Cheat Sheet: Online Lenders' Legal Minefield
By Kevin Wack and Joe Adler
October 1, 2013
Not all online lenders are the same. That's perhaps the simplest way to summarize the head-spinning array of businesses that are currently making consumer loans over the Internet.
There are firms that are clearly operating within the boundaries of the law, and there are also companies of disputed legality. The latter group, which banks are now under pressure to cut ties with, includes lenders that are licensed in one state but making loans in many others. It also includes companies based overseas. And it includes lenders owned by an American Indian tribe, or even by a member of a tribe, often with an assist from a non-tribal payday lender.
As these envelope-pushing business models have become the target of increased regulatory scrutiny, the debate over so-called online lending has been muddied by confusing terminology and a lack of clear legal standards regarding what is allowable and what is not.
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