New York Attorney General Eric Schneiderman’s office said on Monday it had reached settlements with five companies over charges of violating the state’s usury and licensed lender laws through the collection of so-called payday loans.
New York law limits interest rates for most lenders not licensed by the state to a maximum of 16 percent. But payday loans, which are taken out short-term, typically ahead of an employee’s paycheck to be repaid with earnings later received, can have annual rates of 100 percent to 650 percent, or even more, Schneiderman’s office said in a statement.
V&R Recovery DBA Alexander & Stefano, RJA Capital Inc, Westwood Asset Management LLC, Erie Mitigation Group LLC and Northern Resolution Group LLC agreed to pay a total of $279,606 in restitution and $29,606 in penalties, the New York Attorney General’s office said.
One debt-buying company was required to reverse 8,550 negative credit reports it had made to credit reporting bureaus on New Yorkers, and is prohibited from collecting on $3.2 million in payday loans, it added. All five companies will now be banned from collecting on payday loans from New Yorkers.
“These agreements are one more step in our continuing fight to protect New Yorkers from a range of unfair financial schemes — from predatory loans, to illegal foreclosures and other abuses by big financial institutions,” Schneiderman said in the statement.
Last month, New York’s Department of Financial Services said it had sent letters to 35 payday loan companies asking them to stop offering exploitative payday loans in New York via the Internet or by other means.
New York Governor Andrew Cuomo has said that illegal payday loans made over the Internet are made possible in New York by transactions that must pass through a specific financial electronic network and has called for collaboration between the network’s administrators, the banks and his administration to cut off access to payday lenders.
Schneiderman has also launched other similar probes. In July, he sent letters to some of the country’s largest companies over their use of cards to pay hourly employees, according to a person familiar with the matter.
The cards, which have grown in popularity in lieu of paper paychecks and direct deposit, can carry a host of fees, such as 50 cents or $1 for a balance inquiry and $1.50 for an ATM withdrawal. They may appeal to low-wage workers who do not have bank accounts.