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Financial Fraud Law

New York Expands Investigation into Online Payday Lending

 New York regulators are expanding their investigation into online payday lending.

As part of an extensive and ongoing investigation, the New York Department of Financial Services (DFS) now has sent subpoenas to 16 online “lead generation” firms that the DFS said it suspects of deceptive or misleading marketing of illegal, online payday loans in New York.

DFS said it suspects that these firms are placing consumers at risk of abuse by collecting and selling their personal information to illegal online payday lenders and other companies, including scam artists, in violation of New York State law.

“Earlier this year, my administration launched an investigation of online payday lenders,” New York Governor Andrew M. Cuomo said, adding that “we are expanding this investigation to protect New Yorkers from similar scams that ensnare families in endless cycles of debt. We will continue to follow this investigation wherever it leads and use every tool at our disposal to safeguard New Yorkers from those who seek to prey upon vulnerable consumers.”

Benjamin M. Lawsky, Superintendent of Financial Services, added, “Payday lending is illegal in New York and so is the deceptive marketing of those unlawful loans by lead generators. What’s worse is that we’ve received complaints from New Yorkers about lead generation companies related to scams, harassing phone calls, deceptive advertising, and privacy breaches. New Yorkers can get sucked into a seemingly endless black hole of consumer abuse if they provide their sensitive personal information to these types of websites.”

According to the state, lead generation firms do not typically make payday loans directly, but instead set up websites marketing those illegal loans. The state regulators said that, through promises of access to quick cash, lead generation companies entice consumers to provide them with sensitive personal information – such as Social Security and bank account numbers – and then may sell that information to payday lenders operating unlawfully in New York and other companies. As part of its investigation, DFS said that it has heard complaints from New York consumers against a number of lead generation firms about false and misleading advertising (including celebrity endorsements), harassing phone calls, suspicious solicitations, privacy breaches, and other issues.

Some consumers, the regulators said, also have complained to DFS about receiving calls from suspected scammers after providing their personal information to the lead generation companies. According to the state, these scams include enticing the consumers to load money on a pre-paid debit card and use it to pay substantial upfront fees in order to receive an online payday loan. After paying these substantial upfront fees, the consumers reported not receiving the promised loan, the regulators said.

Payday lending is illegal in New York under both civil and criminal usury statutes. In some cases, according to the state, lenders attempt to skirt New York’s prohibition on payday lending by offering loans over the Internet, hoping to avoid prosecution. The state’s view is that Internet payday lending, as well as the misleading or deceptive marketing of those loans to New Yorkers, is just as unlawful as payday lending made in person in New York.

In August 2013, the DFS demanded that 35 companies cease and desist offering illegal payday loans online in violation of New York law. According to the state, the majority of these companies (at least 23) have already ceased business in New York after receiving the letters from the DFS. In August, Lawsky sent letters to 117 banks – as well as NACHA, which regulates the use of the Automated Clearing House (ACH) network and whose board includes representatives from a number of those banks – requesting that they work with the DFS to cut off access to New York customer accounts for payday lenders operating unlawfully. Additionally, Lawsky sent a letter in August to all debt collection companies operating in New York specifically directing them not to collect on illegal payday loans from the companies DFS’ investigation had identified to date, since such loans are null and void.

A list of the 16 lead generation companies to which DFS issued subpoenas is included below. DFS is demanding a range of materials as part of its ongoing investigation, including marketing materials, contracts for sales of consumer information, and privacy policies.

  • Allied Cash Advance
  • Bahamas Marketing Group, Inc.
  • Blue Global, LLC d/b/a 100DayLoans, HighSpeedPayday
  • DJR Group, LLC
  • Fix Media Group, LLC d/b/a We Fix Money
  • Hydra Fund II
  • LightSword, LLC d/b/a Aero Advance
  • Payday Loan Ranger
  • Payday Mobility
  • PayDayForest
  • PayDayMall
  • Personal Cash Advance
  • Selling Source, LLC d/b/a MoneyMutual, LLC
  • US Cash Loans
  • ValleyTrust
  • WebMarketerLive d/b/a JustClickHereLoans, CashMoneyNow

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