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Financial Fraud Law

New York Demands that 35 Online Payday Lenders ‘Cease and Desist’

 New York’s Department of Financial Services is taking on payday lenders, asserting that an investigation found that some are offering illegal payday loans over the Internet to New York consumers with annual interest rates as high as 1,095 percent. The DFS has demanded that 35 companies “cease and desist offering illegal online payday loans that harm New York consumers.”
In addition, the DFS has sent letters to 117 banks and NACHA, which administers the Automated Clearing House (ACH) network, requesting that they “cut off payday lenders’ access to customer accounts.” According to the DFS, illegal payday loans made over the Internet are made possible in New York by credits and debits that must pass through the ACH network.
“Illegal payday lenders swoop in and prey on struggling families when they’re at their most vulnerable – hitting them with sky-high interests rates and hidden fees,” said New York Governor Andrew Cuomo. “We’ll continue to do everything we can to stamp out these pernicious loans that hurt New York consumers.”
DFS Superintendent Benjamin Lawsky said, “Companies that abuse New York consumers should know that they can’t simply hide from the law in cyberspace. We’re going to use every tool in our tool-belt to eradicate these illegal payday loans that trap families in destructive cycles of debt.”
Superintendent Lawsky also issued a letter to all debt collection companies operating in New York specifically directing them not to collect on illegal payday loans from the 35 companies DFS’s investigation has identified to date. Previously, in February, Superintendent Lawsky sent letters to all debt collectors in New York stating that it is illegal to attempt to collect a debt on a payday loan since such loans are illegal in New York and any such debts are void and unenforceable.
Payday loans are short-term, small-value loans that are typically structured as an advance on a consumer’s next paycheck. Oftentimes payday lenders debit only the interest and finance charges from a consumer’s account – even though a consumer may believe they are paying down principal, which effectively extends the length of the loan. In most cases, consumers must affirmatively contact the payday lender if they actually want to pay off the loan.
Payday lending is illegal in New York under both civil and criminal usury statutes. The DFS said that in some cases, however, lenders attempt to skirt New York’s prohibition on payday lending by offering loans over the Internet, hoping to avoid prosecution.
The following 35 companies received cease and desist letters from Superintendent Lawsky for allegedly offering illegal payday loans to New Yorkers. DFS said that its investigation found that a number of these companies were charging interest rates in excess of 400, 600, 700, or even 1,000 percent.
· ABJT Funding, LLC,
· Advance Me Today,
· American Web Loans,
· Archer Direct, LLC,
· Bayside Loans,
· BD PDL Services, LLC,
· Blue Sky Finance, LLC ,
· BS Financial Group Inc.,
· Cash Jar,
· Cash Yes,
· Discount Advances,
· DMA Financial Corp.,
· Eastside Lenders, LLC,
· Fast Cash Personal Loans,
· Golden Valley Lending,
· Government Employees Credit Center, Inc.,
· Great Plains Lending, LLC,
· Loan Point USA Online,
· MNE Services, Inc.,
· MobiLoans, LLC,
·, Inc.,
· National Opportunities Unlimited, Inc.,
· Northway Broker Ltd.,
· PayDayMax Ltd.,
· Plain Green, LLC,
· Red Rock Tribal Lending, LLC,
· SCS Processing,
· SFS, Inc.,
· Sonic Cash,
· Sure Advance, LLC,
· Tribal Credit Line,
· United Consumer Financial Services, Inc.,
· Western Sky Financial, LLC,
A full copy of the cease and desist letter from Superintendent Lawsky is available below.
August 5, 2013
RE: Illegal Online Payday Loans Offered and Sold to New York Consumers
Based upon an investigation by the New York State Department of Financial Services (“the Department”), it appears that your company and/or its subsidiaries, affiliates or agents are using the Internet to offer and originate illegal payday loans to New York consumers. This letter serves as notice that these payday loans violate New York’s civil and criminal usury laws. Pursuant to the New York Financial Services Law, effective immediately, your company, its subsidiaries, affiliates, agents, successors and assigns are directed to CEASE & DESIST offering and originating illegal payday loans in New York.
Debt collectors are reminded that, pursuant to the provisions of General Obligations Law § 5-511, loans offered in New York with interest rates above the statutory maximum, including payday loans made by non-bank lenders, are void and unenforceable. Attempts to collect on debts that are void or unenforceable violate General Business Law § 601(8) and 15 U.S.C. §§ 1692e(2) and1692f(1) of the Fair Debt Collection Practices Act.
Under the New York General Obligations Law § 5-501 and the New York Banking Law § 14-a, it is civil usury for your company to make a loan or forbearance under $250,000 with an interest rate exceeding 16 percent per annum. Further, under New York Penal Law §§ 190.40-42, your company commits criminal usury every time it makes a loan in New York with an interest rate exceeding 25 percent per annum. In addition, under the provisions of General Obligations Law § 5-511, usurious loans offered by non-bank lenders are void and unenforceable; therefore, collection of debts from payday loans violates New York General Business Law § 601(8) and 15 U.S.C. §§ 1692e(2) and 1692f(1) of the Fair Debt Collection Practices Act. Further, insofar as your company has made payday loans in New York, your company has violated § 340 of the New York Banking Law, which prohibits unlicensed non-bank lenders from making consumer loans of $25,000 or less with an interest rate greater than 16 percent per annum.
Within 14 days of the date of this letter, your company is directed to confirm in writing to the Department that your company and its subsidiaries, affiliates or agents no longer solicit or make illegal payday loans in New York, and outline the steps taken to cease offering these loans to New York consumers. Should your company, its subsidiaries, affiliates, agents, successors or assigns fail to comply with this directive by August [ ], 2013, the Department will take appropriate action to protect New York consumers.
Very truly yours,
Benjamin M. Lawsky
Superintendent of Financial Services


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