State Sues Payday Loan Collection Agency

Arkansas Attorney General Dustin McDaniel announced Tuesday that he has filed a consumer-protection lawsuit against a Kansas-based debt collection agency that sought to collect on payday loan debts in the state.

The lawsuit, filed in Pulaski County Circuit Court, claims that National Credit Adjusters LLC (NCA) of Hutchinson, Kan., violated the Arkansas Deceptive Trade Practices Act in its attempts to collect on payday and high-interest installment loan debts that are “usurious, unconscionable, and void under Arkansas law.”

McDaniel’s suit alleges that NCA misrepresented to Arkansas consumers that debt originated by payday lenders and high-interest installment lenders are enforceable and collectable when, in fact, they are not, according to Arkansas law.

“We will do our part to protect Arkansas consumers from the illegal actions of the payday lending industry and those entities associated with it,” McDaniel said. “Though we have successfully shut down storefront payday lenders, we will continue to aggressively pursue online lenders who violate Arkansas law or collection agencies like this that attempt to collect on illegal debt.”

McDaniel said that NCA purchases the right to collect on delinquent debt, and in doing so, has purchased a large number of debts from payday loans and high-interest installment loans. These types of loans carry exorbitant interest rates that greatly exceed the amount allowed by Arkansas law.

The lawsuit asks the Court to issue an injunction prohibiting NCA from actions that violate Arkansas law, cancel outstanding usurious loan contracts, and order NCA to return to Arkansas consumers any money collected based on payday or high-interest installment loans.

In addition, McDaniel seeks civil penalties and costs.

The lawsuit mirrors suits many, many other actions filed by state regulators against ARM companies playing in the payday loan space.

Related Content:

• The Debt Collection Compliance Handbook
• “Guaranteeing” Compliance
• The Future of Compliance for the Debt Collection Industry
• Collection Agency Financial Benchmark Report 2011