Ads for payday loans starring talk-show host Montel Williams were once ubiquitous on late-night television.
It turns out the credit he was advertising, which sometimes had interest rates above 1,000 percent, was illegal in New York, according to Benjamin Lawsky, the state’s top banking regulator. Selling Source LLC, the company that ran the ads and does business as MoneyMutual, agreed to pay $2.1 million and stop advertising to New Yorkers, Lawsky said Tuesday in a statement.
“Using Mr. Williams’s reputation as a trusted celebrity endorser, MoneyMutual marketed loans to struggling consumers with sky-high interest rates -– sometimes in excess of 1,300 percent –- that trapped New Yorkers in destructive cycles of debt,” Lawsky said in the statement.
New York is one of about a dozen states that have banned or severely restricted payday loans -- costly, short-term advances for those with poor credit that are intended to be repaid out out of a borrower’s next paycheck.
To get around those rules, many payday lenders moved offshore or to American Indian reservations, where tribes say interest-rate caps don’t apply.
Rather than advertising themselves, some of these firms rely on companies like Selling Source to gather applications, Bloomberg News reported last year. These “lead generation” companies take down the information of people who respond to their ads, then auction the leads to payday lenders, who sometimes pay more than $100 for the name of someone who’d be willing to take a loan.
800,000 Leads
MoneyMutual sold 800,000 leads from New Yorkers, Lawsky said. The state’s investigation into lead-generation companies will continue, he said.
Selling Source cooperated in the inquiry and isn’t admitting it did anything wrong, Charlie Goodyear, a spokesman for the Las Vegas-based firm, said in a statement. Consumers who use MoneyMutual “are informed and make their own decisions about the loans,” he said.
“Hundreds of thousands of consumers have been paired with a responsible lender, have secured the short-term financing they needed and repaid the money loaned to them,” Goodyear said.