Linda Lacewell, the superintendent of the state Department of Financial Services, is leading a multistate investigation into the payroll advance industry and allegations of unlawful online lending.
Members of the industry claim to provide consumers access to wages already earned prior to payroll. However, according to the DFS, some of these firms appear to collect usurious or otherwise unlawful interest rates in the guise of “tips,” monthly membership and/or exorbitant additional fees, and may force improper overdraft charges on vulnerable low-income consumers. The investigation focuses on whether companies are in violation of state banking laws, including usury limits, licensing laws and other applicable laws regulating payday lending and consumer protection laws.
“High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious and harming consumers,” Lacewell stated in a press release. “… We will use all the tools at our disposal, including partnering with peer regulators to safeguard consumers from predatory lending and scams that ensnare families in endless cycles of debt.”
To learn more, view the DFS press release.