December 22, 2008
Payday and car-title loans - loans that charge very high interest rates for what is intended to be a short term - are illegal in New Jersey.
But consumers desperate for cash ahead of the holidays can nonetheless find these types of loans online.
New Jersey's criminal-usury law prohibits loans with an annual interest rate above 30 percent. Payday loans made against the next paycheck and car-title loans secured by the vehicle typically have interest rates exceeding 400 percent per year.
Even though they are illegal in New Jersey, many lenders offer payday loans online to residents of the state.
Jean Ann Fox, director of financial services for the Consumer Federation of America, said such loans have the disadvantages of a payday loan as well as additional dangers.
"Online payday lending is extremely risky for consumers," Fox said this week. "The borrower must provide all of their personal information online, including their Social Security number and bank-routing number to give the lender access to their account."
With fees and interest, borrowers typically wind up paying a 400 percent to 600 percent annual rate on the loan - and then might have trouble stopping the debits by the lender.
"It's very hard to shut off access to a bank account. Theoretically you can, but in practice it's hard to do," she said. "We urge consumers never to borrow money from online payday lenders."
States from Maine to California have taken action against Internet lenders that don't comply with state laws, Fox said, and some states such as West Virginia are very aggressive about it - suing on a regular basis and requiring lenders to refund money and stop doing business in the state.
New Jersey apparently is not so aggressive.
"I don't know of any cases from New Jersey," Fox said.
Asked Friday about enforcements against online payday lenders, the N.J. Attorney General's Office and its Division on Consumer Affairs took the question but didn't return an answer.
An online search of state government information turned up no references to enforcement of online payday loans.
A search for lenders offering payday loans online to residents of New Jersey found dozens of sites.
Source:http://www.pressofatlanticcity.com
