Scheme skirts Georgia’s law banning payday lending

Avoiding usury laws

Payday lenders have slipped past state attempts at regulation with various ploys, critics say. These are among the strategies that have fueled controversies:› Partnering with Indian tribes: In 2017, Georgia reached a settlement with an online lender accused of a scheme to avoid the state’s usury and payday lending laws. Western Sky Financial and affiliates used a shell company affiliated with a Native American tribal entity to avoid the state’s usury and payday lending laws, state officials said.The scheme involved more than 18,000 loans to Georgia residents with interest rates of up to 340 percent. The settlement came after the Georgia Supreme Court in 2016 ruled that online lenders must comply with Georgia lending laws.› Undisclosed and inflated fees: In 2018, the Federal Trade Commission mailed refund checks to more than 1 million borrowers deceived by a payday lending scheme. The commission said that AMG Services led borrowers to believe they would be charged a one-time finance fee, but instead made multiple withdrawals from customers’ bank accounts with a new finance fee each time.In 2016, the agency settled with Red Cedar Services and SFS Inc. following charges that they misrepresented how much loans would cost consumers and other loan terms.› Registering as a bank, mortgage lender or pawn shop: State usury laws may not apply to banks, credit unions, pawn shops and other lending institutions. A growing concern is that payday-style lenders will set up as online financial technology firms and be able to circumvent usury laws.