Payday loans and the Internet

Unlike a store front, where state regulators can walk in, the Internet is more like outer space.  If someone wants to hide, they can.  So what’s it going to be?

Here are the options:

  • Offshore
  • Choice of state law (lender is licensed and will processes loans in their state regardless of the applicants geographic location.)  The lender find a state w/ favorable laws and the permission to lend outside of the state.
  • Licensed in each state
  • Cowboy model (flying under the radar)
  • Sovereign Nation.

Here are some of the problems:

The “licensed” lenders can only compete up until a point w/ offshore and choice of law models.  Something as little as a cool off period, puts a licensed lender at a huge disadvantage.

If you’re Offshore, good luck selling your business.  Besides, who wants to get arrested at the airport?

Does “choice of law” make you an easy target?  Seems like a logical first choice for Attorney Generals.

Sovereign Nation?  I don’t know about you, but I’m just not that connected.

Cowboy model:  Get a lawyer.

What does help is information.  The CFA (Consumer Federation of America) put together this study titled Consumers at Risk from Online Payday Lending CFA Survey of 100 Internet Payday Loan Sites.  The study is 6 years old, so take it with a grain of salt.  Here is what they found from 100 sites surveyed and how they operate:

Lead Generators vs Direct Lenders

  • 42 were lead generation sites.
  • 58 were direct lenders.


  • 20 licensed in their home state
  • 28 claim choice of state law (Delaware and Nevada were listed by six sites each, followed by California, New Mexico, and Utah.)  I’m not sure if all these states still allow lenders to offer payday loans outside the state.
  • 10 were probably offshore lenders (by process of elimination).

If you’re an attorney and have experience with this, let me know.  I have a lot of people that want to speak with you.

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