Alert February 05, 2013

New Jersey Seeks to Include Payday Lending as a Violation of Consumer Fraud Act

The New Jersey General Assembly is considering a bill that would expand the definition of "an unlawful practice" under New Jersey's Consumer Fraud Act to include "making deferred deposit loans." The bill defines "deferred deposit loan" as "any transaction in which a short-term cash advance is made … in exchange for the consumer's personal check, in the amount of the cash advance plus a fee, whereby the lender agrees to defer depositing or presenting the personal check until a certain date." The bill would apply to lenders "wherever located," apparently targeting out-of-state lenders who solicit New Jersey residents to take out payday loans online, by mail, telephone, television, or by other means. A statement accompanying the bill recognizes that deferred deposit lending is already subject to usury restrictions and other laws, but that the proposed legislation would "expressly prohibit[] payday loans." Violations would be punishable by a penalty of up to $10,000 for a first offense and $20,000 for each subsequent offense.