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Internet Payday Loan Companies Under Fire for Unethical Practices

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Charleston, WVFive debt collection companies have reportedly settled a lawsuit filed by the West Virginia Attorney General that alleged the companies were attempting to collect on illegal Internet payday loans. Because they are available over the Internet, online payday loans are sometimes made available to consumers in states where the loans are illegal, such as West Virginia. These illegal Internet loans often come with high interest rates, and consumers can very quickly find themselves in much more debt than they anticipated.

According to The West Virginia Record (6/6/12), in July 2012, West Virginia settled lawsuits with five collection agencies for $700,000. Although the settlement was not with the companies that offered Internet payday loans, the collection agencies were allegedly attempting to collect on such loans offered by other companies. Internet payday loans are illegal in West Virginia, and debt owed to Internet payday companies was previously canceled.

Concerns about Internet payday loans abound, including high interest rates (1,369 percent, in one case), loan companies operating without proper licenses and offering loans in states where the loans are illegal.

But there are also concerns about how the Internet payday lenders operate. Payday loans are loans offered with the assumption that the loan will be paid back with the customer’s next paycheck, or within 30 days. But some companies automatically renew the loan if the customer does not inform the company of his or her intention to repay the loan in full. Others make automatic withdrawals from accounts, even when the customer has requested they not.

WATE News (6/10/13) reports on one women who took out a loan for $500 in August 2012. When she checked into her account almost 10 months later, she learned that two loan companies had withdrawn a total of $3,000 from her account.

Now, some banks are under fire for allowing Internet payday loan companies access to client accounts when the client has stated they do not want this.

The Center for Responsible Lending (responsiblelending.org) notes that Internet loans are subject to federal and state laws designed to prevent abusive payday lending. The center further notes that the Federal Deposit Insurance Corporation (FDIC) has directed banks to be responsible in situations where electronic payment processors (such as Internet payday lenders) may be involved in illegal activities.

Included in The FDIC’s directive was a note that financial institutions should be on the lookout for return rates or complaints that “suggest the inappropriate use of personal account information and possible deception or unfair treatment of consumers” (1/31/12).

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READER COMMENTS

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Contact your bank and inform them that you are going direct to the Comptroller of the Currency (Atlanta GA - if in Southeastern US - GOOGLE Comptroller of Currency [federal agency that governs banks] for the office in your area of U.S.). Tell your local Branch Manager that and if he/she does not respond appropriately, go the President and/or CEO of your bank. Believe me, that gets the Banks' attention - have had to do it before. OR - close the bank account and reopen with another account number. GOOD LUCK!!!!!

Posted by

on
we have/are also in the internet loan web/ only had 2 loans but bank continued to allow many to withdraw and also juggled deposits and withdrawals to benefit with bounce charges. Even after being told many times we did not owe these companies. Banker left account open over 2 months past when we instructed to close account allowing these payday loan entities to continue to attempt collections accumulating more bank fees, then said he would close account for $500.00. We still have pay day loans contacting us saying we owe them more money and threatening with legal and sometimes physical harm. My husband has been on the edge of losing his job of 17yrs due to phone calls there. We have paid many to stop this. We have tried the "legal" entities of reporting to all the recommended entities and go through the steps of asking for written proof etc but they keep crawling out of the woodwork. Have turned Bank into financial entities only to have them come back and say there is nothing they can do. Have reached out to many attorneys with same response even with proof of Bank being crooked like re-depositing the payments for car loan so the auto payment would bounce then taking car. And the juggling of deposits and withdrawals around the payday loans for bounce charge purposes. This is also where we have our mortgage and this same banker has us in a major bind over this and has refused to refinance or do any of the so called "help" promised and keeps us in a 8.5% ARM. Won't even work with other institutes when we apply there.

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