Idaho Cracking Down on Internet Payday Loans

Boise, IDWhile Internet payday loans may be fast and convenient, critics suggest they are fraught with risk, while removing from the consumer various protections that are observed by storefront payday loan providers regulated by the state. In contrast, purveyors of payday loans attempt to skirt these regulations in various ways, while gaining access to a consumer’s bank accounts online.

Most states are cracking down on the Internet payday lender. To wit, if you are not licensed in the state to which you are targeting your services, then you have no business attempting to conduct business with state residents.

The state of Idaho is the latest to take a stand against an Internet payday loan provider making its services available to Idaho residents. According to a report in The Coeur d’Alene Press (11/13/13), AAA Payday Advance (AAAPayday) is in receipt of a cease and desist order from the state government.

“The 2013 Idaho Legislature enhanced the department’s ability to address unlawful consumer lending in Idaho,” said Gavin Gee, director of the state finance department, in comments published in The Coeur d’Alene Press, “making it illegal for a lender to advertise or solicit to make consumer loans in Idaho, including payday loans, if the lender is not first licensed to make those loans,” Gee said.

According to the laws of the state, any loan undertaken in violation of the state’s licensing requirements is void, uncollectable and unenforceable. On the surface, that appears to let Idaho consumers lured into AAAPayday’s lair off the hook, and the state has published a brochure that explains to Idaho residents their rights under state law.

Online payday loan providers argue that Internet activity should circumvent individual state laws. Other payday loan providers attempt to affiliate with Native American tribes, which have special dispensations, in a further effort to do an end run around state laws.

The states aren’t buying it, and are taking an aggressive stance on the Internet payday loan community. The message is: if you don’t have a license to operate here, then you have no business conducting business here - regardless of platform. AAAPayday is identified as based in Utah.

In most states payday loan providers are storefront operations with addresses and premises. They are heavily regulated in terms of what the state considers a reasonable interest rate and financing terms for consumers who need a quick hit of cash for temporary measures.

The payday loan provider remains a lifeline for various sectors of the American population. For those who do not have a relationship with a bank and therefore without access to traditional loans or other forms of bank funding, the ability to access quick cash to get them through until the next pay period allows them to put food on the table or make the rent. Interest rates, not surprisingly, are usually higher than that offered by a traditional bank or finance company.

However, most states have caps on the rate of interest a payday loan provider can charge. Internet payday loans, on the other hand, are known to carry predatory interest rates most people can ill afford. Some providers are alleged to have taken advantage of access to online bank or credit union accounts in order to siphon off additional funds to which they are not entitled.

Even those Americans who have a relationship with a bank will look to the online payday loan provider as quick and convenient. There is no need to go out to a storefront. Instead, just undertake the transaction from the comfort of your own home.

However, the cost to the consumer of an Internet payday loan can be astronomical. State lawmakers in Idaho are encouraging residents who have committed to loans with AAAPayday to come forward, in order to aid the state’s investigation. “We’re interested in furthering our investigation to learn the breadth of lending in Idaho undertaken by unlicensed Internet payday lenders,” Gee said.