AUGUSTA, Maine — A measure to curb online predatory lending goes into effect Aug. 1.
Under current law, unlicensed online lenders are able to freely access borrowers’ bank accounts through U.S.-based middlemen who process electronic money transfers. The new law makes it illegal to process those electronic transactions.
“Predatory lending hurts the most vulnerable,” said co-sponsor Rep. Aaron Frey, D-Bangor. “While these loans can seem like a lifesaver to someone who needs quick money, they are extremely dangerous and can quickly cripple him or her financially.”
Unlicensed online lenders, often without presence in the United States, target low-income consumers by offering quick, short-term loans. High interest rates and exorbitant fees quickly overwhelm the borrower and trap them into an endless cycle of debt.
Those who already are struggling financially, including low-income and elderly Mainers, are most likely to be targeted by predatory lending schemes.
Once a borrower is hooked, he or she is often charged up to 700 percent interest and even charged fees the size of the entire loan itself. These fees and interest rates are obscured in fine print and confusing language, if even disclosed at all. Most the lenders in question do not give borrowers a truth-in-lending disclosure.
Victims are rarely able to pay in full and often end up borrowing even more out of desperation to keep up.
The new law will result in more effective enforcement of Maine’s consumer credit laws and empower authorities to keep illegal payday lenders from operating in Maine.
If you are a victim of a predatory payday lending scheme or you know of a potential victim, you should contact the Maine Bureau of Consumer Credit Protection at 1-800-332-8529 or the Attorney General’s Consumer Protection Division at 1-800-436-2131.
To read the new law, go to: http://www.mainelegislature.org/LawMakerWeb/summary.asp?ID=280050778