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.