ATTORNEY GENERAL ANNOUNCES $1,000,000 CRACKDOWN ON ILLEGAL LENDING
April 23, 2014
Today, Vermont Attorney General William H. Sorrell launches a sweeping effort to address the growing problem of illegal and predatory online lending. “Online lenders are taking advantage of thousands of low and moderate income Vermonters. They offer illegal short-term, very high-interest loans via the internet.” said Attorney General Sorrell. “These predatory loans are designed to entrap consumers in long-term debt. Fortunately, we have strict lending laws to combat such schemes and we are announcing an aggressive, comprehensive effort to keep these lenders out of Vermont.”
The Attorney General announced actions against lenders and their payment processors under Vermont’s Consumer Protection Act, because the lenders are unlicensed and charging interest of up to 600-700%; 300% on average.
Vermont has long standing laws requiring that non-bank lenders be licensed and limits the annual interest rate on unsecured loans to 12-24 percent. Payday loans (loans contingent on a postdated payment instrument) are explicitly banned.
In May 2012, the Vermont Legislature enacted the strongest law in the nation on predatory internet lending, making lenders who fail to comply with lending requirements and those who process their electronic loan payments directly liable under Vermont’s Consumer Protection Act. The law also imposes direct liability on any person or business which knowingly and substantially assists illegal lenders.
The Attorney General would like to thank the Department of Financial Regulation (DFR) for its assistance in the enforcement efforts and the Legislature for leading the nation in the passage of powerful laws to combat illegal lending.
The Attorney General has issued a report, describing the illegal lending problem and his Office’s activities to date, including:
Settlements with the top three largest known lenders and one payment processor, resulting in at least $1,000,000 in potential refunds and loan forgiveness to over 1,600 eligible Vermont consumers, and $90,000 in payments to the State;
Lawsuits against two illegal lenders and one payment processor;
Publishing all known illegal lenders in Vermont (81 to date), and sending demand letters to cease and remedy all illegal loan activity in Vermont;
Letters to third parties who assist lenders, or are in a position to help stem the flow of illegal lending, such as television, radio, and cable networks, internet search companies (Google, Yahoo, Microsoft), industry trade groups, financial institutions, and local employers.
Copies of the report and the documents described above are available at the Attorney General’s website. The report includes consumer tips, such as how to: (i) seek alternatives to online loans; (ii) check if a lender is listed as licensed with the Vermont DFR; (iii) file a complaint with the Attorney General’s Consumer Assistance Program regarding an illegal loan; and (iv) keep informed on future lending issues.