The New York City Department of Consumer Affairs (DCA) recently filed an enforcement action to enjoin National Credit Adjusters, LLC, a national debt collector, from collecting debts in the City. The DCA had rejected the company’s application to renew its debt-collection license earlier in the year after it allegedly admitted to collecting on illegal payday loans. In the enforcement action, the DCA charged that, after losing its license, the company filed collection lawsuits against 23 New York City residents.

The lawsuit is another example of efforts by New York regulators to crack down on payday lending, not only through actions directed at the lenders themselves but also by targeting their providers and vendors. In February 2013, New York’s Department of Financial Services (DFS) published a notice warning debt collectors “that they should not seek to collect on… payday loans made in New York over the Internet and via phone and mail.”

The warning was followed by the DFS’s announcement in August 2013 of aggressive enforcement-related activities directed at allegedly unlawful online payday lending. Notably, the DFS not only sent cease-and-desist letters to 35 payday lenders but also took actions directed at banks that process electronic payments on behalf of payday lenders and debt collectors. (These actions were detailed in our prior legal alert.)

Earlier this month, New York Attorney General Eric Schneiderman and five New York-based debt collectors that collect payday loans entered into a settlement that resulted in $279,606 in restitution of amounts collected on payday loans made to New York consumers and $29,606 in civil penalties. (For more on the settlement, see our legal alert.)

As the above actions make clear, both State and City regulators are aggressively targeting providers that work with online payday lenders, and that trend is expected to accelerate in the coming months. A provider that ignores this trend could soon find itself in the crosshairs of an enforcement action.