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 Posted: Fri Oct 12, 2007 4:40 pm Subject: Quik Payday vs. Kansas Banking Commissioner
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I suppose it is likely that someone beat me to the punch in posting this, but if not here it goes:
| Quote: | PAUL WENSKE IN YOUR CORNER
Internet payday lenders don't always play by the rules
By PAUL WENSKE
The Kansas City Star
Payday lenders increasingly have taken to the Internet to draw more consumers into high-cost, short-term loans.
But beware. Many neglect to get licensed in states where they solicit consumers, claiming that because they do not operate a storefront on a city street, they are not bound by that state’s rules.
As a result, many may try to evade consumer protection laws that regulate lending rates, say consumer groups and state regulators.
Kansas has been more aggressive than some other states in reining in the reach of Internet payday loans.
In a recent case with broad national implications, the Kansas banking commissioner’s office persuaded a federal judge that state regulators should have authority to impose consumer protection laws on Internet payday lenders, even when they do not have a physical presence in the state.
“The long and short of it is the federal court says we dohave authority to regulate these transactions,” said Kevin Glendening, administrator of consumer credit for the Kansas banking commissioner.
Because the case was in federal court, the decision carries more judicial weight that can influence other courts to rule in favor of a state’s ability to regulate Internet payday lending.
The decision allows Kansas to pursue a lawsuit seeking to force Utah-based Quik Payday Inc. to pay a $5 million fine and refund $445,000 in profits and interest to 972 Kansas consumers. A hearing date has not been set.
Quik Payday had taken the case to federal court to challenge the state’s authority and nullify the lawsuit.
Lawyers for the Internet lender did not respond to requests for comment. But because of the case’s precedent, and the dent it could make in industry profits, you can bet your mouse they’ll appeal.
The challenge Internet payday lenders pose is they open a headquarters in a state with lax lending laws and then charge those same high rates in states with tighter lending restrictions.
Kansas regulators claim Quik Payday made 3,000 loans to Kansas consumers that charged higher-than-allowed interest rates.
“The biggest concern is that Kansas has well-defined parameters in how they interact with consumers and the fees they charge,” Glendening said.
He differentiated Internet payday lenders from most storefront payday lenders that he said comply with state laws. He said Internet payday lenders now must play by the same rules.
“Many of the Internet companies have sought to use the Internet as a cover to avoid complying with state regulations,” he said.
A 2004 Consumer Federation of America study found a spike in abuses by payday lenders that moved online. The study said many operated without licenses or outside the United States.
The study said Internet loans ranged from $200 to $2,500, with $500 being the most frequent. Finance charges ranged from $10 per $100 borrowed — up to $30 per $100. Annual interest rates often reflected more than 650 percent.
Some Web sites, the study said, use confusing contracts and hidden clauses to automatically refinance loans and debit fees directly from a consumer’s bank account.
Consumer groups also say these transactions raise security issues because borrowers fill out online applications that often ask for Social Security and bank account numbers. “These financial transactions expose consumers to identity theft and loss of privacy and control over personal information,” the study said.
Quik Payday claimed in its arguments that because it was a Utah company, it did not have a physical presence in Kansas.
The company argued Kansas was barred from regulating its Internet deals because of interstate commerce laws. It said having to deal with a patchwork of state laws would be cumbersome and hurt its profits.
But the federal court rejected those arguments. The ruling said making loans to Kansas consumers is a lot different than “merely placing things on the Internet.”
The court said the company directly solicited Kansas borrowers and so must tailor its business to comply with Kansas rules.
“This Kansas case will hopefully lead to better enforcement by other states and make sure these companies comply with the law,” Glendening said. |
kansascity.com/198/story/275886.html
This decision is literally monumental as it appeared before a federal court.
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polly
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Posted: Fri Oct 12, 2007 7:40 pm Subject:
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Wow! Thanks for the article! Maybe this will help lead to some better regulations for internet lending. It seems that each day there is more of an uproar about pdls and I am hoping beyond hope that they will become illegal and that an alternative, more consumer friendly method of helping people like myself with bad credit will be created. Until then....
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eleroo
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Posted: Mon Oct 15, 2007 6:41 am Subject:
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Yay! I've been waiting for this case to end!
This is a really great thing for all states!
