ANOTHER Collection Agency Shut Down Over Payday Loans

Like a broken record, another announcement today from a regulator involving a collection agency/debt buyer working payday loan accounts. A similar story ran at the top of insideARM.com on Wendesday.

New York City’s Department of Consumer Affairs (DCA) Commissioner Jonathan Mintz announced late Wednesday that his office has entered a settlement order with Integrated Asset Recovery, a debt collection agency previously known as Forster and Colmes LLC. DCA charged the company with collecting debts from City consumers without a license, trying to collect on an illegal payday loan by threatening a consumer with arrest, and harassing a consumer’s family about the debt.

Under the order, Integrated Asset Recovery and its principals are banned from acting as a New York City debt collection agency for three years. The company must also notify the credit reporting agencies to correct the consumer’s credit report and pay almost $15,000 in fines and restitution. DCA also outlined strict and far-reaching conditions that the company must adhere to if they become licensed after the three-year ban, including obtaining documentation of the original debt prior to attempting to collect, investigating disputed debts and correcting errors with credit reporting agencies if a debt is not valid.

“The abuses that led Consumer Affairs to shut down Integrated Asset Recovery’s operation in New York City are too common: consumers drowning in predatory payday loans followed by illegal and harassing collection tactics,” said Commissioner Jonathan Mintz. “I hope the relief we secured in this case sets a precedent heard far and wide.  Also, I urge New Yorkers struggling with their finances or having trouble with debt collectors to contact us at 311 so that our financial counselors, mediators, and lawyers can help.”

In the case against Integrated Asset Recovery, a Brooklyn consumer took out a payday loan in 2008 in the amount of $425 with an annual interest rate of 1,095 percent.  Payday loans, which are high-interest, short-term loans borrowed against one’s paycheck, are illegal in New York State. State law has an interest rate limit, or usury cap, of 16 percent.

In 2010, Integrated Asset Recovery purchased this debt and, although they did not have a license to collect on a debt of a New York City resident, began harassing and threatening the consumer and the consumer’s family in an attempt to collect on the illegal loan in 2011. It is illegal for debt collectors to contact family or friends of a consumer, threaten to have a consumer arrested, or share information about a consumer’s debt with any person other than that consumer. Integrated Asset Recovery ignored these provisions and continued with their aggressive and predatory debt collection tactics. After intimidation and out of fear of being arrested, the consumer paid more than double the amount of the initial loan. Even after the consumer paid the debt, the company continued to contact the consumer about the debt. The consumer filed a complaint with DCA, which launched an investigation into the company and its practices.

Complaints about abuse by debt collection agencies have been DCA’s top complaint for the past five years, with more than 650 complaints filed last year alone.  In the last year, DCA also secured more than $1 million in restitution for consumers.

Anyone seeking to collect on a debt from a New Yorker is required to be licensed by DCA. In 2010, Mayor Bloomberg announced that debt collection agencies must adhere to common-sense guidelines regulating their interaction with New Yorkers. Those who make calls or send letters to collect debts now must tell the debtor who is calling and from what agency, the original creditor, the amount of the debt they owe, and the name and phone number of a live person the debtor can call back. Anyone contacted by a debt collection agency can demand written documentation regarding the status and history of the debt. Consumers can download DCA’s Debt Collection Guide, check if a debt collector is licensed and file a complaint online at nyc.gov/consumers or by calling 311.