Imposes penalties on some of the erring lenders
New York, NY -- (SBWIRE) -- 03/07/2016 -- New York State has not only banned five payday loan companies but imposed heavy penalties on them as well. As a result they will not be able to carry out any operations in the state.
The reason payday loans are banned in the State is that they lead to on-going debt cycles for consumers. That's the reason these loans are considered illegal in the State of New York. Since these companies were collecting these illegal loans they came under scrutiny and have been banned. But that's not all; they have also been asked to pay more than $300,000 in penalties and restitution as well.
The ill practices of these payday loan companies have also come to light. According to reports, one of these companies made 8,550 negative credit reports for customers to credit bureaus. It was done in an attempt to pressurize them to pay their loans along with huge interests. The company, along with the others, was not only prohibited from making collections in the state but asked to reverse these negative reports as well.
New York State has also filed lawsuits against these payday loan companies since they were charging more interest than the usury applicable cap. Another problem with the functioning of these companies was that they would make borrowers give them access to their bank accounts. It was done so that the lenders could directly withdraw payments from their accounts. The lenders would only withdraw the interest amount and roll over the principal, which would mean that they would keep collecting money from the borrowers who thought their debt was being paid off.
These payday loan companies were not only hurting the interests of borrowers but the National economy on the whole too. That's why the state has taken strict action against them and has also begun offering information and education to borrowers. In states that payday lending is legal users might want to rely on state-registered companies. Payday loans are also offered online by websites and affiliates. They try to abide by the rules and match registered payday lenders, which is why they are considered to be a smart option for users.
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