The State of the PDL Small Dollar Loan Space
Published: Thu, 10/10/13
Feel like you're surrounded by landmines? We are! If we aren't
using the state licensing model, or have a very solid ACH solution,
we're toast. Pivot or die.
In the midst of our tears, , let's remember there are still 20+
million borrowers waiting for us to figure out how to deliver $$ to
them. Need help? Call me: http://www.PaydayLoanIndustryBlog.com
Or, I'll see you at the bar in the San Diego Marriott Marquis & Marina.
STATE OF CALIFORNIA - BUSINESS, CONSUMER SERVICES AND HOUSING
AGENCY EDMUND G. BROWN JR., Governor
DEPARTMENT OF BUSINESS OVERSIGHT
Ensuring a Fair and Secure Financial Services Marketplace for all
Californians
JAN LYNN OWEN
Commissioner of Business Oversight
MEDIA RELEASE
For Immediate Release Contact:
October 7, 2013 Mark Leyes (916) 322-7180
State Banks and Credit Unions Warned
of Illegal Payday Loan Risks
SACRAMENTO (October 7, 2013) - The California Department of
Business Oversight (Department) has
alerted banks and credit unions of the Department's ongoing
efforts to stop illegal unlicensed online payday
lending activity and their obligation to identify and report any
suspicious activity.
In a letter dated October 7, 2013, Commissioner Jan Lynn Owen
directed banks and credit unions licensed by the
Department to monitor transactions with any unlicensed lender and
immediately report potential violations.
The Department will examine banks and credit unions to ensure
safeguards are in place to prevent unlicensed
payday lenders from gaining access to the Automated Clearing House
(ACH) network. By accepting debit and
credit transactions from unlicensed payday lenders through the ACH
network, financial institutions are,
knowingly or unknowingly, enabling illegal payday loan transactions
to occur in California.
"Protecting consumers from illegal online payday lending is a
central focus of the Department's enforcement
efforts," said Commissioner Owen. "With the recent
consolidation of the state's payday lending regulator with
the banking and credit union regulator into the Department of
Business Oversight, we are now better equipped to
protect both borrowers and financial services businesses. We are
reaching out to our licensees and stakeholders
to try and combat this growing threat to consumers."
Payday loans are transactions in which a borrower writes a check
for the amount they need and the lender defers
depositing the check until a specific date, for a fee, pursuant to
a written agreement. Online payday lending
transactions are based on an electronic equivalent, which is
transmitted via the ACH network. Online lenders
who fail to obtain a license from the Department typically violate
laws designed to protect borrowers, such as
charging rates higher than allowed under California statute.
Additionally, many are based overseas, meaning
there is much less legal recourse for unsatisfied customers.
The Department encourages any Californian contemplating a payday
loan to verify with the Department that the
lender is licensed and in good standing with the State of
California. Any borrower who feels they have been the
victim of an unlicensed lender should file a complaint with the
Department. Complaints can be filed
electronically, or complaint forms obtained, at
http://www.dbo.ca.gov/Consumers/consumer_services.
Names of unlicensed lenders that have been the subject of multiple
consumer complaints are cited on the
Department of Business Oversight website at
http://www.dbo.ca.gov/ENF/Alerts. The letter from Commissioner
Owen to banks and credit unions can be found here:
http://www.dbo.ca.gov/Resources/licensee_resources/Letter_to_Banks_and_CUs_-_Payday.pdf.
On July 1, 2013, the Department of Corporations and the Department
of Financial Institutions merged to become the
Department of Business Oversight. California consumers should
contact the Department of Business Oversight to check on
the licensing and standing of the companies, investments or other
financial services they are considering at www.dbo.ca.gov
or at the Department's toll-free Consumer Services Office at
1-866-275-2677.