On September 25, 2017, New York’s Department of Financial Services (DFS) announced that it had entered into a consent order with a payday loan servicer and debt collector over the servicing and collection practices on usurious payday loan debts, resulting in nearly $12 million in relief for affected consumers.
Payday loans are illegal in New York, and the DFS launched an investigation of the activities of two payday loan companies during 2011 – 2014 in order to determine whether the companies were engaged in illegal practices. DFS found that the payday loan debt collector’s attempts to collect on outstanding debts from over 20,000 usurious payday loans violated state debt collection laws. It further concluded that the payday loan servicer violated New York law by intentionally misrepresenting the legal status of the payday loans to consumers during its servicing activities. Consumer complaints lodged with DFS against the entities alleged that the entities harassed consumers to get them to make payments on illegal payday loan debts and repeatedly contacted them by phone or email to pressure them into paying.
Under the consent order, the debt collector agreed to release and discharge all outstanding consumer payday loan debt collected during the relevant time period, totaling more than $11.8 million. The order also requires the entities to pay $45,000 in civil penalties and up to $15,000 in other costs.