Pennsylvania is one of a handful of states that actually has laws to prohibit payday lending. But despite the best efforts of the state, many people living in Pennsylvania are still able to take out payday loans via online lending sites and other companies that have ties to lending companies on nearby American Indian Tribal lands. The state seems to be fit for a fight, though, as new lawsuits are being filed to help the state of Pennsylvania crack down harder on payday lending companies that are offering services to the people of this state.

Case in point – the recent lawsuit filed by the state attorney general against a Texas-based lending company for allegedly scheming Pennsylvania citizens via an online payday loan scheme. The Attorney General of Pennsylvania, Kathleen Kane, recently announced that her office filed this suit against Think Finance Inc., a company that backs quite a few payday lending companies, like RISE Credit, for violating Pennsylvania laws and targeting borrowers in Pennsylvania to take out expensive payday loans.

The lawsuit alleges that Think Finance used the sway of three Native American tribes to allow them to target consumers in the state of Pennsylvania and to sell those customers alternative financial products (i.e. payday loans.) The tribes, which supposedly served as a cover for the lender, made it possible for Think Finance to bring in earnings through the many financial services that it charges to the actual tribal affiliations.

According to the complaint, this is not the only time that Think Finances has engaged in these types of covert lending actions in order to get around the state’s tough payday lending laws. It has been previously reported that the company was involved in a “rent-a-bank” scheme in which it made use of a Philadelphia bank to cover for the provision of small dollar, high interest loans to consumers in the state. This operation was actually shut down by the federal government not too long ago.

The Attorney General’s suit also named Selling source LLC – the company that backs MoneyMutual – as a defendant in this lawsuit because this company allegedly played an active role in the actions of Think Finance. It is alleged that MoneyMutual’s website and TV commercials – those famous spots with Montel Williams – have been used to generate online leads for Think Finance backed loans, and that MoneyMutual received commissions for these leads.

The lawsuit also claims that Selling Source continued with its efforts to refer Pennsylvania consumers to Think Finance after the company was ordered to cease the referrals back in a 2011 agreement with the Pennsylvania Department of Banking.

Other defendants named in this lawsuit were several debt collection agencies, including the Washington law firm of Weinstein, Pinson and Riley and National Credit Adjusters LLC, which were supposedly used to collect on the debts initiated by the illegal loans provided by Think Finance.

All of the defendants are currently accused of violating multiple Pennsylvania laws, including but not limited to violations against the Unfair Trade and Consumer Protection Law and the Fair Credit Extension Uniformity Act. The lawsuit is seeking restitution for all the consumers who were taken in by this scheme and there will also be some civil penalties handed out of up to $1,000 for every violation of state laws and $3,000 for every charge that involved lending/debt recovery to senior citizens in the state. It seems that Pennsylvania is very serious about taking action against short term lenders and that payday lending companies may want to think twice before trying to offer any such financial services in this state.

The Consumer Financial Protection Bureau (CFPB) officially commented on a proposal that will take direct action against No-Action Letters. The policy is designed to go after new financial products or financial services that promise to bring substantial benefits to consumers, but that are still a bit uncertain how regulatory or statutory provisions will be applied in the near future. The documents on this proposed policy are set to be released to the public on December 15, 2014.

Bringing up No-Action Letters reminds some of the SEC No-Action Letters which usually involve scenarios where the requester is not sure whether or not a particular financial service or product is in violation of existing federal security laws. In the letters that were released, SEC employees agreed not to ask for a legal action to be taken against the requester because of the facts that were presented. An alternative that exists is for SEC staff to draft a letter to bring clarity about a specific regulation or rule.

The CFPB No-Action Letters bare similarities to the SEC Letters. These letters would inform the business requesters that their staff is not going to recommend enforcement action due to specific aspects of a known legal requirement or policy. However, the CFPB No-Action Letters Policy is different from the SEC’s in that it only applies to financial products that are offered to the general consumer market, or for financial services which have no existing legal uncertainty.

By limiting the CFPB No-Action Letter Policy to only consumer-related products and services, the Bureau is able to remain consistent with how it interprets that Title X of the famous Dodd-Frank Consumer Protection Act of 2010, which provides governance for the CFPB, is intended to be helpful to consumers and to provide all consumers with access to transparent, fair, innovative financial markets. Additionally, the CFPB is bound to a statutory mandate that promises to promote and facilitate innovation and access in the market for consumer financial services and products.

To meet this goal, the CFPB created an innovative project called “Project Catalyst” in the fall of 2012. This project will support financial innovators that create consumer friendly financial products and services. The No-Action Letter Policy is quite simply the most recent module of Project Catalyst to be put into action.

Consumer friendly financial products and services can get assistance from the CFPB No-Action Letters. Recent consumer spending in the U.S. led to recent financial difficulties, although more complex financial institutions and high dollar deals greatly increased the financial woes of recent years. Quite a bit of effort has been put in to deal with more sophisticated financial businesses during the financial recovery that has been underway for the past few years. And while all of this has been underway, less attention has been focused on underbanked, unbanked and very low income communities around the country; not to mention consumers who may currently use traditional bank accounts but also use non-traditional payment methods too.

Not too long ago, the CFPB began to take steps to bring these sectors to the attention of the rest of the country when it began in inquiry into mobile financial solutions. The Bureau found that nearly 90 percent of United States consumers own cell phones and that this growing trend has led to a whole plethora of new mobile payment solutions that allow unbanked and underbanked households to take more control of their individual finances. We will all have to keep our eyes open to see whether or not these new mobile payment solutions continue to warrant scrutiny from the CFPB and to see how the No-Action Letters pan out for new financial services that are launched in the months and years to come.