New York reaches settlement with Kansas City high-interest loan operator

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A kingfish in Kansas City’s high-interest loan industry will stop trying to collect thousands of illegal high-interest loans made to poor New Yorkers, according to a settlement announced Monday by the state Department of Financial Services.

However, there will be no refunds for people who have already made payments for years to either of the two Kansas-based companies: Total Account Recovery and E-Finance Call Center Support.

Both firms are part of the so-called “payday loan” industry, which quickly lends cash at exorbitant short-term interest rates that are illegal under usury laws in New York and other states. New York limits annual interest rates to 25 percent.

Payday loans are generally obtained by poor residents who may not qualify for traditional bank loans. Lending is a $ 38 billion industry nationwide, and high interest rates make such loans very profitable for lenders, according to the Pew Charitable Trust.

According to State Superintendent Maria T. Vullo, Total Account Recovery obtained illegal loan payments from more than 2,100 New Yorkers between 2011 and 2014. The department did not indicate how much money was raised.

“Payday loans are illegal in New York and DFS will not tolerate predatory actors in our communities,” said Vullo’s statement. In total, the companies requested payment of 20,000 loans from across the state.

Both firms are linked to Joshua Mitchem, a Kansas City man who is a major player in the industry, along with his father, Steve Mitchem, a former traveling evangelist and luxury jewelry executive who founded day loan businesses a decade ago. payment in the Kansas City region. . The elder Mitchem is now trying to capitalize on the medical marijuana sector.

In 2012, the Arkansas Attorney General sued Joshua Mitchem for violating state usury laws by charging interest rates of more than 500 percent on loans. That lawsuit claimed that Mitchem ran business through a variety of shell corporations in the Caribbean. Mitchem later paid a fine of $ 80,000 and agreed to stop the business in that state.

Under the settlement in New York, Mitchem’s companies will pay a state fine of $ 45,000 and agreed to stop pursuing clients for approximately $ 12 million in illegal loans, as well as withdraw


the judgments and liens presented against the debtors.

However, unlike New York State’s last major settlement with another payday loan operator in May 2016, there will be no refunds for customers who have already made payments to Mitchem companies until July 2014, when their two companies reportedly stopped trying to collect in New York.

When the department was asked why the reimbursements were not part of the agreement, Vullo issued a statement saying that the department “considers all relevant factors when choosing an appropriate course of action.”

According to the agreement signed by Joshua Mitchem, the companies have a “diminished financial condition” that makes the companies unable to “make the payment of money” beyond the state fine.

However, since early 2015 Mitchem has donated more than $ 20,000 in political campaign contributions, including the election campaign of President Donald J. Trump; a political action committee linked to Trump’s election to head the US Environmental Protection Agency, former Oklahoma Attorney General Scott Pruitt; and a trade group for payday loans.

Last year, federal regulators from the Obama-era Consumer Protection Board proposed nationwide rules for the industry, which has been largely regulated by individual states. Kansas City has become a hub for payday loan companies like the Mitchems.

President Trump’s proposed federal budget would cut funding at the Office of Consumer Protection, potentially undermining federal efforts to regulate payday loans, which the industry vehemently opposes.

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