When money is tight, some seek out the last resort: a payday loan. These short-term, high-interest cash loans are offered in advance of a paycheck or some other form of cash injection. But the typically massive interest quickly adds up. Critics call these loans predatory and warn that borrowers can fall into even greater debt. That’s why New York made payday loans illegal. Lenders are not allowed to offer payday loans in-person, by telephone, or over the internet. The law also says it’s illegal for debt collectors to collect — or even to attempt to collect — on payday loans in New York state.
A recent blog post by the Federal Trade Commission found some payday lenders act dishonestly. The FTC found that unscrupulous lenders said borrowers would repay their loans with a fixed number of payments, but would dishonestly take more money from a borrower’s bank account.
Some borrowers, the FTC found, ended up paying $1,200 for a $250 loan — a five-fold increase on the initial loan.
The FTC just this week began cracking down on predatory payday lenders. One payday lending enterprise, operating under the names Harvest Moon Financial, Gentle Breeze Online, and Green Stream Lending, allegedly used “deceptive marketing tactics to convince consumers that their loans would be repaid in a fixed number of payments.”
The FTC shut down the operation after it found the payday lender “bled consumers dry, by promising a single-payment payday loan, but then automatically debiting consumers’ bank accounts for finance charges every two weeks, in perpetuity.”
For more information regarding filing debt collection cases during this time, contact Frank, Frank, Goldstein & Nager, P.C for a consultation.