The talk-show host, and the payday lender he promoted, were given a rap on the knuckles by New York state’s financial regulator.
Money Mutual / Via youtube.com
Talk show host Montel Williams will no longer grace daytime and late-night TV to promote MoneyMutual, the online lender. New York's Department of Financial Services said today that MoneyMutual will pay a $2.1 million penalty and Williams has agreed to no longer endorse its payday loans. MoneyMutual will also add more disclosures.
The penalty for the payday lender is part of a long running campaign by DFS and its head Ben Lawsky to crackdown on lenders that use the internet to get around New York State's usury laws and interest rate caps. DFS said in a statement that MoneyMutual would sell leads for New York consumers and would advertise loans with annual percentage rates of "between 261% and 1304%," far, far beyond New York's 25% limit. DFS had sent subpoenas in December 2013 to 16 companies that marketed payday loans through the internet to New York consumers.
DFS said MoneyMutual not only charged high rates, but that the company's combinations of fees and repayment schedules "often prevented consumers from being able to repay those loans on a timely basis, and caused them to roll over their loans or take out additional loans to pay off prior loans" thus putting consumers in a cycle of high-interest debt.
MoneyMutual's partent company, Selling Source, is owned by private equity firm London Bay. DFS said that its settlement with Selling Source does not release London Bay from liability and that an investigation remains ongoing.
While MoneyMutual wouldn't make loans themselves, they would aggressively market them, collect personal and financial information from consumers, including Social Security numbers, and then sell those "leads" to payday lenders outside of New York state.
All the while, Williams would grace MoneyMutual ads that aired in New York state, explicilty appealing to low-wage workers (minimum income requirements of $800 a month) with bad credit, saying MoneyMutual had the "largest network of short-term lenders" offering loans up to $1,000 in 24 hours. MoneyMutual would say in disclaimers that the loans it brokered "should be used for short-term financial needs only and not as a long term financial solution."
"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 a statement. "The company made special efforts to target the more than 55 percent of their customers who were 'repeat clients' – including so-called 'Gold' customers who took out a new loan to pay off a previous loan."
Here is one of Williams's many ads for Money Mutual
via IFTTT
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