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September 28, 2005

Online Payday Lending Scheme Alleged Illegal, Shuts Down

We knew this was coming - the online payday loan businesses are now being watched and are getting under greater scrutiny. But this case is unique because it's not about your common straight-forward payday lending operations... The www.acepays.com run by Ace Pays Inc. was shot down because of... charging consumers more than 600 percent annual interest on loans that were deceptively marketed as "instant cash rebates". In addition, Ace Pays Inc. failed to register as a payday lender or to obtain a license under the Credit Services Act.

What was really 'innovative' is that their online operation was designed as a membership-based program. For example, by signing up for the highest membership tier, a consumer would receive a $1,000 "instant cash rebate". Ace Pays Inc. would then deduct a $20 daily rate from that consumer bank account every two weeks. The amount charged was equivalent to an annual interest rate of 630 percent. Just like payday loan websites, www.acepays.com advertised as "GET THE CASH YOU NEED NOW!" and receive "UP TO $1,000 INSTANTLY."

"It's clear to us that the web-based membership program was a ruse to engage in an illegal payday loan operation," Pennsylvania Attorney General Tom Corbett said. "The so-called 'instant rebates' were nothing more than loans that had to be paid back ..."

Ace Pays inc., a Delaware Corporation, has shut down its online payday operations and has agreed to pay a total of $70,000 in fines and costs. It was also ordered to refund consumers the amount of interest they paid above the maximum 6 % permitted under the Pennsylvania state law.

Consumers have until December 21, 2005 to obtain a refund. They may file a complaint online at http://www.attorneygeneral.gov.

Which online Payday Loan company is next?

 
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