Internet Payday Loans Not Tolerated by New York State
Posted: Thursday, August 22nd, 2013 at 7:51 am
While payday loans may be a common service in most states, they are illegal in New York and over a dozen other states in the nation. This explains why you won’t see shops advertising this type of loan anywhere in New York State. However, providers of payday loans have found a way to promote their services to New York residents simply by using the Internet. This doesn’t make their loans any more legal. In fact, even a company based in another jurisdiction is not allowed to offer payday loan services to New York residents.
The practice of offering payday loans to New Yorkers through the Internet has been going on for several years now. But Governor Andrew Cuomo has finally decided to take action against those who use the Internet to try to circumvent the laws. Cease and desist notices have been issued to 35 providers of payday loans who do business illegally in the state.
While online payday loans are advertised as a good solution for those who need to borrow some cash until their next paycheck, they do carry extremely high interest rates. Some online payday lenders targeted by Governor Cuomo’s cease and desist letters charged annual interest rates as high as 1,095 percent. Those who use their services are often borrowers who have had credit problems in the past or who are unable to get a loan through a legitimate bank or financing company.
Online payday loan companies have been the target of much criticism recently, not only because of the high interest charges, but also because of business practices that are seen as highly unethical. For example, some companies will intentionally hide the cost of borrowing by putting it in small and almost unreadable type on their website. Others will debit only the financing charges from the borrower’s bank account, which gives the impression that they are paying off their loan, while in reality they must take action themselves to pay off the principal.
In a further effort to crack down on illegal payday lending, Governor Cuomo is considering disabling automatic debits from personal bank accounts in New York, which will frustrate the efforts of online payday lenders who often use them to take payments for their loans.