High-interest short-term loans are illegal in many states, but for a brief moment, lenders sought customers in these states anyway. In ads online and on TV, you may have noticed them: commercials that played up the companies’ Native American ownership, which made them totally legal in states where payday loans are normally illegal. “Nice try,” said state regulators.

New York State sent cease and desist orders to dozens of online payday lenders to make them stop pursuing its residents. More importantly, the state superintendent of financial services asked banks to block the lender’s access to New York residents’ accounts.

The good news is that millions of vulnerable people no longer had online access to high-interest revolving credit lines. The bad news is that cracking down on the loans hurt other vulnerable people: the ones who work for the lenders.

The cynical consumer will assume that the Native ownership of companies like Western Sky was just a gimmick to get through a loophole, and the company was actually run elsewhere. Not in the case of Western Sky. The crackdown from states where high-interest loans are normally illegal hurt the company badly, and they stopped funding new loans back in September. They were forced to lay off employees in their base of South Dakota, an area without many other employment options.

Feel sorry for the individual call center workers who were collateral damage in this fight over consumers’ financial choices, but don’t feel so sorry for the companies. NPR reporter Pam Fessler applied for a payday loan online with fake personal information but her real phone number. It turned out that she had sent her application in to a marketing firm, not a bank, and she got slammed with phone calls from banks.

What Happened To Those TV Ads For Payday Loans? [NPR]

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