The payday loan industry is finding itself in hot water. State authorities are going after lenders who are charging interest rates above the usury rate. Low income borrowers are charged over 500 percent for a loan.
Western Sky Financial an online lender is running into state challenges. Western Sky is owned by the Cheyenne River Sioux tribal member. As I stated in a prior article, Western Sky Financial will stop lending in September. Up to 15 states have banned payday loans in order to protect their citizens. Lenders are scrambling to find ways to continue payday lending. Banks who lend these types of loans to consumers will lose money.
New York is cracking down on tribal payday lenders. It is a violation in the state of New York to charge consumers 300% interest. This has prompted American Indian groups to began filing lawsuits in the name of their sovereignty.
Millions of people have become victim to payday lending. Taking out a loan can rollover for 5 months if not paid back in time, per research. Therefore, it is crucial that the loan is paid back on your next payday.
The Consumer Financial Protection Bureau indicated borrowers averages 10 payday loans a year, paying high fees. States with usury laws are finally taking control on the payday loan industry. Unfortunately, this will be a long fight.