Consumer Finance Insights
May 20, 2016

NY DFS Obtains $3 Million in Restitution for Illegal Payday Lending

On May 18, the New York State Department of Financial Services (DFS) announced a consent order with a debt buyer for purchasing and collecting on allegedly illegal payday loans made to New York consumers, in violation of the Fair Debt Collection Practices Act and New York state law.  The settlement requires the debt buyer to repay approximately $3 million in restitution, and represents the Department’s first settlement involving restitution on behalf of New York consumers related to payday lending.

According to the DFS, between 2007 and 2014, the debt buyer attempted to collect on 7,325 payday loans, successfully collecting payments on 4,792 of those debts.  The debt buyer agreed to discharge its remaining 2,801 active payday loan accounts, totaling $2.26 million in debt, and issue refund checks for interest collected on the 4,792 loans during this period, totaling $724,000.  The debt buyer also consented to cease selling or assigning payday loans, make a request that credit reporting bureaus remove all negative information associated with those accounts, and vacate any judgments obtained on those accounts.  Finally, the debt buyer agreed to pay a $200,000 civil penalty to the Department.