McGraw settles with debt collection firms

Jessica M. Karmasek Aug. 3, 2011, 9:33am


CHARLESTON, W.Va. (Legal Newsline) - Two New York-based debt collection firms have agreed to cease collecting debts without a license in West Virginia as part of a settlement reached by West Virginia Attorney General Darrell McGraw.

The firms also have agreed to issue more than $11,000 in refunds and cancelled debts to West Virginia customers, and make a $5,000 payment to the State.

The agreement was reached with two affiliated collection agencies, Northtown Capital Associates Inc. and Interstate Check Systems Inc., both based in Amherst, N.Y.

McGraw's office began investigating Northtown and Interstate, both owned by Joseph H. Elias, after receiving a complaint that the companies were collecting debts in West Virginia without a license and surety bond as required by the state Tax Department.

According to McGraw's office, Northtown and Interstate were attempting to collect debts allegedly owed to an Internet payday lender, Payday Yes, which had previously reached an agreement with the Attorney General's Office to cease lending in the State and to close all of its West Virginia accounts.

Internet payday loans, which typically come with exorbitant annual interest rates ranging from 600 to 800 percent, are illegal in West Virginia.

"West Virginia's laws regarding the licensing of collection agencies are intended to protect both the industry and consumers," McGraw said in a statement Wednesday.

"My office will continue its rigorous enforcement of these laws to ensure a level playing field for all legitimate agencies that collect debts in West Virginia. We will also take action to prohibit any collection agency, licensed or unlicensed, from collecting unlawful debts such as Internet payday loans."

Under the terms of the agreement, Northtown and Interstate will not collect Internet payday loans and will refrain from collecting any debts in West Virginia until licensed and bonded by the state Tax Department.

The companies also agreed to refund or cancel $11,117.25 in debts for 21 West Virginia consumers, and to close all West Virginia accounts with a zero balance, McGraw's office said.

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