NEW YORK, Dec. 3 (UPI) -- New York state is seeking information on websites that sell consumer data to payday lenders that charge exorbitant rates, a confidential document says.
The New York Times reported Tuesday the document reveals the state has sent subpoenas to 16 websites called lead generators that provided consumer data to payday lenders, some of which charge interest rates of 400 percent and more for emergency, short-term consumer loans.
The Times said New York Superintendent of Financial Services Benjamin Lawsky sent the subpoenas last week in an effort to clarify the role the websites play in supporting the payday lending industry that has a reputation akin to loan sharking, the Times said.
The investigation is part of an on-going effort to curb payday lending, which the industry touts as a necessary part of the financial system that provides cash to people not well-connected to retail banking.
In August, the regulator sent cease-and-desist orders to 35 payday lenders demanding they bring interest rates into compliance with state law, which caps the annual interest rate at 25 percent.
A recent Pew Charitable Trusts report said consumers have complained of interest rates exceeding 1,000 percent on some occasions, as rates can soar when consumers miss a payment.
The report detailed loans of $375 that required repayment of $520 just to cover the interest.
Other consumers have complained of deceptive practices, including lead generator websites that demand money up front to secure a loan.
One borrower, Myra Thomas, said she received an unsolicited call that directed her to an online loan of $1,000 from Capital Bank if she applied through a lead generator.
The lead generator charged $375 to secure the loan, but the $375 simply disappeared without a trace. The consumer did not get the loan and the $375 was not returned.
"Unfortunately there are bad actors who fraudulently misrepresent themselves as legitimate companies, in some cases by duplicating website branding to deceive consumers," Peter Barden, a spokesman the Online Lenders Alliance said.
