Cuomo Administration cracks down on illegal payday lenders
By MATTHEW DONDIEGO
Gov. Andrew Cuomo has announced his Administration is actively issuing cease and desist orders to online loan companies providing illegal payday loans to New York residents following an investigation by the Department of Financial Services revealed that some lenders were offering online loans with interest rates as high as 1,095 percent.
Payday loans are short-term loans that provide customers a small value advance against their next paycheck. Lenders are notorious for paying down only the interest and finance charges, despite the customer's belief they are actually paying down the loan's principal, according to the Governor's Office. The DFS investigation uncovered companies charging extremely high interest rates on the loans, ranging from 400 percent to as high as 1,000 percent. This type of short-term, high interest lending is illegal in New York under both civil and criminal laws.
Companies are forbidden from offering loans with an interest rate exceeding 16 percent for loans under $250,000. New York state also prohibits loans with interest rates more than 25 percent per year, according to a letter to loan companies from the Superintendent of Financial Services, Benjamin Lawsky. Lenders enforcing collection of such debts are also subject to criminal penalty for attempting to collect on void or unenforceable loans as a violation of the General Business Law.
"Illegal payday lenders swoop in and prey on struggling families when they're at their most vulnerable — hitting them with sky-high interest rates and hidden fees," Cuomo said. "We'll continue to do everything we can to stamp out these pernicious loans that hurt New York consumers."
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http://www.legislativegazette.com/Articles-Top-Stories-c-2013-08-06-84656.113122-Cuomo-Administration-cracks-down-on-illegal-payday-lenders.html