Aug 6 (Reuters) - The payroll advance industry is under investigation by New York’s financial regulator and other states over whether its companies are charging usurious interest rates and engaging in potential violations of payday lending laws, the regulator said on Tuesday.
New York, joined by financial regulators from ten states and Puerto Rico, sent letters to payroll advance companies requesting information, the New York Department of Financial Services (NYDFS) said.
Payroll advances are a type of loan that give consumers access to wages they have earned ahead of receiving their paychecks. Some of the companies, which operate through websites and apps, appear to charge membership fees, “tips,” and other types of fees that add up to the equivalent of usurious and other illegal interest rates, the regulator said.
“High-cost payroll loans are scrutinized closely in New York, and this investigation will help determine whether these payroll advance practices are usurious and harming consumers,” said NYDFS Superintendent Linda Lacewell. (Reporting by Suzanne Barlyn in New York Editing by Matthew Lewis)