Panic caused by rumors of the Feds attacking payday loan ACH providers began late last week! After MANY frantic faxes, emails and phone calls it appears the companies at risk are all off-shore payday
loan companies who lack Federal Tax ID’s and failed to file US tax returns. Questionable activities also include the potential lack of “proof of ACH authorizations” and an excessively high “ratio of claims”. It appears two ACH processors are involved.
Further information learned today reveals a regulator with the OCC over-stepped their mandate. It seems the regulator took it upon herself to attack the “single-choice-of-law” payday loan model and offshore operators. No cease and desist orders were formally issued to any banks or ACH processors.
Final disposition is premature at this time but our CONSERVATIVE sources advise payday loan internet providers to secure licenses in states and provinces having “safe-harbor” legislation, max out at 3
rollovers, and ALWAYS secure a fully documented “Proof of ACH Authorization” from your customer.
On the other hand, several compliance consultants we contacted feel the “choice-of-law” model is not at risk!
Bottom line: it’s the payday loan product in conjunction with the Internet. Think “wild, wild, West”!!!!