The CIA Factbook states the chief exports for Granada are bananas, cocoa, and nutmeg and for Costa Rica are coffee, bananas, and sugar. What export do both countries share with Delaware? Apparently, it is payday lending laws.
As a citizen of the state of Illinois, I am protected by our state’s Payday Lending Reform Act, which applies to any "lender who offers or makes a payday loan to a consumer in Illinois," but this morning, I discovered I could enter into a payday loan in Grenada, Costa Rica, and Delaware without leaving my office. Typical is the disclosure on MyCashNow, which states, "The transactions related to loans will be deemed to have taken place in the offices of Mycashnow.com (TM) Inc. and according to the laws of Grenada, regardless of where you may be viewing or accessing this site." It’s pretty cold here right now, and maybe I’ll just deem myself to be in Grenada for the rest of the day. They seem pretty concerned about their trademark. Can I deem that any infringement
of the company’s mark will be considered to have occurred in the Cook
Islands?
Other examples include MyPayDayLoan.com‘s disclosure that its customers are bound by the laws of Costa Rica and, perhaps most troublingly given that state’s past magic with its banking laws, Magnum Cash Advance‘s attempts to bind its customers to the laws of Delaware. Legal experts will be as shocked as Louis Renault that someone is using the Internet in an attempt to avoid state legal regulation. I would expect courts to ignore any attempts by a company to invoke one of these clauses. Are there serious arguments that these statements about jurisdiction are enforceable?
Comments
4 responses to “Exporting Payday Loans”
I came across this paper suggesting that it is unlikely choice-of-law clauses are enforceable because most states’ long-arm statutes permit states to enforce their own laws for loans to citizens within the state: Frank Burt et al., Journey to the Fringe: A Survey of Select Fringe Lending Products, CORPORATE LAW AND PRACTICE COURSE HANDBOOK SERIES, PLI ORDER NO. 85651532 PLI/CORP 349, Mar.-May 2006, at 381-82.
I think the point of these clauses is to shield the lender from a claim that it offered to make an illegal loan. I don’t think the lender would expect that this “contract” would protect it from state banking laws if it actually extended the loan. Admittedly, the clause might have some effect in an enforcement suit between the lender and borrower, if the borrower presented an illlegality defense. However, for a number of reasons, those lawsuits just don’t get filed in the payday context.
The real problem is that states cannot effectively discover and prosecute the Internet payday lenders that make illegal loans. This issue might get more attention if military personnel turn to internet payday lenders as a response to the Talent Amendment. Congress will then have to consider whether to target the payment or advertising intermediaries that facilitate these transactions, a decision that is being made right now in the gambling context as regulations are drafted under the Unlawful Internet Gambling Enforcement Act of 2006.
Thats the benirfit of using internet. You can get your loans lcerad up from any corner of the world
I can’t personally see how any of this would be enforceable?