Massachusetts Office of Consumer Affairs Announce Shut Down of Debt Collector and Action against Five Unlicensed Predatory Lenders
The Massachusetts Office of Consumer Affairs and Business Regulation and the Division of Banks announced a series of cease orders targeting unlicensed lenders and a licensed debt collector that were not adhering to the state’s loan consumer protections.
These loans are illegal under the Massachusetts small-loan statute because they include excessively high interest rates and fees. In some cases Massachusetts consumers were charged over 150 percent interest, some as high as 169%. In Massachusetts any business that makes loans of $6,000 or less at an interest rate greater than 12 percent must be licensed as a small-loan company by the Division of Banks. The maximum annual rate of interest for these loans is 23 percent. Third-party debt collectors must also be licensed and supervised by the Division.
These small-dollar, high-interest rate loans, similar to loans commonly referred to as “payday” loans, are primarily offered to consumers over the Internet and require access to a consumer’s bank account and personal information. Many Internet-based payday lenders provide little or no identifying information about themselves and may operate under several different names. With transactions completed over the internet or phone, often e-mail addresses and toll free telephone numbers are the only means of contacting these companies.
Many of these lenders operate over the Internet and across the globe and are difficult to track. This increases the risk of identity theft for consumers. However, in a series of initiatives against payday lending dating back to 2005, the Division of Banks has issued cease-activity orders against hundreds of payday lending companies making illegal loans to Massachusetts consumers, many operating online.
Consumer Affairs and the Division of Banks offer the following advice to consumers looking for a personal loan:
- Check the NMLS Consumer AccessSM at www.nmlsconsumeraccess.org to ensure that the company is properly licensed,
- Shop different banks, credit unions and lenders to see which ones offer better rates.
Evaluate the long term and high dollar cost of loans offered by companies advertising online.
- Even a loan of a few hundred dollars could end up costing thousands.
Anyone with questions regarding consumer loans or debt collection may contact the Division of Banks’ Consumer Hotline at 1-800-495-BANK (2265) x 501.