Email this page Print-Friendly PDF
Share
Print this page

Subscribe

To subscribe to receive Goodwin Procter alerts and publications click here

New York Department of Financial Services Issues Letters to Banks

As a result of its investigation into illegal online payday lending, the New York Department of Financial Services announced that it sent cease and desist letters to numerous payday lenders directing them to cease offering to lend and lending money at usurious rates. Under New York law loans made by non-bank lenders in the amount of $250,000 or less with an interest rate that exceeds 16% per annum constitute civil usury. Further, loans made with interest rates exceeding 25% per annum constitute criminal usury. DFS’s investigation uncovered that numerous out-of-state lenders were using the internet to solicit and provide illegal payday loans in violation of the New York’s usury limits. DFS noted that it “will aggressively pursue appropriate enforcement against payday lenders that refuse to cease and desist their illegal activity in New York.”

Of import, DFS cited access to the Automated Clearing House network as the main method by which these payday lenders are able to conduct their illegal activities, and sent letters to over 100 banks requesting their assistance in cutting off illegal payday lenders’ access to the ACH network. This is the second such effort by DFS to curb payday lending. In March 2013, DFS issued warning letters to debt collectors about collecting illegal, usurious loans made in New York, including payday loans made over the internet, by phone or by mail (see March 5, 2013 Alert).

© 2014 Goodwin Procter LLP. All rights reserved. This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided with the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin Procter LLP, Goodwin Procter (UK) LLP or their attorneys. Prior results do not guarantee similar outcome.

Goodwin Procter LLP is a limited liability partnership which operates in the United States and has a principal law office located at 53 State Street, Boston, MA 02109. Goodwin Procter (UK) LLP is a separate limited liability partnership registered in England and Wales with registered number OC362294. Its registered office is at Tower 42, 25 Old Broad Street, London EC2N 1HQ. A list of the names of the members of Goodwin Procter (UK) LLP is available for inspection at the registered office. Goodwin Procter (UK) LLP is authorized and regulated by the Solicitors Regulation Authority.