New York's Department of Financial Services sent subpoenas to 16 online lead generation firms suspected of deceptively marketing illegal payday loans in the state.
DFS believes the firms are illegally collecting and selling personal data to online payday lenders and other companies. The subpoenas are part of the state's expansion of a crackdown on online payday lending that New York Gov. Andrew M. Cuomo announced Tuesday.
The subpoenas follow Benjamin M. Lawsky, New York's Superintendent of Financial Services, decision to send letters in July to all debt collection companies operating in New York, directing them to not collect on illegal payday loans.
DFS as part of an ongoing investigation heard complaints from consumers about many lead generation firms concerning false and misleading advertising (including celebrity endorsements), harassing phone calls, suspicious solicitations, privacy breaches and other issues.
Lead generation firms typically do not make payday loans directly, but instead set up Web sites marketing those illegal loans. Through promises of access to quick cash, the lead generation companies entice consumers to provide them with sensitive personal information such as Social Security and bank account numbers and then may sell that information to payday lenders.
Some consumers have complained to DFS about receiving calls from suspected scammers after providing their personal information to the lead generation companies. Such scams include enticing the consumers to load money on a pre-paid debit card and use it to pay substantial upfront fees to receive an online payday loan. After paying these substantial upfront fees, the consumers reported not receiving the promised loan.
"We will continue to follow this investigation wherever it leads and use every tool at our disposal to safeguard New Yorkers from those who seek to prey upon vulnerable consumers," said Cuomo.
Payday lending is illegal in New York under both civil and criminal usury statutes. In some cases, however, lenders attempt to skirt New Yorks prohibition on payday lending by offering loans over the Internet, hoping to avoid prosecution, according to Cuomo's office.
In August, DFS demanded that 35 companies stop offering illegal payday loans online in violation of New York law. The majority of these companies (at least 23) already have ceased business in New York after receiving letters from DFS.
Cuomo also announced in August that Superintendent Lawsky sent letters to 117 banks as well as NACHA, which regulates the use of the Automated Clearing House network and whose board includes representatives from a number of those banks requesting that they work with DFS to cut off access to New York customer accounts for payday lenders operating unlawfully.
A list of the 16 lead generation companies to which DFS issued subpoenas is included below. DFS is demanding a range of materials as part of its ongoing investigation, including marketing materials, contracts for sales of consumer information and privacy policies.
· Allied Cash Advance
· Bahamas Marketing Group, Inc.
· Blue Global, LLC d/b/a 100DayLoans, HighSpeedPayday
· DJR Group, LLC
· Fix Media Group, LLC d/b/a We Fix Money
· Hydra Fund II
· LightSword, LLC d/b/a Aero Advance
· Payday Loan Ranger
· Payday Mobility
· Personal Cash Advance
· Selling Source, LLC d/b/a MoneyMutual, LLC
· US Cash Loans
· WebMarketerLive d/b/a JustClickHereLoans, CashMoneyNow