- February 23, 2022
- Posted by: admin
- Category: payday advance loan
There are currently a total of twenty states regulating RALs: Arkansas, California, Colorado, Connecticut, Illinois, Louisiana, Maine, Maryland, Michigan, Minnesota, Nevada, New Jersey, New York, North Carolina, Oregon, Tennessee, Texas, Virginia, Washington State, and Wisconsin. The laws for thirteen of these states are summarized in Appendix A to NCLC’s model state RAL law.
Most of these laws rely on disclosures to protect consumers from RAL abuses, which are limited in their effectiveness. However, RAL laws in Arkansas, Maine, Maryland, Minnesota, and New York provide substantive protection by prohibiting add-on fees. The Connecticut law prohibits RAL facilitators from facilitating a RAL costing over 60% APR; however, the federal Court of Appeals for the Second Circuit struck down this provision, holding that it was preempted by federal banking law.
- Cease offering RALs after .
- Pay a $900,000 civil money penalty.
- Implement a system of verifications in place to ensure that its partner tax preparers operate their future tax settlement activities with appropriate safeguards.
- Review all advertising for tax settlement products at preparer’s offices.
- Conduct audits, including surprise on-site visits and mystery shopper surveys, at 10% of preparer locations.
Prior to the settlement, the FDIC had issued an “Amended Notice of Charges for an Order to Cease and Desist,” which detailed widespread legal violations in Republic’s RAL program, including:
These laws regulate both credit repair organizations and “any person or organization who assists or offers to assist consumers in obtaining an extension of credit,” which should include tax preparers who offer to arrange RALs
- Truth-in-Lending Act (TILA) – The FDIC found that copies of the written disclosures required by TILA were regularly absent from loan files. Nearly 88% of the tax preparers that FDIC investigators called failed to make an oral disclosure of the APR when requested.
- Gramm-Leach-Bliley Act – Tax preparers did not have proper physical and electronic safeguards for the protection of https://signaturetitleloans.com/payday-loans-ar/ confidential consumer information, such as shredders or locked dumpsters. Half of the tax preparer offices had no alarm system, even though the stores had bank checks inside.
- Federal Trade Commission Act – The FDIC alleged that Republic engaged in unfair and deceptive actions, such as implying that customers would receive the full amount of their refunds minus fees in one or two days by getting a RAL, despite the fact that the RAL amounts were limited by Republic to $1,500.
- Equal Credit Opportunity Act (ECOA): The FDIC found tax preparers refused to process a RAL application when only one spouse applied for the loan, in violation of the ECOA.
According to the FDIC, 46.5% of tax preparers who made Republic RALs were in violation of at least three different laws. The FDIC found that Republic failed to properly train tax preparers to comply with consumer protection laws. In particular, Republic tested preparers’ knowledge of consumer laws by giving them an online quiz that permitted the preparers to keep guessing until they passed the test. In addition, the FDIC alleged that Republic attempted to interfere with its investigation by setting up an Internet webpage of Frequently Asked Questions to coach tax preparers during the day when the FDIC tested the preparers.
The most important regulatory action, of course, was the FDIC’s settlement with Republic Bank & Trust, discussed in Section I
In addition to the FDIC’s action, the Arkansas Attorney General obtained a consent Judgment against Mo’ Money for violation of the Arkansas RAL Act and the Arkansas Deceptive Trade Practices Act. The Arkansas Attorney General had alleged that Mo’ Money failed to provide the disclosures required by that state’s RAL Act, and charged add-on fees prohibited by the Act. Mo’ Money agreed to comply with the Arkansas RAL Act and to pay a fine of $25,000.