Payday lenders got another black eye after New York’s top regulator fined a widely-advertised site for marketing illegal high-interest rate loans.
The settlement with Selling Source, whose ads for its payday lead generation site Money Mutual feature talk show host Montel Williams, includes a $2.1 million fine and an agreement to add a disclaimer on its national ads that run in New York that the service isn't available in the state. The company and Williams will be barred from making any new New York-specific ads that do not comply with state usury laws.
The ads will continue to run in other states, however.
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"Using Mr. Williams's reputation as a trusted celebrity endorser, MoneyMutual marketed loans to struggling consumers with sky-high interest rates – sometimes in excess of 1,300 percent – that trapped New Yorkers in destructive cycles of debt," said Benjamin M. Lawsky, Superintendent of Financial Services, in a statement.
"The New York State Department of Financial Services “has made no finding of a violation of law by Mr. Williams, and the agreement does not require him to pay any fines or penalties,” said Jonathan Franks, a spokesman for Mr. Williams, in a written statement. “Mr. Williams and his staff have cooperated fully with the D.F.S. throughout the course of the investigation.”
MoneyMutual's customers are "informed" and "make their own decisions" about the loans they choose through the site, said Charles Goodyear, a spokesman for Money Mutual, in a statement.
"Hundreds of thousands of consumers have been paired with a responsible lender, have secured the short-term financing they needed and repaid the money loaned to them," he said.
New York is the latest to take action against SellingSource as regulators and watchdogs increase their scrutiny of payday loans. The Consumer Financial Protection Bureau has included the company in its recent probe of the payday lending industry. Pennsylvania and Illinois sued the company last year for generating leads for loans that broke state lending laws.