The Consumer Financial Protection Bureau (CFPB) is really taking it to the payday loan industry. The federal watchdog agency announced Tuesday it has filed a lawsuit against NDG Enterprise, an offshore bad credit loan lender, for violating legislation and conducting illegal business practices.
According to the lawsuit filed in a U.S. District Court in New York last week, the CFPB alleges that NDG Enterprise violated the Dodd Frank Act and had operated in several states where payday loans are illegal. Most of the time loans are obtained through bad credit loan affiliate websites which funnel people back to NDG.
NDG Enterprise, which is majority owned by Sagewood Holdings Ltd, distributes and receives Internet payday loans in all 50 states through its nine subsidiaries.
It owns a plethora of brands, including New World RRSP Lenders Corps, Payroll Loans First Lenders Corp. and Northway Financial Corporation. This business practice is said to have been ongoing since 2011.
The British Columbia-based company is alleged to collect loan principals and fees from consumers that did not actually receive bad credit loans or who had zero obligation. Moreover, NDG Enterprise is accused of making fallacious threats against consumers with lawsuits, wage garnishment and even imprisonment.
“We are taking action against the NDG Enterprise for collecting money it had no right to take from consumers,” said CFPB Director Richard Cordray said in a statement. “Companies making loans within the U.S. have to comply with federal law, and the Consumer Bureau will work to ensure that American consumers receive the protections and fair treatment they deserve.”
NDG Enterprise allocates loans exclusively over the Internet. These short-term payday loans are 14 days and can be between $100 and $1,500. Finance charges are between $19.98 and $26.98 for every $100 borrowed.
The lawsuit states that CFPB regulators are seeking monetary damages and preventing NDG Enterprise from further violating federal consumer financial protection laws. Moreover, the CFPB wants monetary relief and damages awarded to consumers affected by these unwarranted charges.
Under the Dodd-Frank Act, the CFPB has the federal authority to take action against private companies participating in illegal acts.
CFPB Pursuing Bad Credit Loan Businesses
Over the past year, the CFPB has been railing against the bad credit loan industry. Nationwide, state legislatures and consumer activists have, too, been attempting to institute greater regulations against this business activity.
Earlier this year, the CFPB released a number of proposed regulations that would attempt to remedy some of the common complaints regarding the business models instilled by payday loan establishments.
Some of the rules being mulled over would refrain lenders from gaining payment by garnishing consumers’ wages and accessing their bank accounts. It would also restrict the exorbitant fees and interest charges. These rules would be applied to an array of loan types, including payday, vehicle titles, high-cost installments, open-ends and deposit advance products.
The purpose of the initiative, the CFPB says, is to end the debt payment trap that inflicts millions of Americans.
“The CFPB’s proposals under consideration for longer-term loans would eliminate debt traps by requiring that lenders take steps to determine that borrowers can repay,” the CFPB said in a report. “Just as with short-term loans, lenders would have two alternative ways to extend credit and meet this requirement – prevent debt traps at the outset or protect against debt traps throughout the lending process.”
A recent Pew survey found that a majority of Americans support these proposed regulations.