State: Internet payday lending will have to be licensed
August 27, 2008
Legal Internet payday lending could vanish in Pennsylvania after the state Banking Department today announced that the online operators will have to be licensed under state law.
"Pennsylvania consumers should be protected by Pennsylvania laws, regardless of where the company they're doing business with is located, whether it's down the street, in another state or on a Web site," said Banking Secretary Steve Kaplan. "This new approach addresses the rising prevalence of Internet-based lending activity, especially Internet payday lending, which has left Pennsylvania consumers vulnerable to practices that our laws were intended to prohibit."
"This is a major victory for Pennsylvania consumers," said Kerry Smith, an attorney with Community Legal Services in Philadelphia.
Payday loans allow consumers to borrow against a future paycheck. But they charge rates that effectively can reach nearly 800 percent, according to the Consumer Federation of America.
Under the new requirement, Internet payday lenders would have to abide by a state cap on interest rates, which is about 24 percent annually.
Source : http://www.mcall.com/