Wednesday, December 1 2021


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Myra Thomas was the victim of fraud facilitated by a lead generator, which provides personal information to predatory lenders.Credit Karen Tam for The New York Times

Government authorities are trying to stifle the supply of borrowers to online lenders who offer short-term loans with annual interest rates over 400%, the latest development in a wider crackdown on the credit industry. payday loans.

According to a copy of the confidential document reviewed by the New York Times, New York State financial regulator Benjamin M. Lawsky last week sent subpoenas to 16 lead-generating websites, which sell tons from sensitive consumer data to payday lenders. Summons are intended to elicit information about the practices of websites and their links to lenders.

The move is part of an evolutionary push by state and federal authorities to curb payday lenders and their practice of offering quick money tied to borrowers’ paychecks. In August, Mr. Lawsky sent cease and desist letters to 35 online lenders ordering them to stop providing loans that violate state usury limits to New Yorkers.

Short-term lenders argue that when used responsibly, their loans can be a valuable tool for customers who may not have access to traditional banking services. The Online Lenders Alliance, a business group, added that its members follow all applicable laws.

Yet for payday lenders, lead generator websites are a vital link, state officials say. At first glance, the sites appear to be online lenders, tricking customers into entering their private financial data into apps.

To attract customers, the sites advertise cash, flash $ 100 bills, and photos of smiling families, according to a review of the companies’ websites. MoneyMutual, one of the websites cited to appear by Mr Lawsky, is promoting talk show host Montel Williams as its spokesperson. A recording of Mr. Williams greets callers on the company’s toll-free number.

A spokesperson for Mr. Williams said that while his role is limited to being the public face of the business, “Mr. Williams is concerned any time a consumer has a bad experience with a product or service with which he is involved.

Charles Goodyear, spokesperson for MoneyMutual, said: “Our lenders certify through their contracts with MoneyMutual that they are operating under applicable federal or state law.”

None of the other lead generators contacted returned a request for comment.

Lead-generating websites function as a middleman, ultimately selling the information, or “leads,” to lenders.

With this financial information, payday lenders can gain lucrative access to New Yorkers and grant loans that exceed the state’s wear and tear limit of 25 percent annual interest.

But such government interest rate caps can prove difficult to control. Even though New York and 14 other states have imposed caps on interest rates in recent years, lenders have become nimble, moving from storefronts to websites. From this perch, where they find consumers across the country, lenders can dodge the laws of every state. With the help of lead generators, lenders have even greater access to reach borrowers, even in states where lending is illegal.

Beyond their role of fueling lenders, the main generators, according to state officials, pass client information to other types of financial schemes. Regulators are increasingly interested in how these sites work in the online lending ecosystem, an issue that has become urgent with the proliferation of online lenders.

The administration of the govt. Andrew Cuomo of New York has also broadened its control in recent months to include banks that allow lenders to withdraw money from customers’ bank accounts. Along with lead generators, banks are a crucial pipeline between consumers and payday lenders. Through an electronic transfer system called ACH, or Automated Clearing House, lenders can automatically withdraw loan payments from borrowers’ checking accounts.

Some state and federal authorities say businesses, including lead-generating websites, have thwarted government efforts to protect people from predatory loans, an issue that became even more urgent after reckless mortgages helped. precipitated the 2008 financial crisis.

Payday loans can have annual interest rates above 400%, according to an October summary from the Pew Charitable Trusts. For already fragile borrowers, a single missed payment can result in an even higher interest rate. On a $ 375 loan, a borrower can pay $ 520 in interest only, according to the report. At the extreme, customers say their interest rates can go up beyond 1000%.

Mr Lawsky’s office is concerned that consumer information may also fall into the hands of crooks. His office has received complaints from consumers who said they were inundated with calls after applying for a payday loan online.

When Myra Thomas, 42, got a call offering her a $ 1,000 loan from Capital Bank after applying through a lead generator, she was elated because she needed the money for an upcoming move. Ms. Thomas, a former truck driver who had to stop work due to illness, ran out of money.

To receive the loan, however, Ms Thomas had to send the company $ 375 – money, she said, was missing. Ms. Thomas never received the loan or her repayment of $ 375. The website she used to apply for the loan is one of the lead generators cited by Mr. Lawsky.

The Online Lenders Alliance said its members, which include some of the lead generators, vigilantly protect customers’ personal information to prevent fraud.

“Unfortunately, there are bad actors who fraudulently present themselves as legitimate businesses, in some cases by duplicating the website’s branding to deceive consumers,” added Peter Barden, spokesperson for the group.

Mr Barden said the group had reported all cases of fraud to the Federal Trade Commission and other law enforcement agencies.

But, for Ms Thomas, a fraud experience is more than enough to turn her off completely.

“I won’t do it again,” she said. “I’m just going to have to find something else.”



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