Minnesota Attorney General Lori Swanson sued collection agency Bradstreet and Associates on Wednesday for charging steep interest rates on overdrawn checking accounts at two big banks.
The Minneapolis-based company allegedly broke state law by charging as much as 22 percent in bogus interest on old bank overdrafts and fees. The lawsuit involves $18 million in debt and unknown interest costs that the firm was pursuing from people who overdrew Wells Fargo and U.S. Bank accounts.
Swanson said the assessed interest rates weren't allowed in customers' original banking contracts and were many times what state law allows. Bradstreet sometimes went to court to get default judgments that tacked on thousands of dollars to the original amount of bounced checks, she added.
Bradstreet is not a member of ACA International, the largest association for collection agencies.
Swanson, a two-term Democrat, isn't alleging wrongdoing by the banks, which sold off the debt.
Minnesota regulators believe there are as many as 16,000 Minnesota consumers who could be affected. The case filed in Hennepin County (Minn.) District Court seeks restitution and a halt to the collection practices.
According to the complaint, Bradstreet bought the old checking account debts from United Credit Recovery LLC, a Florida debt buyer that the attorney general sued in October for churning out fake bank affidavits on a mass scale.
United Credit Recovery allegedly was cutting and pasting bogus signatures of bank officials onto the documents to make them look authentic. Bradstreet officials could not be reached for comment.