Cuomo Administration Closing Loophole that Allowed Lenders to Make High-interest Loans More than Double New York’s Interest Rate Caps to Servicemembers
Omni Military Lending Agrees to Stop Making Loans in Excess of New York’s Interest Rate Caps
Governor Cuomo announced a crackdown on high-interest loans made to military servicemembers by closing the "Fort Drum Loophole." That loophole – predicated on a previous 2005 determination by the New York State Banking Department – had allowed companies to make unlicensed loans that were in some cases more than double New York State's interest rate caps to servicemembers who were stationed in New York but were not permanent New York residents. The Cuomo Administration is formally reversing that 2005 determination administratively effective July 6, 2015.
“Jacking up the interest rates on loans made to military servicemembers to make a greater profit is simply unacceptable, and it will not be tolerated in the state of New York,” Governor Cuomo said. “This action will help protect military servicemembers and their families from predatory lending, and companies should know that we will not hesitate to crack down on bad actors.”
Governor Cuomo announced his intention to close the Fort Drum Loophole as part of his 2015 Opportunity Agenda. In the following months, Omni Military Lending, after discussions with the New York State Department of Financial Services (DFS), agreed that all loans to servicemembers stationed in New York would now be made through an entity licensed by DFS, Omni Financial of New York, Inc., in compliance with New York’s usury and licensed lender laws. Omni had been making loans in New York at interest rates of up to 36 percent – despite a New York State interest rate cap of 16 percent on such loans or 25 percent interest for certain licensed lenders.
The NYDFS sent a letter to Omni today acknowledging the company's agreement and providing guidance to all military lenders that loans made to servicemembers stationed in New York should be made in compliance with New York’s interest rate caps, thereby closing the Fort Drum loophole.
While Omni lends through a store front entity in Evans Mills, NY near Fort Drum, the Governor’s administration will also be cracking down on illegal online lending by military lenders to servicemembers stationed in New York in the weeks and months to come. In recent years, NYDFS has taken a series of actions to stop illegal, high-interest online lending – particularly payday lending – over the internet.
A copy of the NYDFS letter sent closing the Fort Drum loophole can be viewed here.
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