NEW YORK – The New York Department of Financial Services is leading a multistate investigation into the payroll advance industry and allegations of unlawful online lending.
“Members of the industry purport to provide consumers access to wages already earned prior to payroll,” the department said in announcing the initiative. “However, some of these firms appear to collect usurious or otherwise unlawful interest rates in the guise of ‘tips,’ monthly membership and/or exorbitant additional fees, and may force improper overdraft charges on vulnerable low-income consumers.”
The NYDFS said the investigation is focusing on whether companies are in violation of state banking laws, including usury limits, licensing laws and other applicable laws regulating payday lending and consumer protection laws.
Usurious & Harming Consumers?
“High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious and harming consumers. Protecting consumers is our top priority and New York is leading the charge to expand the investigation of illegal online lending by including regulators from ten additional states and Puerto Rico,” said Superintendent Linda Lacewell. “We will use all the tools at our disposal, including partnering with peer regulators to safeguard consumers from predatory lending and scams that ensnare families in endless cycles of debt.”
DFS said it is sending out letter requests for information to members of the payroll advance industry.
Other States Involved
Also joining in the investigation are the Connecticut Department of Banking; Illinois Department of Financial Professional Regulation; The Office of the Commissioner for Financial Regulation in the State of Maryland; New Jersey Department of Banking and Insurance; North Carolina Office of the Commissioner of Banks; North Dakota Department of Financial Institutions; Oklahoma Department of Consumer Credit; Puerto Rico Comisionado de Instituciones Financieras; South Carolina Department of Consumer Affairs; South Dakota Department of Labor and Regulation's Division of Banking, and Texas Office of Consumer Credit Commissioner.