law and order

The NY Attorney General has taken legal actions against Forster & Garbus, being large law company specialized in debt collection. The latter has initiated several lawsuits against payday loans consumers. Eric Schneiderman from Attorney General stated that the debts were collected on behalf of NCEP, LLC, but at least in 5 investigated cases the attempts to collect on payday loans were illegal under the law of New York.

Any loan of 250,000 or less is considered usurious if it has at least 16 percent interest rate according to the New York General Obligations Law and Banking Law. The loans with more than 25% are liable to criminal responsibility.

And most consumer loans taken via PersonalMoneyService from direct lenders belong here, though multiple attempts to cap the interest rates on this kind of unsecured loans are taken around the country all the time.

Weak Defense and the Consequences for Forster & Garbus

Forster & Garbus try to justify the activities claiming it was unaware of the debt’s nature they took collection actions on, but the procedures were stopped immediately after the notice from the Attorney General.

Eric Schneiderman reminds the law firm that ignorance is no excuse, and the explanation has little sense as debt collection companies are obliged to make sure before filing a lawsuit that the underlying loan does not belong to the payday loan category. In case the collectors had failed to do so, the responsibility is inevitable.

Additionally, the NY Attorney General’s settlement prohibits Forster & Garbus taking any collection actions before the careful investigation of all the related documents and written confirmation of the fact the loan is not a payday one.

Besides, the firm should investigate each customer complaint if it is concerned the prior judgment or settlement on a payday loan. In case the company finds out the debt arose from such an obligation, the judgment should be nullified and the compensation should be paid to the consumer of any amount spent on the judgment. Forster & Garbus has already agreed to cover $10,000 in costs, fees and penalties.

Policies against Firms Abetting Payday Lending to Continue?

Attorney General and New York Department of Financial Services (DFS) have recently focused on payday lending having made the law firms and repossession companies trying to enforce such loans in New York their main target. The above mentioned case shows that the Attorney General’s position lies in the fact that the company itself bears the burden of responsibility and should not start any collection activity until it’s confirmed that the subjected debt is not a payday loan.

Most of the consumers believe the DFS and Attorney General will go on their aggressive policies against the firms and companies in New York abetting such kind of predatory lending.