State Suspends Debt Collector's License Because of Lender

The state of Maryland has suspended the debt collection license of a company that was attempting to recover payday loans from a client that had been previously served with a cease and desist order from the state.

The Maryland Collection Agency Licensing Board in the Office of the Commissioner of Financial Regulation last week suspended the license of Smith Haynes & Watson LLC, a Kansas-based collection agency. The board also issued a cease and desist order covering all collection activity. As a part of the order, the company must turn over to the state all information regarding its debt collection activities.

Smith Haynes & Watson had been collecting payday loans from a number of clients, including East Side Lenders LLC, based in Delaware.

In early 2008, the Office of the Commissioner of Financial Regulation began an investigation into the lending practices of East Side Lenders, pursuant to multiple consumer complaints. The agency determined that the lender’s agreements constituted usury and were not legal in Maryland. Furthermore, East Side Lenders was not licensed to do business in the state.

In June of this year, the state issued a cease and desist order to East Side Lenders. But the Collection Agency Licensing Board contends that it warned Smith Haynes & Watson in July 2009 that any loans from East Side Lenders were not enforceable in the state of Maryland. Despite the warning, the state claims the collection agency continued to pursue consumers for collection. The state also claims that it followed up the warning with multiple letters over the second half of 2009.

The suspension is effective immediately, but the company can request a hearing within 15 days to contest the suspension, according to a court filing.