Gov. Andrew Cuomo and financial services Superintendent Ben Lawsky are cracking down on Internet-based “payday lenders” who charge annual interest rates as high as 1,095 percent.
While already illegal in the Empire State, these lenders have continued to do business. Lawsky said thousands of New Yorkers have used them, falling into a cycle in which they can seldom settle up because of the usurious interest rates.
He said the Department of Financial Services has received more than 200 complaints about such loans from the Capital Region alone over the past two years.
“The fact is, these loans are illegal,” Lawsky said, outlining measures he has taken to stop them.
He has written to banks asking them to stop dealing with the lenders, who typically make a deposit in a borrower’s account — but are then able to make withdrawals when the time comes to pay back the loan.
While the loans are rarely for more than several hundred dollars, the high interest rates can make them difficult to pay off, especially for low-income borrowers who turn to these lenders when they are short of cash.
Lawsky sent cease-and-desist letters to 35 lenders this week.
Some of these web-based lenders — with names like Blue Sky Finance, Cash Jar, Great Plains Lending, Red Rock Tribal Lending and Tribal Credit Line — advertise on television.
Additionally, some say they are operated by sovereign Native American tribes in the Midwest and western states, although regulators in New York say they have legal power over them.
Banks appeared to be receptive to Lawsky’s pitch to stop dealing with these lenders.
“We pledge to work cooperatively with the department to ensure compliance with all laws and regulations,” state Bankers Association President Michael Smith said in a statement Tuesday.
Sarah Ludwig, of the New Economy Project, said several states have started cracking down on these lenders. But “New York has gone to the next step,” she said.