New York’s attorney general’s office recently sent a warning letter to the American Recovery Association about repossessing vehicles owned by state residents that are connected with title loans, which law enforcement officials contend are illegal in the Empire State.
In the document posted on ARA’s website, assistant attorney general James Morrissey explained payday loans are illegal in New York, but firms are using online channels to accomplish the same endeavor by using a vehicle title as collateral.
Morrissey clarified that the following attributes taken together make loans illegal in New York:
—A personal loan to a New York resident of $25,000 or less from a lender that is not licensed by the New York State Department of Financial Services.
—The loan is for personal, family, household or investment purposes.
—The unlicensed lender charges an annual interest rate of more than 16 percent.
“If the lender is a federally chartered bank, or a bank that is chartered by a state other than New York State, the loan may not violate New York law. This would rarely be the case with a title loan,” Morrissey said.
“Your members should be aware that if they repossess the motor vehicles of New York residents based on an illegal title loans, they too may find themselves the subject of an investigation and an enforcement action by the (Office of the Attorney General),” Morrissey went on to tell the ARA here.
Morrissey added that the New York attorney general believes that repossessing vehicles based on illegal, void and unenforceable loans constitutes illegal, fraudulent and deceptive business practices. He said a court could order penalties of up to $5,000 for each deceptive act as well as costs.
“I welcome the opportunity to speak with you to discuss what role the ARA could play in assuring that its members do not enforce payday or title loans that violate New York civil and criminal usury laws,” Morrissey said.