Alert March 05, 2013

New York Department of Financial Services Issues Warning Letter to Debt Collectors

The New York Department of Financial Services sent a warning letter to remind debt collectors operating in New York that they should not collect illegal, usurious loans made in New York, including payday loans made over the internet, by phone or by mail. The letter noted that usurious payday loans are void or unenforceable and attempts to collect such debt violate state and federal law. The DFS also warned that it “will continue to monitor lenders and debt collectors to protect consumers from usurious lending, including payday lending, through aggressive enforcement of law violations.” The CFPB is also focusing on payday lending. At the first bi-annual meeting with the Consumer Advisory Board, Director Richard Cordray called short-term credit products (e.g., payday lending) “debt traps” and noted that payday lending is “marketed as [a] short-term solution[] to an emergency need obscuring the risks inherent in terms that can make a tough situation even more difficult.”