Virginia lawsuit shows importance of compliance for short term lenders

Americans have used short term lending as a viable alterative to big bank and credit union borrowing for many years. Generally, these loans are easy to obtain and don't require a consumer credit report to be screened. Also, they can be paid off rather quickly, making it an attractive option for consumers looking to short term solutions.

However, some enterprises in the industry unknowingly make mistakes and errors that can violate local and federal laws, which can harm their reputations. With so many Americans relying on short term services, ensuring that lending outlets are properly certified is important for any executive or branch manager in the industry.

In Virginia, an online short term outlet was recently sued by the state's Attorney General Ken Cuccinelli for failing to obtain the proper license, the Associated Press reported. According to the source, Jupiter Funding Group was offering loan products that charged interest at an annual rate greater than 12 percent. Under Virginia law, extending loans with such rates requires a license.

The lawsuit alleges that the company was charging between 438 percent and 1,369 percent for its services. Although these rates are fairly standard for the industry, the lack of diligence displayed by Jupiter in adhering to state regulations should provide a lesson for other industry outlets. One of the best investments that such institutions can make is hiring a reputable lawyer who is knowledgeable of financial laws and policies. Such professionals can ensure that short term providers are in compliance with state and federal regulations.

According to LawyersandSettlements.com, one of the major pitfalls that short term lenders make is conducting business online. Although the practice is legal in many cases, these enterprises are often accessed by consumers that may be across state lines. As laws differ from state to state, lenders may be providing funding that could be a violation of state laws.