New York State Attacks Payday Loan Lenders: Claims ACH System the Weak Link
Published: Tue, 08/06/13
loan Internet lenders, instructing them to "cease and
desist" from offering loans that violate local usury laws. The
regulator, Benjamin M. Lawsky, ordered the lenders to halt the
"illegal" loans within two weeks. New York outlaws any
loans at rates above 25 percent annually.
, prefer to read online?
http://paydayloanindustryblog.com/?p=2017
Reminder: requested my thoughts. Click "unsubscribe" below
to put an end to this :o) Spam is for JERKS!
Additionally, Mr. Lawsky requested 117 banks block online lenders
from accessing New York consumer checking. He questioned why the
ACH. network had allowed online payday lenders the "foot in
the door" they needed to ensnare consumers. Mr. Lawsky
"urged the banks to work with us to create a new set of model
safeguards and procedures" that will identify illegal loans.
(Jeez, this is like asking the wolves to guard the hen house!
Banks provide capital to payday lenders, offer competing loan
products at very high rates to borrowers, and make a ton of money
on the ACH transactions!)
My response?
Fact: Consumers want and need access
to small dollar loans without a lot of hassle.
Fact: The costs associated with
lending must be absorbed with sufficient profit to "remain in
the game." Lacking a reasonable profit (who gets to decide
what is reasonable?) lenders will move on. Where do borrowers go?
Fact: Tribes are authorized by the
Feds to participate in e-commerce as sovereign nations.
Fact: Regulators cannot end demand for
small dollar loans Witness, alcohol, tobacco, sex, drugs, big coca
colas...
Fact: Attacking the ACH system to
force big brother down the throats of lenders and borrowers is not
the answer. Silicon Valley is so far ahead of of bank 1.0 that no
regulator can keep a lid on demand or loan proceeds delivery
methods. New delivery systems are being created as I write this.
What authority will make the determination that a payday loan ACH
occurred rather than an installment loan or a collateralized loan
or a merchant cash advance or... too complicated.
Fact: The long-term answer to this
"payday loan issue" is to ensure the continued existence
of a multitude of loan products having full disclosure of all fees
and costs available to consumers. Allow enlightened borrowers to
decide what's best for them.
Fact: Technology and competition
already influence rates and forcing lenders to develop a multitude
of loan products. Why should a resident of New York be forced to
rob me for $300 when a resident of California can pay $45 to borrow
$300 for two weeks?
Fact: There still remain 33+ states
offering safe-harbor small dollar loan legislation in which an
entrepreneur is legally able to offer a fairly priced loan product
via the Internet or a brick-n-mortar. Proof not all state regulators are
unrealistic. (Shameless Plug: visit http://www.PaydayLoanUniversity.com
What does Mr. Lawsky expect residents of New York to
do when faced with a lack of cash to pay the rent, fix the car,
turn on the gas... There are no lenders in New York offering a $300
loan at a rate 0f $1.44 per week in interest.
What do you think,? Jer@TrihouseConsulting.com Tell Me!