AG Tong, Banking Commissioner Perez Caution Federal Workers to Beware of Predatory Online Payday Lenders during Ongoing Federal Shutdown
While many Connecticut financial institutions are stepping up to the plate to provide no-interest, low-interest loans and other financial assistance to furloughed federal workers during the ongoing government shutdown, Attorney General William Tong and Department of Banking Commissioner Jorge Perez today cautioned workers to avoid predatory online payday lenders who may seek to exploit struggling workers with unaffordable and potentially illegal payday loans or disguise themselves as participants in Governor Lamont’s zero-percent public-private loan program passed by the legislature yesterday.
"It is so heartening to see Connecticut banks and credit unions coming forward to offer assistance to federal workers and their families who have been negatively impacted by the federal shutdown," said Attorney General William Tong. "But the unfortunate reality is that, in times of trouble, scam artists and predatory online companies often come out of the woodwork to take advantage of tough situations. We're urging all federal workers impacted by the shutdown to use caution, to steer clear of unsolicited calls, emails or internet ads offering financial assistance at a high cost, and to call my office or the state Department of Banking with any questions before signing onto a deal with a company or a person that ultimately might not be in your best interest."
"In times of crisis, bad actors are always ready to take advantage and exploit the vulnerable," said Commissioner Perez. "The best advice for Connecticut consumers is to continue to conduct business with your trusted institution. Many Connecticut Banks and Credit Unions stand ready to assist our hard working federal employees, whether through Governor Lamont’s public-private partnership or a program the institution has initiated on its own. We urge those affected by the shut-down to talk to their Bank or Credit union and find the solution that works for them."
Payday loans are small-dollar, short-term loans that borrowers promise to repay within a short period of time. They typically have extremely high interest rates and are typically marketed to minorities, the working poor and others who may be viewed as struggling financially.
Under Connecticut Banking Law, payday loans, also called small loans, for $15,000 or less and charge an interest rate greater than 12 percent per annum, are void and unenforceable. Banks, credit unions and those who hold a small loan license through the Department of Banking, are exempt from this provision.
The Department of Banking considers predatory payday loan companies as unlicensed small loan lenders. Before signing on the dotted line, consumers are encouraged to contact the Department of Banking or visit its website at portal.ct.gov/DOB to check whether a lender is legitimate and avoid falling into a payday lending trap.
Determine if the entity is licensed by the Department of Banking as a Small Loan Company using NMLS Consumer Access. Click on the NMLS Consumer Access button. See Instructions for Using NMLS Consumer Access.
Complaints about unlicensed payday lenders can be made to the Department of Banking through their online consumer complaint form. Consumers can also contact the Office of the Attorney General's Finance Department at 860-808-5270 with any questions.
Jaclyn M. Severance