As reported by in July by this reporter, Payday lending poses an economic entrapment to the everyday worker, especially those who have little recourse to a bank.
This past summer, the City Attorney for San Francisco, Dennis Herrera and his staff won a consumer reimbursement settlement against two payday loan outlets. Herrera and those who worked on the case, noted that payday lending continues, despite many attempts to put a stop to unscrupulous practices.
Yet, the California Corporations Commissioner this past August 15 issued an official consumer alert to all consumers that Payday lenders are increasing their use of the Internet.
"Unlicensed payday lenders are becoming more aggressive in their collection techniques,” said Corporations Commissioner Jan Lynn Owen. “We’ve heard of payday lenders hiring collection agencies and contacting employers and threatening to report to credit agencies. The department is taking action to shut down illegal lenders and protect consumers whenever we discover the violations,” said Owen.
Mark Leyes, Media rep for the department explained the reason for the Commissioner's alerting the public. "Traditionally, payday lenders have been storefronts in urban settings." "Yet, the Internet approach is remarkable because the lending can be done on line quickly," he said, as he talked with this reporter by phone on Aug. 27.
Leyes noted that while the technology of the Internet makes it more convenient, such technology also makes it easier for payday lenders to employ even more shrewd tactics.
Using a person's debit ATM account, payday lenders can access a person's pay aggressively and instantaneously, taking their portion quickly, even before a person actually gets their paycheck, deposited. "Usually, the lender is required to 'post-date' a check individually, for that particular pay period," said Leyes.
"But with this electronic access to the borrower's checking or savings account, this creates lots of risk for the borrower, said Leyes, making them more vulnerable."
Leyes also pointed out that by using the Internet payday lenders can be unlicensed vendors, which creates even more risk and potential harm to consumers. "It is difficult to trace unlicensed payday lenders on line."
"Every payday lender needs a license to operate, including those on the Internet," noted Leyes. Dealing with out of state or off-shore lenders is more complicated, "It is harder to bring them into compliance, to issue warrants or serve subpoenas," Leyes said.
So far, according to Leyes, nine payday lenders working through the Internet have been sanctioned.
The California Department of Corporations reminds consumers to be wary of these types of lenders and like any disclosure of personal and banking information on line, consumers must be cautious. Doing business with such lenders could be disastrous to the consumer, leaving a consumer with no recourse should something go wrong with the lending transaction.
It is advised that consumers check with the California Dept. of Corporations on a lenders' license and current status before proceeding to apply for a loan. For more information contact the California Department of Corporations at 1-866-ASK-CORPS. Or visit the web site.