Website Pushed US Borrowers Into Bad Illegal Payday Loans: CFPB

WASHINGTON (Reuters) – The U.S. agency tasked with protecting consumers from financial abuse has taken on a little-understood area of ​​payday lending, where websites sell information about people looking for small, short loans term, and fined a California firm on Wednesday for leading borrowers into illegal and bad debt.

The Consumer Financial Protection Bureau in the United States has been working for more than a year to develop a rule that would restrict payday loans, short-term debts that are unsecured and that are historically paid off by the next paycheck. of a borrower. Loans are popular with low income people and are frequently used to cover expenses for an emergency.

A final version of the rule is expected to be published shortly.

The bureau fined California-based Zero Parallel LLC $ 100,000, which, as a “primary aggregator” identifies potential borrowers and then sells their information. The action shows the agency has an eye on the online side of the industry, which crosses state borders and has grown in recent years. Potential borrowers fill out web forms and then are immediately sent to a lender’s site to take on the debt.

According to a CFPB statement, Zero Parallel sold demands to lenders whom it knew did not comply with state usury laws, interest rate restrictions and prohibitions on who was authorized to grant loans. loans, and kept borrowers in the dark about risks and costs.

According to the CFPB, Zero Parallel simply sold leads to the highest bidders, and the borrowers were unaware they were taking out illegal loans.

Payday lenders mostly charge a fixed fee instead of interest and frequently allow borrowers to take out new loans to cover outstanding loans, which can add up until a borrower ultimately pays. four times the amount of the original debt.

Zero Parallel will pay the fine without admitting or denying the allegations, the CFPB said. The agency also said it has reached a deal with Zero Parallel owner Davit Gasparyan to resolve similar charges filed last year against his former company, T3Leads, with a fine of $ 250,000.

Zero Parallel did not return calls for comment.

The CFPB said loans that did not comply with the laws of the borrowers’ states of residence were void and could not be collected.

Before the financial crisis of 2007-2009, payday loans were regulated by the states. But the Dodd-Frank Wall Street reform law of 2010 tasked the CFBP with playing a federal role in overseeing the sector and establishing national regulations to prevent borrowers from falling into the expensive debt trap.

Reporting by Lisa Lambert; Editing by Frances Kerry

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