Maryland's financial regulators said Monday that they have ordered a Kansas firm to stop collecting debts from Maryland residents, alleging that the company repeatedly tried to collect on illegal payday loans despite being warned not to do so.
Smith Haynes & Watson's debt-collection license was suspended last week by the state Department of Labor, Licensing and Regulation after complaints from residents, a temporary action that will become final if the firm doesn't request a hearing within 15 days of receiving the order.
The company pursued residents for payment on small, short-term loans that can't legally be collected, the agency said. The loans were issued by unlicensed companies and had interest rates far higher than allowed, the agency said.
In one case, a consumer was given a $300 loan to be repaid in less than two weeks along with a $90 finance charge, the equivalent of a 995 percent annual interest rate, the state said. Maryland's payday-loan law caps at 33 percent the annual interest rates on loans of $1,000 or less.
Anne Balcer Norton, Maryland's acting deputy commissioner of financial regulation, said the state notified Smith Haynes & Watson more than a year ago that it could not collect on such debts, but the company continued doing so. The firm also misled consumers as it tried to collect, telling one resident that it had "placed a grievance" against her Social Security number, the state said.
"It's frustrating to see this, because it's the combination of pretty abusive loans coupled with collection practices that really aren't much better," Norton said.
Smith Haynes & Watson did not respond to requests for comment.