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Prohibition of payday lending business in New York

The legislation of New York has banned payday loans and eliminated the activities of payday lending companies. The code of the State contains laws providing these measures, which are very strict. All the regulations have been passed in order to restrict operations of payday lenders and protect borrowers against unfair and usurious lenders that generally set three-digit numbers for annual interest rates on payday loans. Such rates make loans extremely expensive and introduce a high threat to a customer’s income. Furthermore, the New York authorities state that only lending firms with a license can legally operate in this sphere. All other businesses will be criminally prosecuted in court. A New York resident who has decided to apply for a payday loan should be familiar with the State legislation and pay special attention to the following provisions of the law. Firstly, the process of cashing of post-dated paychecks is prohibited in New York. Secondly, in order to establish lending business in the State, a company must receive a license. Thirdly, lending firms that set interest rates exceeding 25% for a loan will be criminally prosecuted. Finally, a civil action will be lodged against a lender that charges more than 16% for a loan per year.

In spite the fact that payday lending industry is illegal in New York a lot of payday lenders continue to provide their services online to the State residents. Internet lenders declare that since they are officially registered in another State where payday lending is allowed, they have a legal right to offer payday loans countrywide. However, it is not true. Regardless of their physical address payday lenders who intend to operate in New York are required to comply with the State legislation and get a license for their operations. However, the authorities aren’t able to monitor and control all the bargains conducted via the internet and find the real location of an illegal payday lending firm. A borrower who has applied for a payday loan online and been deceived by an unlicensed lender can bring a complaint about it to the State Banking Department of New York. The deceived customer may just repay the loan amount and avoid paying off interest rate or extra fees in case the illegal lender is disclosed.

Considering the fact that payday loans are one of the most expensive credit and that many unlicensed payday lending companies are able to operate without being revealed, it is recommended for New York borrowers to avoid such lenders. In case you want to apply for a payday loan in another State, where the industry is legal, you still have to examine lending legislation of this State and ensure that you have chosen a reliable payday lender.