New York has several laws prohibiting payday loans. Under New York General Obligations Law § 5-501 the civil usury cap is 16% APR. Under New York Penal Law § 190.40 and 190.40 the criminal usury cap is 25% APR. Check cashers are prohibited under New York law from cashing checks with deferred dates. While PayDay lending itself is not specifically prohibited, the statutory cap on interest rates effectively serves to prevent the practice and any other form of lending that violates theses statutory prohibitions.
To circumvent New York laws, some New York payday lenders partner with banks located in deregulated states. These lenders deliver loans via electronic funds transfer and claim the local storefront is brokering loans for the bank that is exporting its home state interest rates and other terms to New York. This is called rent-a-bank lending and is the same mechanism that credit card companies use to charge rates of 19.00% to New York residents.
Regarding the debt collection agency that is contacting you, you should know that all debt collection agencies that seek to collect personal or household debts from New York City residents must have a DCA license no matter where the agency is located. Further, the Fair Debt Collections Practices Act ["FDCPA"] is a broad federal law that is designed to prohibit abusive, deceptive and misleading debt collection efforts.
It is generally held that Payday lenders have NO LEGAL RIGTH TO COLLECT LOANS IN NEW YORK. Furthermore, if the collection agencies violate any aspect of the FDCPA, you may sue them in federal court for actual damages, statutory damages and punitive damages as well as attorney's fees.
A well worded letter from an attorney may stop any further collection efforts.
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They are not going stop just because you want them to. You should consult with a lawyer to see if you have a lawsuit against them under the Fair Debt Collection Practices Act.
I am a former federal and State prosecutor and now handle criminal defense and personal injury/civil rights cases. Feel free to check out my web site and contact me at (212) 385-8015 or via email at Eric@RothsteinLawNY.com. The above answer is for informational purposes only and not meant as legal advice.
What you can do is start out by sending them a cease and desist letter with signature confirmation. They have clearly violated your rights under the FDCPA by threatening to serve you with a summons.
Many FDCPA attorneys will take your case with no out-of-pocket cost to you, since they utilize fee shifting provisions that force the collector to pay your attorney fees if you win the lawsuit.
Contact a local attorney in your area.
NOTE: This answer is made available by the lawyer for educational purposes only. By using or participating in this site you understand that there is no attorney client privilege between you and the attorney responding. This site should not be used as a substitute for competent legal advice from a licensed professional attorney with whom you have established an attorney client relationship. The law changes frequently and varies from jurisdiction to jurisdiction. The information and materials provided are general in nature, and may not apply to a specific factual or legal circumstance described in the question.