internet Payday Loans: Survey Washington, DC: You have to know that something is a definitive issue when the venerable Cable News Network aka CNN gets into the act. This time it’s CNNMoney, reporting on Internet payday loans and the efforts of the Pew Charitable Trusts to establish a snapshot of just how bad things can get. Given the availability and ease of acquiring a payday loan online, little wonder so many Americans and even state Attorneys General are filing a payday loan lawsuit [READ MORE]

Internet Payday Lender Group Sues, Regulators Promptly Fight Back
Internet Payday Lender Group Sues, Regulators Promptly Fight Back Washington, DC: It’s somewhat poetic that the US Department of Justice, in attempting to protect consumers from the chokingly high interest rates inherent with many online payday lenders, dubbed its effort to rid the industry of illegal operators as “Operation Choke Point.” Still, that hasn’t stopped an industry group representing payday loan lenders from filing a payday loan lawsuit of its own against the feds for allegedly trying to force US banks to drop those lenders as clients [READ MORE]

Crackdown on Illegal Internet Payday Loans Nets Help for Consumers
Crackdown on Illegal Internet Payday Loans Nets Help for Consumers Annapolis, MD: The state of Maryland is the latest to bring the hammer down on the Internet payday loan and, specifically, the duo of Western Sky Financial (Western Sky) and CashCall Inc. According to The Baltimore Sun (6/24/14), the lenders and state regulators agreed to a $2 million settlement designed to address unsavory lending and collection practices that were described as “abusive. [READ MORE]



READER COMMENTS

Posted by
Michigan
on
I took out a loan for $600 in December of 2014 with American Web Loan, with a repayment plan of $180 per month. I was not aware of the other fees that were associated with the loan due to the lack of information that was provided, and now I am getting repeated overdraft fees because I didn't expect to repay over $3,000 for a $600 loan.

Posted by
Alaska
on
In 2012, I took out a $10,000 loan from Western Sky (Cash Call, Delbert Services, now Cash Call again). I have been paying payments of $743.49/mo and have now paid over $19,000. I was desperate at the time I took it out because I had black mold in my home and no funds to pay to get it taken care of. It appears all of the funds I have paid have gone to interest and I am getting nowhere with this and cannot afford this payment.

Posted by
California
on
I have gotten payday loans and have been contacted by "lawyers" and "investigators" claiming I was going to be arrested and prosecuted if I didn't pay up for a loan that had already been paid.

Posted by
California
on
I work in business mgmt. I had a seizure and lost two months of work and salary. I am back to work, but playing catch up as you can well imagine. Drivetime has a zero grace period on their lease program, so I lost the car. The down payment on the car was the reason I took out payday loans to begin with. I keep asking them for a payment history on my account, a statement? They keep telling me they are not required to supply that to me and my payment history has been removed from my online account access. I am sure I have paid more than the principal amount borrowed but they refuse to acknowledge this and are telling me they are filing a lawsuit against me for intent to defraud for freezing my checking account. My current intent is to not become homeless. What are my rights?

Posted by
Ohio
on
I currently have six payday loans, five of which were receievd online, totaling over $3,200. I am looking into the laws and trying to find out what is legal and what is not on these. Any help would be appreciated.

Posted by
Maryland
on
I took out an $800 dollar payday loan and was informed that I would have to pay the total of $2,040 back in increments of $120.24 every two weeks. I missed one payment and was 330% after being told by a spotloan manager that she would start the payment over without penalty. I have been paying on this loan for over a year now and they have the nerve to tell me the buy-out amount is $800. This is the original amount that I borrowed. I need to know if Maryland has any laws pertaining to overcharging the consumer and anything on this ridiculous percentage rate.

Posted by
Illinois
on
I put my information in a website that would find me an online lender. My information was used by a company called Triple Services LLC who began withdrawing money from my bank account without my consent or any kind of loan agreement. They now have a collection item on my credit report and harass me at work and on the phone, threatening all sorts of things for $500.

Posted by
Arizona
on
Took a $300 cash advance payday loan with Cash Advance Now. Did not receive documents. Made two $100 payments (tomorrow will be the third) and I STILL have a payoff balance of $354. I had them re-send the documents and the interest is 806%!!!!! Original $300 loan would be $1,260 payoff over ONE YEAR!!

Posted by
Alabama
on
Has violated my state laws on payday loan lending and continues to ignore all comunication with me, but continues to debit my account.

Posted by
New York
on
After researching extensively I found a payday loan company that I presumed was reputable. According to the terms of the communication and agreement, I made $540 to receive a $3000 loan. I was then asked to make another large payment prior to receiving the funds, which I did not. I was told if I did not, I would not receive the loan nor the monies that I have sent. I signed no contract although I have all of the terms in writing. I need assistance.

Posted by
Pennsylvania
on
Payday loan for $950 has caused me to fall behind in my mortgage. I was billed over 275% interest every 2 weeks and I’m ruined. After finding out these loans were illegal, I emailed them and asked if this was a legal loan. They did not draw any payment this past payday and my online account is now showing closed. Ihave paid them thousands of dollars over the last 7 months and the damage is done. They should have to repay me.

