Massachusetts Office of Consumer Affairs and Division of Banks Announce Shut Down of Debt Collector and Action against Five Unlicensed Predatory Lenders
Some Massachusetts consumers were charged interest rates as high as 169 percent
BOSTON – The Massachusetts Office of Consumer Affairs and Business Regulation and the Division of Banks today announced a series of cease orders targeting unlicensed lenders and a licensed debt collector that were not adhering to the state’s loan consumer protections.
The Division of Banks ordered Nevada-based Delbert Services Corporation, a licensed debt collector, and its owner, John P. Reddam, to immediately cease collecting payments on over 100 illegal loans made to Massachusetts consumers. The Division also issued orders to five unlicensed, Internet-based lenders who sold loans to Massachusetts consumers. The payments on those loans were collected by Delbert Services.
The loans are illegal under the Massachusetts small-loan statute because they include excessively high interest rates and fees, in some cases over 150 percent interest. Also, any business that makes loans of $6,000 or less at an interest rate greater than 12 percent in Massachusetts must be licensed as a small-loan company by the Division of Banks. The maximum annual rate of interest for these loans is 23 percent. Third-party debt collectors must also be licensed and supervised by the Division.
Delbert Services is required to cease all collections on loans which violate state law and refund all collection fees received to Massachusetts consumers. Loan amounts ranged from $850 to $5,075.
“There is no place in the Commonwealth for these types of business practices. We believe that these businesses knew that these predatory loans created serious injury to consumers by charging outrageous and illegal fees,” said Consumer Affairs and Business Regulation Undersecretary Barbara Anthony. “The Division uncovered evidence that Delbert was not only collecting on illegal loans, but they were collaborating with a network of predatory lenders that were making loans with annual interest rates ranging from 59 percent to 169 percent, and with origination fees as high as $500.”
The Division issued related orders to the unlicensed lenders, all Internet based companies, requiring them to immediately cease making, offering or purchasing illegal small loans in Massachusetts. These companies are required to refund all interest, finance charges, and fees collected from Massachusetts consumers on the illegal loans. The companies ordered to cease these activities include Cash Call, Inc. and its wholly-owned subsidiary WS Funding, LLC, located in Anaheim, Calif.; GP Investors, LLC, located in Sicklerville, N.J.; Novea Resource Management, LLC, located in Surfside, Fla.; and Western Sky Financial, LLC, a/k/a Western Sky funding, LLC, a/k/a Western Sky, a/k/a westernsky.com, located in Timber Lake, S.D.
“These companies have exhibited a blatant disregard for Massachusetts borrowers and the state’s consumer protection statutes and regulations,” said Commissioner of Banks David J. Cotney. "The Division of Banks will continue to aggressively identify and pursue entities engaging in the solicitation, lending, purchasing and collection of illegal and predatory loans.”
These small-dollar, high-interest rate loans, similar to loans commonly referred to as “payday” loans, are primarily offered to consumers over the Internet and require access to a consumer's bank account and personal information. Many Internet-based payday lenders provide little or no identifying information about themselves and may operate under several different names. With transactions completed over the internet or phone, often e-mail addresses and toll free telephone numbers are the only means of contacting these companies.
Since these lenders operate over the Internet and across the globe, they are often difficult to track and this increases the risk of identity theft for consumers. However, in a series of initiatives against payday lending dating back to 2005, the Division of Banks has issued cease-activity orders against hundreds of payday lending companies making illegal loans to Massachusetts consumers, many operating online.
In conjunction with the actions taken today, the Division issued a letter to the 408 companies currently licensed as debt collectors in the Commonwealth, advising them that they must ensure that they collect loans only on behalf of properly licensed creditors. The letter also informed these companies of the requirement to collect only on loans that are legally made within Massachusetts’ rate and fee limitations. Any licensee found to be collecting illegal loans to Massachusetts borrowers will be subject to enforcement action and will be required to refund all fees collected.
Consumer Affairs and the Division of Banks offer the following advice to consumers looking for a personal loan:
- Check the NMLS Consumer AccessSM at www.nmlsconsumeraccess.org to ensure that the company is properly licensed,
- Shop different banks, credit unions and lenders to see which ones offer better rates.
- Evaluate the long term and high dollar cost of loans offered by companies advertising online. Even a loan of a few hundred dollars could end up costing thousands.
Anyone with questions regarding consumer loans or debt collection may contact the Division of Banks’ Consumer Hotline at 1-800-495-BANK (2265) x 501.
The Division of Banks is an agency within the Office of Consumer Affairs and Business Regulation and oversees state-chartered banks and credit unions, check sellers, debt collectors, foreign transmittal agencies, mortgage lenders and brokers. The Office of Consumer Affairs and Business Regulation is committed to protecting consumers through consumer advocacy and education, and also works to ensure that the businesses its agencies regulate treat all Massachusetts consumers fairly. Follow the Office at its blog, on Facebook and Twitter, @Mass_Consumer.