You may see ads online for quick cash, short term loans, or “cash by tomorrow.” Think of these offers as a swamp that will suck you into financial quicksand.
The high interest rates, sometimes 400 to 600 percent, can lead you into a cycle of debt that’s difficult to escape.
That’s why some states like New York continue to try to crack down and stop illegal payday lending.
While payday lending is not outlawed in every state, New York law clearly bans these high interest loans. But the Internet makes it easy for payday lenders to do an end run around New York’s civil and criminal laws.
Benjamin M. Lawsky, Superintendent of Financial Services (DFS) sent a critical letter to NACHA, the electronic payments organization that manages the network, which process payments for online payday loans.
He’s dissatisfied with the organization’s efforts to regulate groups that use its system. He wrote, “Unfortunately, NACHA’s reforms do not go far enough and continue to leave New Yorkers vulnerable to predatory payday lending over the Internet. Unless NACHA and its board of directors take bolder action, banks will continue to serve as a pipeline for the illegal activity by payday lenders who prey on consumers and brazenly violate New York law.”
Lawsky wants NACHA to issue a clear policy that says it’s illegal to debit money for payday loans in New York State. He also wants the group to put banks that do business with the payday lenders on notice that it’s their obligation to make sure debits are not processed, and he wants the banks to honor stop payment requests when borrowers realize they’ve made a big mistake.
In August 2013, Lawsky also demanded that 35 companies stop offering illegal payday loans online to New York customers. Of that number, 23 companies complied
And in December 2013, DFS announced that it was expanding its investigation into payday lending and sent subpoenas to 16 online ‘lead generation’ firms suspected of deceptive or misleading marketing of illegal, online payday loans in New York.