The Consumer Financial Protection Bureau on Friday permanently barred the former head of a Kansas payday loan debt collector from the industry but dramatically reduced the penalty that he and the company will have to pay.

The CFPB said National Credit Adjusters, a Hutchinson, Kan., buyer and seller of payday loan debts, had hired third-party collectors that routinely inflated the amounts customers owed and threatened them and their families. Bradley Hochstein, co-owner and former CEO of the company, was barred by the CFPB from working "in any business that collects, buys or sells consumer debt."

The CFPB said that the collectors hired by the company threatened to arrest consumers who did not pay their debts, though they had no legal authority to do so.

The CFPB said it reduced the penalty Hochstein must pay to $300,000, from the $3 million imposed in the consent order, while National Credit was ordered to pay $500,000, also down from $3 million. The CFPB did not specifically designate that any of the money go to consumers who were harmed.

From 2011 to late 2015, National Credit sold $700 million in consumer debt and continued placing debt with five third-party debt collectors "with knowledge or reckless disregard of the [firms'] illegal and harmful consumer debt collection practices," the CFPB said in the consent order.

National Credit and Hochstein "were aware of, but did not prevent, the conduct of the [firms]," the consent order said. "Respondents continued to refer accounts to the [firms], even after learning the [firms] frequently inflated account amounts, threatened to take various legal actions NCA did not have the intention or legal authority to take, and ignored NCA’s compliance department."

National Credit said it was satisfied with the agreement.

"Unlike other targets of the bureau, we were able to make minor adjustments to our business practices to comply with both the letter and the spirit of the law," National Credit said in an emailed statement. "We are pleased that this matter has concluded; and we look forward to continuing to provide excellent service to consumers and our clients."

The CFPB identified the five debt collection companies as Delray Capital; First Capital Recovery; Lionstone Holdings Group; Brookshaw Management; and Clear Credit Services, also known as Clear Credit Solutions.

National Credit and its owners have no ownership stake in any of the third-party firms, a spokesman said.

The CFPB said Hochstein and National Credit "provided instructions on collection conduct, set collection benchmarks, shuffled accounts between the [firms] based on performance, directed the [firms] to hire or fire employees, and withdrew accounts from the [firms] for financial performance — not misconduct — reasons."

In 2015, the New York State Department of Financial Services ordered the company to discharge $2.2 million in outstanding payday loan debts and to issue refunds to roughly 4,760 consumers for collecting on thousands of unenforceable and void payday loan debts in the state.

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