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 When she checked into her account almost 10 months later, she learned that two loan companies had withdrawn a total of $3,000 from her account.
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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).