Richmond, VAInternet payday loan companies in Virginia have been put on notice by Virginia Attorney General Ken Cuccinelli, who filed a lawsuit against one Internet payday loan company for illegal loans. With exorbitant interest rates and often operating without a proper license, online payday loan companies are raising the ire of many states and consumers, some of whom are also looking into the role banks play in allowing such companies to operate.
According to a news release (found online at oag.state.va.us; 7/18/13), Cuccinelli filed the lawsuit against Jupiter Funding Group, LLC, alleging the company is making illegal payday loans in Virginia without a valid state payday loan license. Companies that do not have a license cannot charge more than 12 percent annual interest on a loan, but Cuccinelli alleges Jupiter Funding Group charged much more than that.
“According to Jupiter Funding’s terms and conditions, the interest rates on its payday loans ranged anywhere from 438 percent annually for a 25-day loan to 1,369 percent annually for an eight-day loan,” Cuccinelli said in his news release.
Payday loans are those that are obtained for a short term, often only until the borrower’s next paycheck. The problem is that interest rates can add up quickly and some lenders have been accused of practices - such as automatically renewing the loan - that push consumers further into debt. Also of concern is that some lenders require authorization to automatically debit loan payments from the borrower’s account, providing the opportunity for multiple withdrawals, debits that happen sooner than expected or withdrawal of unexpected fees.
Furthermore, some Internet payday lenders operate only online, allowing them to lend to consumers in states where they do not have the proper licensing or are completely illegal.
“Jupiter Funding has preyed on Virginia consumers by making high-interest rate loans over the Internet without any regulatory oversight,” Cuccinelli said in his news release. The lawsuit seeks consumer reimbursement of interest paid as well as fines of $2,500 for each violation of the Virginia Consumer Protection Act.
In addition to concerns about Internet payday loan companies, some regulators are looking into the role banks play in allowing the payday loan companies to operate illegally. Some practices, such as allowing the automatic withdrawal by payday loan companies, even when the consumer has requested they stop, may be a violation of consumer protection laws.
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