New York's Department of Financial Services (DFS) has sent letters to collection agencies statewide warning them against trying to collect on illegal payday loans.
DFS Superintendent Benjamin Lawsky cautioned that his agency will aggressively enforce the law, including those offering lending over the internet and by mail. Loans with an interest rate above the statutory maximums are legally void and unenforceable, he added.
Payday loans are typically short-term loans providing advances on a paycheck, and commonly include high interest rates. State officials say they often violate a New York law that limits interest rates to 25%.
Some payday loan rates can be as high as 400%, with studies showing them as a "high-cost debt trap" for people with low incomes.
