The Risks of Online Payday Loans.

California business regulators are stumbling in their efforts to locate and ban a unlicensed form of high-interest consumer credit: payday loans available on the Internet.

For the past three years, the state Department of Corporations has been trying to force these Internet-only businesses to adhere to the same rules that govern the state-licensed payday loan storefronts that offer short-term, unsecured loans of up to $300.

But many of these Internet operators — with no physical presence in the state and run as tribal entities outside of California — say they are American Indian-owned businesses, linked to sovereign Indian nations and immune from state regulation.

Those protections give consumers the ability to file complaints with state regulators, who can intercede on behalf of borrowers and discipline Internet lenders with fines or lifting of their licenses. Currently, 16 Internet lenders are licensed by the state and must comply with the same rules as brick-and-mortar companies, Leyes said.

Getting a payday loan from an Internet operator, especially one that is not licensed by the state, is riskier and even more dangerous than borrowing from a storefront lender, consumer advocates warn.

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