NEW YORK STATE COLLECTION
Date: Tue, 03/26/2013 - 09:18
http://www.empirestatenews.net/News/20130223-2.html
State tells debt collectors not to seek collection on illegal payday loans
ALBANY – The New York State Department of Financial Services has sent letters to all debt collectors in New York stating that it is illegal to attempt to collect a debt on a payday loan since such loans are illegal in New York. Payday loans are short-term loans, typically an advance on a paycheck, with extremely high interest rates that violate New York’s criminal usury law, which limits interest to 25 percent. Considering the fees on an annual basis, the interest rate can be as high as 400 percent.
“Today’s notification will remind debt collectors in the state that such practices are illegal in New York,” Governor Andrew Cuomo said. “Studies clearly show that payday loans are not a solution for people with low incomes, but rather a high cost debt trap. That’s why they are illegal in New York, and the State will continue to protect consumers from these misleading loans.”
Superintendent of Financial Services Benjamin M. Lawsky said, “All debt collectors in New York should know that it is illegal to try to collect payday loan debts. We will aggressively enforce the law to protect all New Yorkers and especially low income individuals who are all too often abused by unscrupulous lenders and debt collectors.”
Lenders attempt to skirt New York’s prohibition on payday lending by offering loans over the Internet, hoping to avoid prosecution. However, Internet payday lending is just as unlawful as payday lending made in person in New York. No matter what method is used to make the loan, usurious and illegal payday loans are not valid debts and cannot lawfully be collected on. Superintendent Lawsky’s letter makes that point clear to the debt collection industry.
The letter states, “Debt collectors should take note that attempts to collect on debts that are void or unenforceable violate state and federal law. The Department of Financial Services will continue to monitor lenders and debt collectors to protect consumers from usurious lending, including payday lending, through aggressive enforcement of law violations.”
State tells debt collectors not to seek collection on illegal payday loans
ALBANY – The New York State Department of Financial Services has sent letters to all debt collectors in New York stating that it is illegal to attempt to collect a debt on a payday loan since such loans are illegal in New York. Payday loans are short-term loans, typically an advance on a paycheck, with extremely high interest rates that violate New York’s criminal usury law, which limits interest to 25 percent. Considering the fees on an annual basis, the interest rate can be as high as 400 percent.
“Today’s notification will remind debt collectors in the state that such practices are illegal in New York,” Governor Andrew Cuomo said. “Studies clearly show that payday loans are not a solution for people with low incomes, but rather a high cost debt trap. That’s why they are illegal in New York, and the State will continue to protect consumers from these misleading loans.”
Superintendent of Financial Services Benjamin M. Lawsky said, “All debt collectors in New York should know that it is illegal to try to collect payday loan debts. We will aggressively enforce the law to protect all New Yorkers and especially low income individuals who are all too often abused by unscrupulous lenders and debt collectors.”
Lenders attempt to skirt New York’s prohibition on payday lending by offering loans over the Internet, hoping to avoid prosecution. However, Internet payday lending is just as unlawful as payday lending made in person in New York. No matter what method is used to make the loan, usurious and illegal payday loans are not valid debts and cannot lawfully be collected on. Superintendent Lawsky’s letter makes that point clear to the debt collection industry.
The letter states, “Debt collectors should take note that attempts to collect on debts that are void or unenforceable violate state and federal law. The Department of Financial Services will continue to monitor lenders and debt collectors to protect consumers from usurious lending, including payday lending, through aggressive enforcement of law violations.”
