New York moves to protect troubled borrowers
In separate actions, New York officials are cracking down on companies taking advantage of troubled borrowers.
The Department of Financial Services issued subpoenas to nine lending companies in the state Tuesday. The state's bank regulator is investigating them for what are called "loan-to-own" schemes.
DFS didn't indicate what laws may have been broken, but said the companies made "unconscionable" loans to people incapable of repaying them. DFS says the sole intent was to seize the asset used to secure the loan, typically a house.
Three of the lending companies being investigated are based on Long Island. None returned phone calls. DFS says the companies keep a low profile in order to avoid licensing requirements and regulatory oversight.
In a separate action, New York Chief Judge Jonathan Lippman adopted new rules designed to make debt collection harder.
According to Lippman, collection agencies perform sloppy legal work in order to get default judgments against people with little knowledge of the legal system.
The courts will now require debt collection agencies to submit more documentation proving the debt. Also, the courts will throw out cases where the debtor was never notified of a claim because the mail was returned undeliverable.
Consumer advocates praised the new rules, while collection agencies called them unfair judicial advocacy.