The payday loan industry always seems to fall target to some opposing group. At the moment, there are six federal agencies probing into the practices of the online direct lenders. Both the Justice Department and the Consumer Financial Protection Bureau, The Federal Deposit Insurance Corp, the Office of the Comptroller of the Currency the Treasury’s Financial Crimes Enforcement Network and both attorneys general and financial regulators from several states have all set their sights on controlling the industry’s practices.
There are so many different investigations over numerous categories within the lending industry all focused on snuffing out lenders who practice short-term loans. Besides targeting direct lenders, there are also banks and payment processors that do business with the fast payday loan companies.
Predatory payday loan companies are targeted.
In New York, 35 online payday loan lenders were ordered to comply with the 16% APR interest cap. There were also 117 letters sent to banks asking for help to cut off direct lenders form a global network which is used to send and collect money. A group representing the payday loan companies argued that this practice was misguided since state laws is insufficient to govern the global nature of the Internet. New York to a chance to regulate in the way the leaders felt obligated to do in order to protect the citizens of the state.
It is difficult to pinpoint fingers at a whole group of lenders, especially when they are not all choosing to break state regulations. It may take a while before access to banking systems can be cut off to the direct lender, but if something can be done in the meantime to stop deceptive payday lenders from preying on the financially vulnerable consumers would be great.
As states regulate, there are lenders who look for loop holes to get around them. Renaming or reclassifying their loans, tweaking the loan terms and conditions or reclassifying their business are all attempts to work their way out from under the strict regulations.
It isn’t just the direct lender that is skirting the rules. Banks are under investigation for providing easy access to accounts or delaying their own investigations prompted by customer complaints. If a bank account is debited unjustly by a direct lender, a complaint to the bank should spark an immediate inquiry.
There are similar tactics used by the government in 2011 to squash online poker businesses. With all of the different federal agencies investigations, there is bound to be solid results to limit the payday loan industry further.
In the meantime, any borrower will need to use caution when finding a direct lender to work with. The company that offers you the most money may not be the best choice as far as your state government regulations states. Find out what, if any, limits are when it comes to the online payday loan industry before you fill out an application.
It will be interesting to see the final results of the investigations. Will states have the rights to increase regulations or will the short-term loan industry find themselves cut off from using banks to get to customer’s bank accounts? In the meantime, payday loans online will continue to offer their emergency money services to those who apply and meet current regulation standards.