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goudah2424
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Posted: Sat Nov 17, 2007 9:29 pm Subject: Thank God for Kansas
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I hope that all the other states will follow suit. I have been reading your forum for some time and this is the first time I have commented. I am a person with a graduate degree, great high paying job and so so credit. I got sucked into these bottom feeders and just now I had to ask my parents for help. It was humiliating but I was really worried that if I didnt pay them all off they would ruin my career. I am fortunate to have parents that can help so I feel so bad for others who dont have that option. I am going to click on this site anytime I even think a payday loan would be a good idea. My prayers go out to all of you who are stuggling.
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stargzr
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Posted: Sun Nov 18, 2007 7:49 am Subject:
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Thank-you Polly for that post!! I struggle from paycheck to paycheck..but thanks to this site I have nearly completed all my obligations to payday loans!
I will never take another one out and will try my best to persude others from doing so! It is nice to know these states are making it harder for predatory lenders to con people like me! Good job Kansas!
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laura19544
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Posted: Sun Nov 18, 2007 8:36 am Subject:
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Great article Polly!! I am hoping other states follow suit also! ..karen 
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Bossy4455
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Posted: Mon Nov 19, 2007 5:01 pm Subject:
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I just wanted to reiterate that this case was heard and the decision was made in a Federal court, thus it sets a standard for every state. It answers the question that everyone has been asking all along: If a lender is state a lends to a consumer in state b, which respective state laws are applicable? Answer: The state of the consumer. So, if a Nevada lender lends money to a California resident they are bound to follow the laws of California. This decision is literally monumental.
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polly
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Posted: Mon Nov 19, 2007 9:38 pm Subject:
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I would agree with Polly to the extent that it's monumental for people that live in California, New York and other states that are aggressively anti-payday loan. But the decision simply said it wasn't unconstitutional for Kansas to try to impose its laws on a Utah lender. (Wish they'd try to impose their laws on the hundred or so internet lenders in Overland Park!!!). But for people that live in states like Minnesota, Louisiana or Pennsylvania the problem remains. Those states say their OWN laws prevent them from taking similar action against most out-of-state lenders. At least the ones that are licensed. So there's still a lot of work to be done at the state level too.
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Posted: Tue Nov 20, 2007 7:49 am Subject:
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I agree with Freaky Friday . . . Those states that allow out of state companies to lend without holding them to state laws need to change things.
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Posted: Wed Nov 21, 2007 8:54 pm Subject: Thank You all so much
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Hello. I have been reading but not really participating in this forum. I too had gotten over my head with payday loans. Recently my parents helped me with a loan. I called Zip Cash today to tell them to take the entire amount out of my account ( to avoid another $150 rip off). They gave me a bunch of reasons why they couldnt do that. I said, ok spell your name, give me your real company name and phone number because the next call I am making is to the California state attorney. I informed the person on the phone that they were loaning illegally and against California regulations. The person on the other end asked me to hold on, came back and miracle on miracle they could in fact withdraw the entire amount without further fees! Had I not been reading all of your wonderful advice I would not have known to do that. You are all incredible people taking the time to help others. I salute all of you! God Bless and Happy Turkey day to all
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stargzr
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Posted: Wed Dec 05, 2007 6:46 pm Subject:
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Does anyone have an updated link for this article? I have a client in KS with 18 Pay-day loans, some at 3000% interest (no typo, three thousand percent)
The link doesn't seem to work anymore...
thx
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rstimson
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Posted: Wed Dec 05, 2007 7:17 pm Subject:
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Also, does anyone know where the burden lies? I know KS has a limit to the number of simultaneous pay-day loans. Who determines this? Does the consumer have to know that they can only have a certain amount of pay-day loans or is that the responsibility of the loan company?
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rstimson
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Posted: Thu Dec 06, 2007 7:38 am Subject:
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It is a shared responsibility. Most storefront payday loan applications will have an area on it asking if you have any outstanding loans. If you are not honest, the pdl may not know you have other loans. Also, a lot of states now have databases that hold the information, so the pdl can look it up and see if you have other loans.
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goudah2424
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Posted: Thu Dec 06, 2007 7:42 am Subject:
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If you go to the homepage for the newspaper, you can do a search. You do have to register, and pay for the access, but then you can get the article from the archives.
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