Posted by
Illinois
on
I’ve been paying on online loans out of every paycheck, but when I log in to my accounts, I still owe the same amount. I live in Illinois and have found that most online companies are not licensed in my state. Is there anything I can do about either instance?

Posted by
California
on
I received a “payday” loan from American Web Loans in the amount of $500. In receiving the loan I wasn't properly informed of the APR or the terms of the loan. After looking at the website for the information and not finding it, I reviewed an email sent from them finding that information toward the bottom. It stated that I would owe 15 payments of $150 and 1 payment of $200, with an APR of 812.95% totaling at $2450 at the maturity date. Is this kind of loan legal? Are these practices of not having all this information available before the loan is processed moral or legal?

Posted by
Oregon
on
I have paid 600% interest on a few loans. I had to take loans to cover loans. I finally had to close my bank account today so I could keep some of my paycheck, and will be changing my phone number within the week.

Posted by
Pennsylvania
on
I took out a $750 loan from mobile loans. Every payday they took $150 out of my account but only very little was toward the loan, the rest interest. I started falling behind on bills and took out more when they offered. Then they said they can't offer more and I found out it was an illegal loan in Pennsylvania. And luckily my bank changed names and had to issue me a new account. So the automatic debits stopped. However, the loan was bought by a collection agency and they've been calling me.

Posted by
Pennsylvania
on
I had two payday loans; I was paying on these. I fell short a few payments because of vehicle issues. Anyway, I tried to work with them both, and now my account is sold through a third party. I am scared of what will happen. The total for both together = $1,600 PLUS interest! Im not sure what to do at this moment.

Posted by
Minnesota
on
I have been told by someone who works for a payday loan company that I will be arrested from my home or workplace if I don't pay them the money. I don't know who this company is. They have been harassing me for over a year. Can you please help me about this issue? Thank you.

Posted by
Pennsylvania
on
Had two Internet loans for years at over 60% interest. Had to shut the checking account down three or four years ago to keep the lenders from constantly withdrawing. Now a collection agency has one account and they’re after me hard, calling my work, my cell, and so on. I need help!!!

Posted by
New York
on
Paid thousands of dollars in interest on payday loans from several lenders and continue to receive debt collection phone calls from several lenders.

Posted by
New York
on
I have taken loans from several of these companies. I faithfully set up days they can withdraw the set amount, but they became quite agressive and began taking from my account without my authorization. I am so in debt, and hoping these people are stopped and punished. I want my money back if possible. Because of them I am much more in debt. Help!

Posted by
Oklahoma
on
I have been dealing with an Internet title loan company for almost a year, I have paid all fees on time and now they have hit me with a final balloon payment due Jan 20, 2014. The balloon payment amount is way over the initial loan, and I have already paid close to $6,000 in interest; now the title loan company is claiming sovereign immunity...I need help. I am going to have no choice but to hand over the vehicle as I refuse to pay the $3,016 balloon payment or refinance the loan. This initial loan was $2,450, monthly payments are $469.05 a month. How do we find out if this is legal and not a company just stating to be a part of the indian tribe??!!

Posted by
Massachusetts
on
I'm trying to decide if I should loan my sister roughly $3,000 dollars to pay off her loans that are putting her further in debt. We live in Massachusetts and I believe they are illegal in this state from what I am reading. If she doesn't pay them what can they really do when they did something illegal in the first place?

Posted by
Alabama
on
I have lost so much money on these loans because I have been backed into a corner with bills and could not borrow from anyone else. I hate making that choice, but it is my only choice. I currently have two that are bleeding me dry.

Posted by
New York
on
My mother took out a number of payday loans to cover the medical costs for my diabetic sister as well as to help with her rent and tuition. She ended up owing about $3000. She closed her bank account and contacted a pay day consolidator who is supposedly helping her pay off her debt. However, because of this she is still struggling. The lenders continuously contacted her to "help her financially" but what they did was put her in more debt. Can she be helped?

Posted by
Maryland
on
Unwilling to provide address for payoff to be mailed. Charged $1,600+ on a $200 loan. Interest at $79 biweekly. Refuses to allow paydown option....all, or continue to pay $79.00

Posted by
Georgia
on
I live in the state of Georgia and not knowing the law at that time, took out a payday loan from the Bank of Delaware on the internet. I found out the loan was illegal and discontinued payment. They are now calling my work and threatening me with being arrested for check fraud if I don't pay the loan back. Please tell me what I can do. Thank you.

Posted by
Connecticut
on
Multiple unauthorized ACH Debits. 16 supposed PDL's wiped out my account. Forced to close Account and now in process of filing complaints and sending stop letters to these predatory lenders.

Posted by
New York
on
yes I am one of the people who have fallen prey to these online payday loan companies and I am suffering to date. They promised that i had options to pay it back, but when I speak with them they insist that I owe them more then what I was loaned. They are harnessing me, threatening my family and calling my work place. I am glad i opened this page up today to see that i am not the only one that succumb to this scam. Please help me.

Posted by
Virginia
on
I was unaware that online payday loans were illegal in the state of Virginia and I don't know what to do. I've read several articles that I should close my account and send them a letter that they are practicing illegally therefore I stop all ach transactions.

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