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Lender backed by Montel Williams faces crackdown

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  • Lender backed by Montel Williams faces crackdown

    By Kaja Whitehouse



    A New York banking regulator on Tuesday blasted lender MoneyMutual for hiding behind its celebrity endorser, Montel Williams, in wrongfully marketing loans with sky-high interest rates — some exceeding 1,000% — to struggling New Yorkers.

    Benjamin Lawsky, superintendent of New York's Division of Financial Services, said MoneyMutual, a unit of marketing company SellingSource, has agreed to pay a $2.1 million penalty and cease its payday loan lead generation activities in the Empire State, where such loans are illegal.

    Williams, a former day-time talk show host, has also agreed to withdraw his endorsement for paydays through MoneyMutual to New York consumers, Lawsky said.

    Payday loans offer small amounts of money at high interest rates on the condition that it will be repaid when the borrower receives their next paycheck. MoneyMutual, for example, advertises loans on its website at interest rates of 261% to 1,304%, Lawsky said.

    Lawsky took the company, which promotes payday loans online, to task for marketing to New Yorkers, where such loans are illegal.

    Lawsky said MoneyMutual's parent company, SellingSource, used William's reputation to peddle its loans as legitimate. When seeking to reassure borrowers that the loans were safe, the company would say, "Montel Williams has endorsed MoneyMutual and would not do so if it were not a legitimate company," according to Lawsky.

    Williams' spokesman Jonathan Franks said DFS "has made no finding of a violation of law by Mr. Williams."

    Williams "is not blind to the problems of the industry," but "we stand by his overall endorsement of Money Mutual," Franks said.

    "As he has said publicly many times, Mr. Williams himself utilized short term lending while attending the Naval Academy on more than one occasion and paid those loans back on time," Franks said.



    LUCID PUBLIC RELATIONS

    Statement of Jonathan Franks, Spokesman for Montel Williams


    MoneyMutual said in a statement that the settlement will help it avoid "what could have been costly and extended litigation."

    In addition to the fine, which will be paid out over three years, the company has agreed to "revise its advertising to make clear that MoneyMutual's services are not available to residents of New York," the company said.

    MoneyMutual's parent company SellingSource is owned by private equity firm London Bay Capital. Tuesday's agreement does not release London Bay from liability for the conduct uncovered during the Division of Financial Services' investigation, which remains ongoing, the regulator said.
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