Maryland regulators ordered a Kansas collection agency to stop doing business in Maryland after alleging the company repeatedly tried to collect on illegal payday loans - despite warnings to not do so.
Smith Haynes & Watson's collection license was suspended last week by the state Department of Labor, Licensing and Regulation after complaints from residents. The temporary action will become final if the firm does not request a hearing within 15 days of receiving the order.
Smith Haynes & Watson pursued residents for payment on small, short-term loans that cannot legally be collected in the state. The loans were issued by unlicensed companies and had interest rates far higher than allowed.
The company had been collecting payday loans from several clients, including East Side Lenders LLC in Delaware.
In early 2008, Maryland's investigation into the lending practices of East Side Lenders found the lender was not licensed in the state and that its' agreements constituted usury and were not legal in Maryland.
Maryland regulators notified Smith Haynes & Watson more than a year ago it could not collect on the payday loan debts. The firm also allegedly misled consumers, telling one resident that it had "placed a grievance" against her Social Security number, according to regulators
A consumer in one case was given a $300 loan to be repaid in less than two weeks along with a $90 finance charge, the equivalent of a 995% annual interest rate, the state said. Maryland's payday-loan law caps at 33% the annual interest rates on loans of $1,000 or less.
The company did not respond to requests for comment at press time.
