Minnesota Attorney General Sues 5 Internet Payday Lenders – Twin Cities
You’ve seen the payday loan companies in the strip malls. Now people in desperate need of cash are turning to online lenders, and the Minnesota attorney general says some customers are being illegally shaken.
Five Internet lenders are the targets of separate lawsuits filed in Minnesota on Tuesday, citing illegal lending practices. The investigation that triggered the lawsuits, brought by Minnesota Attorney General Lori Swanson, identified “illegally high interest rates of up to 782%”, unauthorized withdrawals from customer bank accounts and a bogus scam.
“These Internet loan companies are truly a sign of the times,” Swanson said Tuesday. She said they were taking advantage of the turmoil in the economy and consumers looking for a short, relatively small loan for everything from car repairs to groceries.
“We think it’s growing,” she said, noting that the total US internet payday loan market is estimated at $ 10.8 billion.
The lawsuits charge the companies with various violations, including automatic loan extensions and loan renewals by paying off an old loan with the proceeds of a new one.
The five companies being sued are Flobridge Group LLC, Silver Leaf Management and Upfront Payday, all of Utah; and Integrity Advance and Sure Advance LLC, both of Delaware.
The lawsuits, filed in district courts in various counties in Minnesota, allege that high interest rates and high finance charges have made it difficult for consumers to repay the principal on a loan.
The lawsuits also claim the companies were not properly licensed by the Minnesota Department of Commerce.
A call to Flobridge on Tuesday encountered a voicemail system looping back through the options list after pressing “0” for “all other requests.” One option was to press 3 “if you want to extend your loan for another two weeks”.
A customer service representative from Sure Advance LLC of Delaware requested that a request be sent to an email address. No response had arrived Tuesday evening.
A consequence of the business models of online lenders is that borrower information sometimes ends up overseas with criminals.
The phone calls to Diane Briseno’s home in Maplewood were from India, the attorney general’s office later discovered. His caller ID indicated that the call was from the state of Minnesota.
Briseno’s 20-year-old son had started applying for a loan online but never filled out the form. Either way, he had left enough information for the phone calls to start almost immediately. When Briseno called a toll-free number, he was told that his son had taken out a loan of $ 700 and had to pay $ 6,000 immediately.
When she asked about the details of her supposed transaction, “they said he got the loan two days ago,” Briseno said with a laugh. “They are very demanding. They won’t listen to you at all.
On a subsequent call, she alerted the voice on the other end of the phone that she had contacted Swanson’s office. “I said, ‘I’m going to put you in jail.’ Then they hang up on you.
Swanson said people in need of a loan would be “better off trying to find a physical financial institution in Minnesota” that is licensed. Consumers can get a small line of credit from a local bank or credit union.
“The worst they can do is do business with these unlicensed companies,” she said.
Earlier this year, the Idaho attorney general reached a deal with the Flobridge group that ordered the company to reimburse consumers who had received collection notices, garnishment requests or court documents from the company.
Under Minnesota laws, loans between $ 250 and $ 350 are capped at 6% interest plus a $ 5 fee. For loans between $ 350 and $ 1,000, payday loans are capped at an annual interest rate of 33% plus an administrative fee of $ 25.
John Welbes can be reached at 651-228-2175.