New York City's Department of Consumer Affairs is turning the heat up on debt collectors for allegedly pursuing residents over high-cost loans.
On Oct. 25, it filed a complaint to permanently ban Kansas-based collection firm National Credit Adjusters LLC from operating in the city. The department alleges that National Credit Adjusters collected on debts from city residents months after being denied a request to renew its debt-collection license in the Big Apple. The Department of Consumer Affairs turned down the company's renewal request in April after discovering that National Credit Adjusters was collecting on payday loans that violate the state's 16 percent cap on most annual interest rates.
Because payday loans are illegal in New York, collection firms cannot pursue such debt from borrowers, said Jonathan Mintz, commissioner of the city's Department of Consumer Affairs. Consumer groups normally aim their criticism at the companies that lend to consumers but more recently have asked regulators to examine other firms, such as banks and payment processors that provide services to lenders. "Online payday lenders present different legal and consumer protection challenges than storefront high-cost lenders," wrote several consumer organizations -- including the Center for Responsible Lending and National Consumer Law Center -- in a recent letter to regulators that included the Consumer Financial Protection Bureau and the Federal Deposit Insurance Corp. "These online lenders routinely market and originate loans with terms and conditions that violate the law of the state where the borrower resides."