Online lender Geneva Roth Ventures Inc., based in Mission, Kan., and its CEO have faced legal issues in recent years that illustrate the controversial tactics used by such companies and the increased scrutiny they draw from state and federal regulators.
Several state agencies have joined the Consumer Financial Protection Bureau and the Federal Trade Commission (FTC) to combat the problem. In Arkansas, Geneva Roth agreed to pay $60,000 to the attorney general’s office after the state argued that the company’s annual percentage rate (APR) ranged from 364 percent to 1,365 percent, compared to the 17 percent maximum allowed under the state constitution. In Connecticut, the state banking commissioner issued a cease-and-desist order that accused Geneva Roth of charging multiple customers interest rates of more than 700 percent. Several states have barred Geneva Roth from doing business. In another case against it, a Montana woman took out a $600 payday loan from the online lender. The company made electronic withdrawals from her bank account, eventually taking out more than $1,800 in interest charges alone, which calculated as an APR of 780 percent.
“Payday lending is right up there among our top issues,” said Nikhil Singhvi, staff attorney for the FTC. The lenders, however, especially those that operate online, can be difficult to track. Geneva Roth and other online lenders argue that their loans do not fall under state law. Some lenders move into Native American tribal jurisdictions or overseas to avoid prosecution, and others operate under a variety of names. The lack of a concrete business locations make online lending cases more complex, since consumers cannot go back to a store and make a complaint face to face.