California Cracks Down on Illegal Online Lending

California officials have cited at least nine Internet payday lenders for illegally offering “quick-cash” loans online and being overly aggressive in collecting on the debts. The state Department of Corporations issued a “consumer alert” warning about unlicensed online lenders, many of which advertise on Facebook or online sites like “These loans are a last resort for some people, particularly if they have unusual or unexpected expenses,” said department spokesman Mark Leyes. In California, payday loans are limited to $300, with fees up to $15 per every $100 borrowed. Unlike a storefront payday center, online lenders require borrowers to provide access to their bank account for automatic depositing of funds and debiting of repayment. Leyes said some unlicensed online lenders are dodging the law and “gouging consumers” by charging excessive interest rates and fees. “If you give out your bank account information online, they’ve got their hooks in you,” he warned. “They can get in there anytime they want.” Since the start of the year, the state Department of Corporations has issued nine complaints against online payday lenders, more so than usual. TIOR Capital LLC in particular was ordered to “desist and refrain” making loans and to return all funds to borrowers. The state gave an example of a $300 payday loan with a $90 finance fee, due in two weeks. When the consumer failed to repay the loan on time, it was automatically “refinanced” for an additional $90 fee. This amounted to an annual interest rate of 782.14 percent.

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