NYS Settles With Commack Debt Collection Firm

 Attorney General Eric T. Schneiderman today announced that his office reached a settlement with Forster & Garbus, one of the largest debt collection firms in New York State, to ensure that it does not file actions against New Yorkers to collect on payday loans. A payday loan is a type of short-term borrowing – sometimes due in two weeks, which accounts for the name – in which the consumer borrows a small amount at interest rates that can range from 100 percent to 650 percent or more.  Payday loans are illegal because the interest rates far exceed the maximum of 16 percent allowed under New York law for most lenders not licensed by the State. This settlement is part of an ongoing crackdown by Attorney General Schneiderman on payday loans.

“Payday loans take money away from hardworking New Yorkers who are forced to pay illegal and outrageous interest rates,” Attorney General Schneiderman said. “Debt collection firms must make certain that the underlying loan is not a payday loan before filing a lawsuit, and they will be held responsible if they fail to do so. Ignorance is no excuse.”

The Attorney General’s investigation showed that a company called NCEP, LLC placed consumer debts with Forster & Garbus, located in Commack, for collection. These included payday loans, and on five occasions it attempted to collect on payday loans from New Yorkers. Forster & Garbus represented to the Office of the Attorney General (OAG) that it was had not been aware that the loans were payday loans, and after notification from the OAG, Forster & Garbus stopped its collection efforts.

Under the agreement, Forster & Garbus may not file an action against a New Yorker  over a consumer credit transaction unless it first obtains a copy of the loan document and determines in writing that it is not a payday loan.  When it receives a written complaint from a consumer that an existing judgment or settlement may have involved a payday loan, Forster & Garbus is required to obtain a copy of the loan document and, if the loan was a payday loan, vacate the judgment and pay restitution to the consumer for any amounts paid on the judgment. Forster & Garbus was also required to pay $10,000 in costs and penalties.

Attorney General Schneiderman has been tough on payday loans, sending a clear message that these predatory transactions will not be tolerated. Since January 1, 2011, as a result of his no-nonsense approach:


  • Five debt collection firms that collected on payday loans were required to pay a total of $279,605.98 in restitution and $29,605.98 in penalties;
  • A debt-buying company was required to reverse 8,550 negative  reports it had made to credit reporting bureaus on New Yorkers and was prohibited from collecting on $3.2 million in payday loans taken out by New Yorkers;
  • 12 companies agreed to refuse requests to repossess the vehicles of New Yorkers when the underlying loan is a payday loan; and
  • Three companies and their owners were stopped from collecting interest on outstanding payday loans and required to provide refunds to New York borrowers who had paid back more than the principal of their loan plus the legal interest rate of 16%, and to pay $1.5 million in penalties.


This case was handled by Assistant Attorney General James Morrissey and Karen Davis, Senior Consumer Fraud Representative in the Buffalo Regional Office, which is led by Michael Russo, Assistant Attorney General in Charge. The Buffalo Regional Office is a part of the Division of Regional Offices, led by Marty Mack, Executive Deputy Attorney General for Regional Offices.

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