Payday loan promoter to pay $1 million penalty to New York state

Reuters News
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Posted: Mar 17, 2016 1:08 PM

By Suzanne Barlyn

(Reuters) - An online company that sells customer information to businesses making payday loans has agreed to pay a $1 million penalty and stop generating such leads in New York, the state's financial regulator said on Thursday.

Blue Global LLC in Scottsdale, Arizona, and its chief executive officer, Chris Kay, agreed to the measures in a settlement with the New York State Department of Financial Services, or NYDFS, the regulator said.

The case is the first by the NYDFS to require that a company adopt measures to secure future personal information it collects about customers, NYDFS said.

"Reaching this agreement is in our company's and our stakeholders' best interests, and we will be complying fully with the terms of the consent decree," Kay said in a statement. The NYDFS settlement stems from "certain prior business practices," Kay said.

A NYDFS investigation found that Blue Global misrepresented to consumers that it provided security for personal information submitted through its websites and that the measures were “completely 24/7 guaranteed,” the NYDFS said.

But Blue Global did not have security measures in place for sharing sensitive consumer information with third parties. The company sold information about potential borrowers that included sensitive personal data on about 180,000 New York consumers.

That information was made available to people who used details such as names, email addresses and bank account numbers in attempted frauds, the NYDFS said.

Blue Global also marketed online payday loans to New York consumers, even though the loans are illegal in the state, the NYDFS said.

Payday loans are small extensions of credit that borrowers agree to repay in a short time, such as when they next receive a paycheck.

Lenders who offer the products say they help people who are strapped for cash, but consumer advocates say borrowers often end up with high debt because of high interest rates, fees and rolling over the loans.

New York consumers were contacted by scammers after filling out payday loan applications on a Blue Global website. The scammers, in some instances, obtained advance payments from consumers to secure payday loans that were never issued, or threatened to collect loans that consumers had not made.

Blue Global, as part of the settlement, must disclose in advertisements that its payday loans services are not permitted in New York state. The company must also designate a compliance officer, among other measures.

(Reporting by Suzanne Barlyn; Editing by Cynthia Osterman and Peter Cooney)