It’s something that has been brewing in the news for the last few weeks, but has only just come to a dramatic conclusion – for a while now, New York lawmakers have been threatening to crack down on payday loan companies, much to the chagrin of Native American tribal lenders and those who have argued that such loans serve a necessary purpose in the market.
It seems that regulators have moved from mere talk to action. Yesterday, they successfully forced a Tennessee-based payday loan conglomerate to shut down, causing the overnight closure of three online lenders.
Who Was Targeted?
The conglomerate was owned by philanthropist and entrepreneur Carey Vaughn Brown and based in Chattanooga. The structure of the conglomerate is somewhat confusing, but includes the companies Area203 Digital, Cloudswell, SupportSeven, ACH Federal, Eclipse in Action, Credit Protection Depot and Credit Payment Services.
They offer a variety of financial services and products, but it is the latter (Credit Payment Services) which was providing payday loans via three websites: MyCashNow.com, DiscountAdvances.com and PayDayMax.com.
As of yesterday, all three sites have been replaced with a ‘temporarily unavailable’ placeholder message.
How Did Regulators Manage to Shut Them Down?
By going straight for the jugular. Rather than forcing the sites to close directly, New York regulators went directly to banks instead, sending a letter to all of the major banks and urging them to stop giving Carey Brown’s payday loan ring access to the national Automated Clearing House network. This system, usually referred to by its acronym ACH, allows authorized lenders to deposit loans directly into a customer’s account. More importantly, it allows the lender to automatically collect the loan repayment on an agreed date.
Without access to the ACH, it would be very difficult (if not impossible) for a payday loan lender to operate. Given that Brown’s payday loan websites suddenly closed, we can only assume that the denial of access request was acquiesced by the major banks.
Who Has it Affected?
While it is too early to say how this will affect those who have currently got outstanding loans with any of the above named parties, there has already been a large amount of fall-out from the sudden closure: specifically, company employees.
Approximately 400 employees are understood to have lost their jobs, with staff observed leaving company offices with their possessions in boxes mere hours after the news broke.
While the conglomerate affected has not specifically addressed the shutdown directly, on the topic of staff lay-offs it issued the following statement: “Due to the current regulatory environment and a contraction of the financial industry’s support of online lending, we have determined that the ongoing viability of these companies is unsustainable… We appreciate the commitment and hard work of our colleagues, and we wish them well.”
The Implications Going Forward
This development is interesting in that it is the first assertive action made by New York regulators into the realms of Native American lending, which had been threatened earlier in month – Brown’s payday loan operations originate from within a tribal reservation, which many lenders have argued fall outside of state laws since they’re classed as a sovereign nation.
Despite Brown maintaining immunity – both due to the Indian reservation technicality and the argument that the loans are processed on offshore servers – it looks like the ACH block has totally disrupted his service overnight, and it’s not likely to recover in its current form. If Carey V. Brown had any confidence that they could fight the ruling, he probably wouldn’t have made his entire workforce redundant.
When Illegal Lending Backfires
It’s a near certainty that New York regulators will continue to crack down on lenders, but it could be easily argued that Brown’s payday loan companies were a very easy target. After all, they had been openly breaking the rules for quite some time.
A couple of his payday loan companies had been sued for spam text messages by the thousand. It had also been slammed in a few states (including Tennessee) prior to this for charging a higher interest rate than that permissible by state laws, and was banned from operating in certain areas as a result.
Choosing a Company that Plays by the Rules
Since its founding in 2005, AAA Payday Cash has been committed to working with both customers and regulators to make sure we provide:
A) Superb customer service
B) Efficient loans in 2 days or less
C) Full transparency with our fee structure and how we work
In a nutshell, it’s as simple as A, B, C! What’s more, as a registered lender we do all of the above while abiding with every letter of the law.
If you’re new to payday loans or have been impacted by the recent news, you’re in the right place. We’ll be happy to help you with your short-term borrowing needs, and are sure you’ll be impressed with how efficient our services are – simply visit the homepage for steps on how to get started, or see our FAQ page for explanatory info on the various services we offer.
Alternatively, do feel free to get in touch! We love hearing from our customers, and try to help out as much as possible via our G+, Facebook and Twitter profiles. If you have any queries or simply want to say howdy, do feel free to drop us a line!