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Payday Lenders Move Online, Try to Bypass State Laws

By Mark Huffman
ConsumerAffairs.com

November 20, 2006
Consumer advocates have long campaigned against financial companies offering payday loans, car title loans, and other loans targeted to low-income or poor-credit consumers. While these outfits were once limited to shabby storefronts, they've now moved into cyberspace, exploiting anyone who has access to a computer.

Payday Lenders • Congress Moving Toward National Cap On Payday Loans • West Virginia Sues Online Payday Lenders • Senate Bill Would Rein in Payday Lenders • Virginia Considers Measure Aimed At Payday Lenders • Cash Today Hit with FTC Complaint • Payday Loans Can Lead to Bankruptcy • Pennsylvania to Require Licenses For Internet Payday Lenders • Bill Would Set National Limits on Predatory Lending • Payday Loan Lead Generators Settle FTC Charges • Tiny Virginia Town Stands Up To Payday Lenders • Payday Lenders Targeting Seniors • Payday Lenders Trumpet False Claims, Critics Charge • Pentagon's Predatory Lending Rules Faulted • Last Payday Lender Leaves West Virginia • Pennsylvania Class Action Challenges Payday Lender • Payday Lenders Fight Back in State Legislatures • Payday Lenders Fleece Consumers for $4.2 Billion A Year • Soldiers Pinned Down by Predatory Payday Loans • California Sues Payday Loan Business • North Carolina Declares Victory In War On Payday Lending • H&R Block To Settle More Payday Loan Suits • DOD: Payday Loans Affecting Military Readiness • States Want FDIC Crackdown on Payday Lenders • No Payday for Payday Lenders in Texas, New York • Payday Lenders Prey on African-American Neighborhoods • Payday Loan Report: Reform Needed • Illinois Warns of Payday Loans • Fast Cash Loans Charged with Illegal Practices • Cashback Payday Loans Banned in NY --- • Video: What is a Payday Loan? • Consumer Complaints

A number of states have passed laws trying to regulate payday lenders, who charge their customers exorbitant interest rates, by forbidding them from doing business in their states. The online lenders, however, seek out clever loopholes.

"All aspects and transactions on this site will be deemed to have taken place in our office in the State of Delaware, regardless of where you may be viewing or accessing this site," reads the disclosure language on APPLE Fast Cash Personal Loans' Web site. "Borrower is responsible for complying with any local statutory obligations that may exist in their state or area with respect to any transactions with APPLE Fast Cash Personal Loans."

Recently West Virginia Attorney General McGraw filed suit to enforce investigative subpoenas against 14 Internet payday lenders and to enjoin their usurious lending activities in his state.

McGraw also announced that his office has reached formal settlement agreements with 18 other Internet payday lenders in which they promised to permanently discontinue their payday loans here and to refund all unlawful fees and charges collected from West Virginia consumers. McGraw said the latter agreement will result in tens of thousands of refunds and canceled debts for hundreds of West Virginia consumers.

McGraw said the 14 Internet lenders made "payday loans" to consumers in their homes via interactive web sites and have claimed that states, including West Virginia, cannot regulate their lending activities. The state, he says, sees it differently. The defendants require payment of interest with Annual Percent Rates ("APR") ranging from 600 to 800 percent APR. The State of West Virginia has a maximum allowable rate of 18 percent APR for consumer loans.

The companies sued by McGraw's office include the following:

• Apple Fast Cash Personal Loans - Wilmington, DE
• Cash Advance Network, Inc. - Carson City, NV
• Cash Advance USA - Miami, FL
• Cash Advance Marketing d/b/a Cash Back Values - Carson City, NV
• Cash Net - Salt Lake City, UT
• American Interweb Marketing d/b/a CASHRebateOnLine.com Carson City, NV
• Leads Global, Inc. d/b/a Cash Today Limited and d/b/a Cash2day4you.com - Reno, NV
• GECC d/b/a Cashdirectnow.com - Rapid City, SD
• Americash Hotline d/b/a Direct CashExpress - Wilmington, DE
• Magnum Cash Advance, Inc. - Wilmington, DE
• Ambassador Financial Services d/b/a Nationwide Cash - Espanola, MN
• PayDay OK d/b/a PayDay Select - Ruidiso, NM
• Quik Payday.com Financial Solutions - Logan, UT
• USA Cash Center - Rapid City, SD

The companies that have signed formal settlement agreements with McGraw's office include:

• AnyDay Cash.com of Holiday, UT;
• Checkexpress.com d/b/a Paydayloantoday.com of Las Vegas, NV;
• CNC Funding of Euless, TX
• Elite Cash Advance of Salt Lake City, UT
• FSM Processing, Inc. of Las Vegas, NV
• Get Cash 911.com of San Diego, CA
• PayDay Advance Plus, Inc. of Los Angeles, CA
• Sordi, Inc. d/b/a Checks for Cash of Rockford, IL
• Star Light Financial of Del Ray Beach, FL
• VIP Cash of Las Vegas, NV

At least eight other companies have furnished written confirmation that they will sign similar formal agreements with the attorney general.

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