The Attorney General for the State of New York announced that it reached a settlement agreement with several online payday lenders for alleged violations of New York’s usury and licensed lenders laws. The terms of the settlement require the lenders to pay civil money penalties, modify existing loans, cease collections of loans where principal has been repaid, and cease collection of outstanding interest. On a similar note, the Attorney General for the State of Colorado also announced it had reached a settlement agreement with some of the same lenders for allegedly making unlicensed, high-cost loans to consumers in Colorado. The terms of the settlement require the lenders to pay a civil money penalty and prohibit the lenders from making any consumer loans in Colorado, collecting on any already-made loans to consumers, or selling these loans to third parties. The settlement also expressly ordered the lenders to “discharge, cancel, release, forgive, and adjust to a zero balance all” consumer loans made in Colorado.
These settlements follow similar action by the CFPB against payday lenders in what is a growing trend to reform the payday lending industry. In November 2013, the CFPB took its first public enforcement action against a payday lender for allegedly engaging in unfair and deceptive acts or practices (see November 26, 2013 Alert).
IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.