The payday loan industry has shown a lot of resilience when it comes to legislation. While insisting that their products are legal, essential and wanted by the public, cash advance lenders find themselves under increased scrutiny by legislators at both the state and Federal level. While main concerns center around the fact that these lenders seem to victimize members of the military and the poor, several legislators with good common sense are also worried about whether the general public should be borrowing money online at interest rates that normally exceed four hundred percent per year.

Several states and a handful of cities have created tight legislation that regulates these business, either by changing zoning laws or by enacting strict interest rate caps for loans. With those restrictions in place, lenders have just turned to the Internet, and are offering their loans there. There are actually hundreds of sites that offer loans via the World Wide Internet, and a lot of of those businesses are located in states that have no laws regarding interest rate caps. As such, those who borrow may find themselves borrowing at huge rates. They may also find their bank accounts emptied. That is the problem with doing business by means of the Internet. You do not know with whom you are doing business, and you’re giving them access to your checking account.

California has had enough of this, and in order to restrain predatory lending within the state from without the state, the California Department of Corporations has issued cease and desist orders to more than forty different providers of online loans.

The Department of Corporations, or the DOC, is a state agency that is responsible for the regulation and enforcement of securities, franchises and monetary services. The agency has recently asked forty online lenders to stop offering financing to residents of California, as these lenders are not licensed by the state. It is difficult to say what effect, if any, this will have on lending. While the DOC can fine such lenders should they continue to offer loans to California residents, it seems unlikely that they will be able to do so. In several cases, the lenders in question are located outside the United States, which could make it rather challenging to enforce payment of the fines.

Still, by issuing the cease and desist orders, the DOC can make public their actions and in doing so can make consumers more aware of the risks associated with taking out high-interest loans by way of the Internet. If their actions discourage a couple of people from doing business with potentially questionable corporations, then their cease and desist orders may have had some positive effect, in the end.

Of course, cash advances offered within the state continue to be legal, provided that the lenders are licensed businesses. The town of San Diego has recently tried, with little success, to regulate the business due to the large number of lenders located near the city’s military facilities. That fight wages on, as lenders have so far been able to successfully lobby against such legislation at the state level.