How Payday Lenders Work

You can’t say much good about payday lenders, but you have to admit they’re clever about exploiting opportunities to get their hooks in.  New York State officials discovered how payday lenders work to avoid laws and use loopholes to do end runs to make illegal loans.


Payday lending is outlawed in New York for a good reason. These short term loans come with interest rates that sometimes exceed 1,000 percent and the loans often trap people in debt for years.

Courtesy Pixabay
Courtesy Pixabay

But many payday lenders figured out how to use the Internet to offer loans in New York and elsewhere where payday lending is illegal.  When the New York State’s Department of Financial Services discovered how these payday lenders work, the department got the electronic network that processes payments for banks to agree that it will not handle these loans.

After they were cut off by the banks, payday lenders  got creative. They began to notify borrowers, on their websites, that they no longer use the electronic network to process payments. Instead, they ask for debit card information so payments can be automatically deducted from borrowers’ accounts.

 New York state investigators discovered the new tactic and reached out to Mastercard and Visa.  Both companies say they’ll partner with New York to stop illegal debits.

Governor Andrew Cuomo says,  “By working with us to root out this illegal conduct, Visa and MasterCard have stepped up to the plate and shown how private companies can work alongside state government to protect vulnerable New Yorkers.”

The state’s Department of Financial services launched an investigation into payday lending last year. And in August 2013, DFS sent letters to 35 online payday lenders ordering them to stop peddling  illegal loans in New York.

Now it has sent letters to another 20 companies, including 12 that appear to use the debit card ploy.

DFS Superintendent Lawsky said, “Whenever online payday lenders try new schemes to flout our laws and exploit New York consumers, we will take strong action to head them off at the pass.”


  • AALM Consulting Services, Ltd. d/b/a MultiLoanSource 
  • Action Payday, LLC 
  • Coral Keys, Ltd. 
  • Fast eFunds 
  • First American Capital Resources ONE, LLC 
  • Iggy Group, LLC d/b/a Iggy Loans 
  • Joro Resources, LLC d/b/a Idealgelt 
  • MB Marketing, LLC d/b/a My Next Day Cash 
  • Rapital Capital 
  • Red Leaf Ventures, LLC d/b/a Red Leaf Lending 
  • Sierra Lending, LLC 
  • Uncle Warbucks 
  • VIP PDL Services d/b/a VIP Loan Shop 
  • Fast Next Day Cash (aka Vista B Loans) 
  • First America Credit 
  • My Web Funds 
  • Net Cash 123 
  • Platinum Cash Link 
  • CWB Services, LLC d/b/a
  •  Vandelier Group, LLC
  • Shoreline Online,LLC
  • Cutter Group, LLC 
  • Hydra Financial Limited Fund d/b/a Hydra Fund II



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Barbara Nevins Taylor

As the winner of 22 Emmy Awards and a slew of journalism honors and awards, I created to give you the straight story about complicated stuff. Tell us what you want to know and we'll get you the answers.