As states like Montana pass legislation capping interest rates for payday lending, many providers of payday loans are going out of business.
Though payday lender storefronts may be bare, this form of financing is not dead. It has found a new life online and via telephone.
Online lenders have toll-free numbers that connect to lending services operated in more lax states or even other countries. Interest rates range up to 1,000 percent and states have difficulty regulating online lending transactions.
Brick-and-mortar payday lenders are not happy about their online counterparts. Now, consumers do not know where their loans are originated or funded. Some online lenders debit accounts in an unacceptable way.
Customers still go to former brick-and-mortar payday lenders for help, which they can no longer provide. This leaves people confused and vulnerable to online lending companies that charge as much as $45 for a $100 loan.
Sources report that online payday lending is big business characterized by consumer complaints. Online payday lending brokers pass consumer information to various competing lenders.
The lending organizations do not license in regulated states like Montana so they are not subject to state laws. Though they are technically operating illegally per state legislation, it can be difficult to find the companies.
Customers file complaints regarding illegal Internet lending in these states but authorities have trouble determining where to serve the documents.
Some attorneys have filed class action lawsuits because they believe many consumers are being fleeced with hefty interest charges. Their advice is to avoid supplying financial information online, whether to a payday lender or another source.
