Monday, September 16, 2013
Pay Day Loans Can Charge up t0 500%
Western Sky Financial, owned by a tribal member of the Cheyenne River Sioux — has just announced that it will stop financing loans next month after numerous states have challenged their lending practices.
Fifteen states have banned usurious payday lending to protect workers from the servitude of compound interest fees worthy of loan sharks. In reaction, lenders are now looking for other ways to ply their abusive trade — by conducting business offshore via the Internet or through ties with American Indian groups invoking their sovereign nation status.
Western Sky Financial’s retreat is a significant step forward in the government crackdown on payday lending. The company faces usury law challenges in five states, most recently in New York where Attorney General Eric Schneiderman filed suit this month charging the company with levying interest rates of more than 300 percent in violation of state law that caps interest at 25 percent. New York authorities have ordered 34 other online and American Indian lenders to stop providing online payday loans in the state, prompting American Indian groups to begin lawsuits in the name of their sovereignty. Complaints of abuses by Western Sky Financial are being pressed by authorities in Colorado, Maryland, Minnesota and Oregon as officials focus on lenders’ increasing resort to the Internet.
Borrowers averaged 10 payday loans a year and paid $458 in fees. Firm standards and controls can rein in the abuses of payday lending.