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Internet-based, short-term lenders have various routes for setting up business, but most of their options expose them to potential legal challenges.
October 1 -
At least nine lenders have halted operations in the three weeks since state regulators began pressuring banks to cut off their access to the payments system.
August 28
California regulators are warning banks and credit unions chartered by the Golden State to refrain from processing transactions for 16 online consumer lenders.
The action follows
There is some overlap between the online lenders targeted by the two states, but the majority of the Internet lenders on California's list were absent from New York's.
None of the 16 lenders being targeted by California have licenses to do business in the state. And all of them have been the subject of enforcement actions this year by the California Department of Business Oversight, according to a
The letter instructed banks and credit unions to assess their controls and discontinue transactions with other lenders, beyond the list of 16, that do not have California lending licenses. It also warned that state bank examiners will review banks' efforts to ensure that unlicensed lenders do not gain access to the electronic payments networks.
Many high-cost online lenders do not adhere to the licensing requirements of the states where their borrowers live including caps on allowable interest rates and claim they're not required to do so.
The 16 online lenders pinpointed by California include Indian tribes that claim sovereign immunity from state licensing requirements; companies doing business from overseas; and firms located in states other than California.
Seven of the 16 lenders have overseas locations: Bottom Dollar Payday, in Costa Rica; Cash Yes and Hong Kong Partners, in Belize; Federal Financial Services, in the United Kingdom; Prestige Group Marketing and Vince Enterprises in Nevis, West Indies; and Northway Financial Corp. and CashLine LLC in Malta.
Three of the lenders were identified as tribes: the Chukchansi Indian Tribe of California; the Otoe-Missouri Tribe of Indians of Oklahoma; and the Tunica-Biloxi Tribe of Louisiana.
Four of the lenders are companies based in states other than California: Joro Resources, in Texas; East Side Lenders, in Delaware; and Twin Bluffs Financial and CWB Services in Missouri.
No geographic location is listed for the two remaining lenders: Cash Express Loan and NetPDL.com.
