The New York Department of Financial Services (DFS) opened a new front in its campaign against the payday lending industry by subpoenaing 16 online lead generation firms that allegedly collected and sold consumers’ confidential personal information to online payday lenders. The DFS emphasized that the subpoenas were directed not at the online payday lenders, but at those firms that allegedly established websites marketing payday loans, which are illegal in New York.

In identifying the 16 companies, Governor Andrew Cuomo explained that “earlier this year, my administration launched an investigation of online payday lenders and today we are expanding this investigation to protect New Yorkers from similar scams that ensnare families in endless cycles of debt.” The DFS had allegedly received numerous complaints from consumers who were inundated with calls from suspected scam artists after having uploaded their personal information on the websites of the subpoenaed firms.

In our alert last week, we wrote that the DFS’ crackdown on online payday loans was not limited only to the lenders allegedly making illegal payday loans. Rather, the DFS has recently expanded its probe to target debt collectors, banks, and law firms that allegedly provide services to online payday lenders that lend money to New York residents. The subpoenas are yet another warning that any vendor working with online payday lenders must confirm that its services are not facilitating unlawful (as opposed to lawful) payday lending. In particular, any vendor whose services are being used by an online payday lender to make loans in New York is vulnerable to enforcement action by the DFS or New York Attorney General.

Ballard Spahr's Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws throughout the country, and its skill in litigation defense and avoidance (including pioneering work in pre-dispute arbitration programs). Our attorneys, including the attorneys who joined us from the New York City litigation firm Stillman & Friedman, P.C., to form Ballard Spahr Stillman & Friedman LLP, have substantial experience in handling litigation with DFS and the New York Attorney General.

For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or, CFS Practice Leader Jeremy T. Rosenblum at 215.864.8505 or, James A. Mitchell at 212.223.0200 x8006 or, or Marjorie J. Peerce at 212.223.0200 x8039 or

Copyright © 2013 by Ballard Spahr LLP.
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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.

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