The New York State Department of Financial Services is leading a multistate probe into the advance payroll industry to see if the practice involves usury and violation of state banking, licensing and other laws.
Payroll advance companies offer consumers access to wages already earned prior to the payment date but allegedly exact usurious interest rates in the guise of tips, monthly membership or exorbitant additional fees, the NYDFS said.
NYDFS Superintendent Linda Lacewell said the regulatory probe conducted by 10 states and Puerto Rico aims to protect consumers from predatory lending and scams that push them into endless cycles of debt.
The state agency said it is sending out letters requesting information to members of the payroll advance industry. It is also encouraging consumers who believe they were victimized by a payroll advance company to file a report with the DFS.
Participating in the investigation are the Connecticut Department of Banking, Illinois Department of Financial Professional Regulation, Office of the Commissioner for Financial Regulation in the State of Maryland, New Jersey Department of Banking and Insurance, North Carolina Office of the Commissioner of Banks, North Dakota Department of Financial Institutions, Oklahoma Department of Consumer Credit, Puerto Rico Comisionado de Instituciones Financieras, South Carolina Department of Consumer Affairs, South Dakota Department of Labor and Regulation's Division of Banking, and the Texas Office of Consumer Credit Commissioner.