NY Department of Financial Services Settles Payday Lending Claims Against Online Lender

NYDFS  •  Payday Lending

Enforcement_NY2On March 17, 2016, the New York Department of Financial Services (NYDFS) announced that it entered into a consent order and settlement with a financial services company over allegations the company offered illegal online payday loans in New York. The company allegedly operated an online payday loan “lead generation” business. Although payday lending is illegal in New York, the company allegedly solicited online payday loan applications from New York consumers and sold the applications to numerous lenders who offered payday loans. The lenders then contacted consumers offering payday lending loans. The company’s online advertisements allegedly misrepresented the interest rate and fees associated with the loans, as well as the number of companies that would have access to consumers’ personal financial information, including social security numbers and bank account numbers. The NYDFS also alleged that the company failed to sufficiently protect consumers’ personal and financial information when transmitting the applications to lenders. Consumers complained to the NYDFS that their personal information had been stolen after completing the loan applications, and in some cases consumers reported identity theft. Under the consent order, the company must pay a $1 million penalty, cease accepting applications for payday loans from New York consumers, and reform its consumer disclosures for other loan products. The company must also implement new data security measures.

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