Regulators in Massachusetts ordered a Nevada-based collection agency and its owner to immediately stop collecting payments on more than 100 illegal loans made to consumers in the state.

Five unlicensed, Internet lenders that sold loans collected by the agency also were ordered to stop making, purchasing or offering illegal small loans in the state.

The collection agency, Delbert Services Corp., and owner John P. Reddam, were ordered by the state's Office of Consumer Affairs and Business Regulation and the Division of Banks to cease collecting on loans violating state law and refund to Massachusetts consumers all collection fees received. Loan amounts ranged from $850 to more than $5,000.

“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% to 169%, and with origination fees as high as $500.”

The Division of Banks said the loans from the Internet lenders are illegal under the state's small-loan statute because they carry excessively high interest rates and fees, in some cases more than 150% interest. 

Further, any business making loans of $6,000 or less at an interest rate greater than 12% 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%. Third-party debt collectors also must be licensed and supervised by the Division.

The Internet lenders include Western Sky Financial LLC, a/k/a Western Sky Funding LLC, a/k/a Western Sky, a/k/a westernsky.com, based in Timber Lake, S.D.; Cash Call Inc. and its wholly-owned subsidiary WS Funding LLC, based in Anaheim, Calif.; GP Investors LLC, based in Sicklerville, N.J.; and Novea Resource Management LLC, based in Surfside, Fla.

“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.”

The small-dollar, high-interest rate loans, structured much like payday loans, are mainly 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.

“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.”

Along with the actions taken this week, the Division issued a letter to the 408 companies currently licensed as debt collectors in the state, 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.

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