New York State Taking Action Against Payday Lenders
Following close on the heels of recent regulatory action 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”), New York Governor Andrew Cuomo’s office issued cease and desist letters to 35 online payday lenders doing business with New York State residents.
Governor Cuomo has also solicited the cooperation of NACHA, The Electronic Payments Association which administers the Automated Clearing House (“ACH”), and several banks, in an effort to limit the ability of payday lenders to access the accounts of New York State residents.
Complying with the New York State Law
Payday loans are already 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 residents despite the prohibition.
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. 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 could result in significant fines and court-directed changes to business practices.