Hutchinson, Kansas, Company Settles with CFPB

Inside Subprime: July 18, 2018

By Kerry Reid

Hutchinson, Kansas, has the nickname “Salt City,” thanks to the underground salt mines that once formed a big part of the town’s economy. But debt collection practices by a local company made the federal Consumer Financial Protection Bureau (CFPB) feel salty enough to go after it.

National Credit Adjusters LLC, a privately held company housed in Hutchinson, reached a settlement with the CFPB late last week. The settlement also involved the company’s former CEO and part-owner, Bradley Hochstein, as reported by the Topeka Capital-Journal.

In a July 13 press release, the CFPB said “The Bureau found that NCA and Hochstein violated the Consumer Financial Protection Act of 2010 and that NCA violated the Fair Debt Collection Practices Act.”

Specifically, the CFPB noted that NCA used debt collection companies that “engaged in frequent unlawful debt collection acts and practices that harmed consumers, including by representing that consumers owed more than they were legally required to pay, or threatening consumers and their family members with lawsuits, visits from process servers, and arrest, when neither NCA nor the collection companies intended or had the legal authority to take those actions.”

The settlement bars both NCA and Hochstein from certain collection practices – indeed, as reported by the Capital-Journal, Hochstein is permanently barred from any business that collects, buys or sells consumer debt. The settlement also imposes a judgment for civil penalties of $3 million apiece on NCA and Hochstein, which is suspended subject to NCA paying a $500,000 penalty and Hochstein paying $300,000.

The CFPB case was a holdover from former director Richard Cordray’s leadership. Reuters reported in March that interim director Mick Mulvaney was quietly planning on dropping the suit.

The Reuters article also pointed out that many of the NCA collection practices involved collecting debt for online lenders operating on tribal lands, where the lenders argue that triple-digit loans are permitted, even if state law prohibits them. According to Reuters, some of the abuses by NCA included threats to jail borrowers and their family members and that NCA wrongly collected about $50 million. CFPB originally sought to have $45 million returned.

In 2014, a Missouri man who had taken out an internet loan reported that he received racist and threatening phone calls from NCA.

Currently, Kansas law allows payday loans of no more than $500 for a term of 7-30 days, with no rollovers permitted. Fees and finance charges must be no more than 15% of the loan, with an annual percentage rate, or APR, of 390% on a 14-day loan of $100. A borrower may not have more than two loans out at a time and a lender may not make more than three loans to a borrower within a 30-day period.

The Kansas attorney general’s office provides a fact sheet on payday lending for residents. Additionally, if a resident believes they have been the victim of a predatory loan scam or other illegal practices – including those related to collections on a debt – they can file a complaint with the State Bank Commissioner of Kansas here.

To learn more about payday lending in the United States, check out these related pages and articles from OppLoans:

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