COMMACK, N.Y. (Legal Newsline) - New York Attorney General Eric Schneiderman reached a settlement on Friday with a New York debt collection firm that allegedly collected on predatory payday loans.
A company called NCEP LLC allegedly placed consumer debts with Forster & Garbus for collection. The debts included payday loans, which are illegal in New York because the interest rates far exceed the maximum of 16 percent allowed under state law for most lenders not licensed in New York. Payday loans can have interest rates ranging from 100 percent to more than 650 percent.
“Payday loans take money away from hardworking New Yorkers who are forced to pay illegal and outrageous interest rates,” Schneiderman said. “Debt collection firms must make certain that the underlying loan is not a payday loan before filing a lawsuit, and they will be held responsible if they fail to do so. Ignorance is no excuse.”
Forster & Garbus allegedly attempted to collect on payday loans in New York on five different occasions. Following notification from Schneiderman's office, Forster & Garbus ceased its collection efforts.
Under the terms of the agreement, Forster & Garbus may not file actions against New Yorkers over consumer credit transactions until it obtains a copy of the loan document and determines in writing that it is not a payday loan. The company also agreed to pay $10,000 in penalties and costs.
Since January 1, 2011, Schneiderman's office took legal action against payday loan companies, resulting in debt collection firms paying $279,605.98 in restitution and $29,605.98 in penalties.