«The scheme primarily involved making loans to U.S. consumers in violation
of state usury laws and then using unfair, deceptive, and abusive practices to collect on the loans and profit from the revenues,» the CFPB lawyers argued in the complaint filed in the Southern District of New York in 2015.
The bill effectively
preempts state usury laws for non-bank finance companies like payday lenders in the name of ensuring access to credit, even if on extremely onerous terms.
In April 2017 the Consumer Financial Protection Bureau filed an enforcement action asserting that Golden Valley and three other lenders were engaged in unfair debt collection practices because they
violated state usury laws, and also failed to disclose the effective interest rates, violating the federal Truth in Lending law (enacted in 1969).
Those laws
include state usury laws that limit interest rates and the Truth in Lending Act, which requires lenders to provide certain disclosures on total loan cost, said Stuart Rossman, director of litigation at the National Consumer Law Center.
When the
old state usury laws were dismantled one - by - one during the 1980s, consumer interest was free to rise without restriction.
According to the New York Times, a growing number of payday lenders set up shop in states with looser lending regulations, or even overseas in places like Malta and the Bahamas, to get
around state usury laws.
Golden Valley relies on the dubious legal dodge of setting up shop on an Indian reservation and electing tribal law in its contracts to
evade state usury laws.
Critics of such agreements say the funders can charge interest rates that
exceed state usury laws while grabbing control of the litigation from the parties actually involved in the case.
Option 1: Use the IRA funds to make a loan to another flipper at 10 % annual interest (highest rate in CA without violating
CA state usury law).
Because a sale - leaseback is not considered a loan,
state usury laws do not apply; a buyer in a sale - leaseback can earn a higher rate of return on its investment than if it had made a conventional mortgage loan to the property owner.
The state of Georgia has outlawed the practice entirely claiming payday lenders violate racketeering and New York and New Jersey have also prohibited payday loans because they are in violation
of state usury laws.
They shouldn't, and if they do sign onto this bill, it should only be in exchange for some solid consumer protections to substitute for the
preempted state usury laws.
Otherwise, the only applicable limit could be
state usury laws.
As reported on Turtle Talk this morning, Oregon and Washington are none too pleased about tribal payday lenders making loans to citizens of their state, in contravention of
their state usury laws.
They also do not pay attention to
state usury laws.