PayDay Loans Under Increased Scrutiny From Federal And State Governments
By Jay Weller
Pay Day loans, although easy to procure, usually carry with them extremely high interest rates and burdensome terms and fees. Often Borrowers are caught in a mire where they need to continually borrow from such Lenders to pay their essential bills.
Recently, the Attorney General of Illinois, Lisa Madigan, accused on such Lender of misleading Borrowers who procured expensive loans that come bundled with insurance products that were not needed or useful. Such insurance promises to make payments on behalf of the Borrower if he is unable to make payments because of loss of employment.
However, such insurance was never paid to any of the insured. In fact, the insurance scheme is merely a devise that allows the Lender, All Credit Lenders, to skirt the Illinois State Usury Law that limits the interest a Lender may charge to 36%.
Other Lenders circumvent the Usury Laws by granting the Borrowers more time to repay the loans, or by issuing Open Ended Loans that do not come with a fixed period of repayment. The Consumer Financial Protection Bureau is investigating a number of Lenders offering Short Term Loans throughout the United States. Among these is World Acceptance Corporation. Prosecutors in 21 States are also investigating Lenders with connections to Native American tribes. The
Lenders use these connections to contend that they are immune from Federal and State Laws because of the sovereign status given the tribes.
Investigators, including Benjamin Lawsky in New York, are also focusing on the Lead Generators who sell leads to the Pay Day Lenders.