As we previously blogged and in light of of recent regulatory action by the Federal Deposit Insurance Corporation (FDIC) regarding short term loans (also referred to as “payday loans” and “cash advances”), New York Governor Andrew Cuomo has increased enforcement efforts against payday lenders and recently widened the net of potential defendants to include marketers of payday loans, in addition to the payday lenders themselves.

Complying with New York State Law

Payday loans have been illegal in New York State for many years – 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 residents despite the prohibition.  While many payday lenders and marketers believe (or argue) that New York’s ban on payday lending does not apply if the loans are offered or advertised over the Internet, this belief is mistaken.  According to Governor Cuomo, the use of the Internet as a medium for offering and/or marketing payday loans does not relieve the companies of liability.

In order to avoid prosecution, payday lenders must at all times ensure that their lending practices comply with all state laws applicable to individuals that obtain the loan products and services.  Entities that fail to comply with the requirements of applicable law may find themselves facing regulatory action from not just the New York Attorney General, but from numerous other state attorneys general, which could result in significant fines and court-directed changes to business practices.

Recent Crackdown on Payday Loan Marketers

In an effort to curtail further disregard for payday lending laws, Governor Cuomo sent 16 subpoenas to online lead generation companies that are suspected of engaging in deceptively marketing illegal payday loans in New York.  The list of payday marketers which were subpoenaed can be found here.

According to the New York Department of Financial Services, the payday marketers are not only engaging in marketing illegal services, but are also collecting and selling New York consumers’ personal information to third party payday lenders and other companies.