The State of New York has banned payday loans, but you wouldn’t know it by checking the web.
Google “payday loans NYC,” and you will see dozens of local businesses offering payday loans, even though it’s illegal in New York to make these loans in person, online, or over the phone.
According to the New York State Department of Financial Services (DFS), these payday loan lenders fly under the radar and provide cash loans to clients who typically have poor credit and cannot get a loan from a bank. The DFS says payday loans are illegal in New York because they are designed to trap borrowers in debt.
Due to the short term of the loan, most borrowers cannot afford to both repay the loan and pay their other important expenses. Not to mention that the annual percentage rates on payday loans are extremely high, typically around 400 percent or higher, according to the DFS.
The Underground World of Payday Loans
The underground business of payday loans, although illegal, flourishes in New York City.
Maria Ramos, a Washington Heights salon owner, shared her experience with borrowing from payday loan lenders in this story published by CityLab.
She said in the article that she has $14,000 worth of interest between the three loans she’s secured. “I can’t sleep sometimes. I spend the night thinking about the debt,” she told CityLab.
Ramos says lenders visit her salon every two weeks, trying to collect money she owes.
Some Expert Insight on Payday Loan Lending
The not-for-profit Provident Loan Society wants consumers to know that payday loans are illegal and that there are better options for New Yorkers who don’t have credit but need a short-term loan.
Securing a loan from some pawnshops may be as close as it gets to instant cash. With no credit checks and lower interest rates, it is easy to qualify for a loan and some pawnshops work with you to help you keep up with payments. Provident Loan Society has interest rates that are typically half the cost of a commercial pawn shop.
In the U.S., there are more payday loan lenders than McDonald’s, according to NBC. Becoming a vigilant consumer is a priority at this point.
About the Author
Julia Martyn studies communication and media studies at Fordham University.