By Kenneth Long on June 27, 2011

National Credit Adjusters has been trying to collect on old payday loans that were in default. Since payday lending is illegal in Arkansas, the attorney general has declared that collecting on these illegal loans is no longer allowed in his state.

Attorney General Dustin McDaniel filed a lawsuit against the Kansas collection agency for possible violations of Arkansas law and for refusing to cooperate with his investigation. Two formal investigative requests remain unanswered by the company.

Arkansas is one of several states that have declared payday lending illegal. Payday loans are very short term, extremely high interest loans that are marketed to poorly educated and financially desperate consumers. Most state usury laws limit interest at around 36% APR, while payday loans typically charge more than 10 times that amount (391% APR).

McDaniel released the following statement:


Borrowers who still owe on a payday loan should contact the Arkansas Office of the Attorney General if they are being harrassed by debt collectors attempting to collect on these illegal loans. The Consumer Hotline is 501-682-2341 or 800-482-8982. This includes loans made by Ace Cash Express, Advance America, BMG Accounts, Cash Central, Cash Net, Check into Cash, Check N' Go, Global Payday, Internet Payday, Internet Payday Loans, Rapid Cash for You, Sonic Cash Payday Loans, and FNS Payday Loans.

Understand that the Attorney General has declared that these loans made to Arkansas residents are illegal. Therefore, any collection attempts made by National Credit Adjusters or any other collection agency are also illegal, as the debts are unenforceable.

By Kenneth Long on June 20, 2011

Western Sky Financial is one of the most successful payday loan companies currently operating in the U.S. Their confusing loan fee and interest rate combination makes if difficult for most borrowers to know just how bad these loans really are. So exactly what interest rate does Western Sky Financial charge?

The answer is, it depends on how much you borrow. For a $2,600 loan, Western Sky Financial publishes a 139.22% APR. For this loan, you would make 47 payments of $294.46 for a total of $13,839.62. Of course, you are really only getting $2,525 in proceeds, since Western Sky charges a $75 origination fee. My first thought when looking at these rates is, what idiot would apply for such a bad deal? Apparently, many people are willing to throw away their future for a quick loan.

To put this in perspective, imagine buying a $10,000 car using the same terms. You would need a $288 down payment to pay the loan origination fee so that you could borrow the full $10,000 to buy the car. Then you would make 47 payments of $1,166.17 for a total of $55,098. That would be the equivalent of paying for a brand new BMW X5 yet driving a stripped down Nissan Versa. Nothing against the Versa, but do you really want to pay $55,000 for a cheap subcompact?

Considering these staggering rates, should you consider taking out their lower loan amount? It has even worse terms! Instead of a $75 fee, the $1,500 loan product carries a $500 origination fee. You only receive $1,000 on a $1,500 loan! Furthermore, the APR on this loan is a whopping 194.70% APR.

Using these terms on a $10,000 car loan looks far worse. First you would need a $5,000 down payment to pay the loan origination fee on a $10,000 loan (yes you read that correctly). Next you would need to make 24 monthly payments of $1,668.22 for a total of $40,037. Don't forget about the $5,000 down payment you made, raising the total to $45,037 paid for a $10,000 car over 2 years. That same purchase with excellent credit would have cost you less than $10,500 over 2 years.

The terms of loans offered by Western Sky Financial are very transparent. Yet, most people who take out these loans fail to see just how bad these rates really are. Even the blunt disclosure on their television commercial that "It's not cheap" is a fair warning that you are about to steer down a rocky path. However, you should be aware that it is not even a rocky path so much as it  is driving off a cliff.

If after reading this article you decide to take out loans with interest rates that are as high as this lender charges, then you deserve the financial nightmare that will follow. Our job is to help you avoid making another bad mistake, but even our hands are tied if you deliberately try to ruin your life. Still, we will not tell you "I told you so." Instead, you can expect the counselors at Debtors Unite to be understanding and work with you to remedy the damage.

If you have not taken out the loan, please do not do so. We can help you find better options for your financial needs. If you did accept the loan, then we can help you review your situation to determine what steps you need to take to get out of your trap.

Don't expect Western Sky Financial to be able to circumvent state usury laws forever. California, Maryland, South Dakota and West Virginia residents have been protected by their attorneys general who have blocked the lender from doing business in their state. Colorado is trying to block Western Sky Financial, but they have a legal battle to fight first. Don't wait for your state to protect you. Protect yourself from what is without a doubt a bad deal clouded by smoke and mirrors.

By Kenneth Long on June 16, 2011

NASCAR driver Rusty Wallace touted the vehicle extended warranty plans offered by US Fidelis on national television commercials, bringing credibility to a firm that sold more than 400,000 service contracts. After countless acts of fraud, lying and theft that ultimately led to a bankruptcy filing, the owners have now been indicted for their criminal acts.

Darain Atkinson

Owner Darain Atkinson faces a 14-count indictment for his role in the massive scam. His previous legal challenges include convictions for theft, forgery and burglary by a Kansas court in 1986. In 1987, a federal court convicted him of counterfeiting, finding that he had illegally manufactured Federal Reserve notes. Darain Atkinson faces life in prison due to his repeat offender status.

Cory Atkinson

Co-owner Cory Atkinson was indicted on 13 counts related to the scheme. He has a prior conviction for felony criminal trespass from 1997 while in Colorado. Cory Atkinson faces up to 15 years in prison for the scam.

Rusty Wallace

NASCAR driver Rusty Wallace, the spokesperson for US Fidelis at the time, was in the dark and did not participate in the scam. If he is guilty of anything, it is of failing to properly investigate the firm and background of its owners prior to agreeing to serve as its public face. Countless fans have almost certainly fallen victim to the scam simply because they trusted Wallace as the spokesperson. Wallace apparently has not cleaned up his image though, as he has since moved on to serve as spokesperson for the LoanMax payday loan company.

The Scam

US Fidelis convinced scores of buyers that their extended warranties had expired or were about to expire. They stated they had relationships with automakers which allowed them to have the owners' factory warranties extended or reinstated. The company originally started as National Auto Warranty Services while doing business as Dealer Services.

Clients were repeatedly charged fees in excess of the contract and had difficulties getting repairs approved and paid for under their warranties. Refunds were virtually nonexistent. Complaints ultimately led to US Fidelis being barred from marketing their extended warranties in 11 states.

The Victims

Over 400,000 extended warranties were sold by US Fidelis. Many promised repairs where denied. Refunds were denied. After looting the company of over $101 million, the owners left little money to actually provide the promised service. A bankruptcy filing in March 2010 left victims holding worthless extended warranties that had cost them thousands of dollars.

Ironically, a bankruptcy judge in St. Louis only required that the two con men repay approximately $10.5 million through a settlement that may ultimately require an additional $10 million in assets be surrendered by the former owners. That represents only about a fifth of the money the two bilked the firm for, leading to speculation that the two have parked millions of dollars out of sight. US Fidelis ultimately sued the two.

Protecting Yourself from Fraud

Putting money in emergency savings can allow you to avoid purchasing an expensive extended warranty for your vehicle. Still, you should check auto extended warranty reviews prior to signing with any company. Otherwise, you risk falling victim to one of the many auto extended warranty scams that have marred the industry with a flood of bad news.

If you have been a victim of US Fidelis or any other fraudulent extended warranty provider, you are encouraged to tell your story so that others may know what warning signs to watch for.

By Kenneth Long on June 15, 2011

Debt collector Brooks, Newman & Stone found themselves in hot water after the Minnesota Department of Commerce slapped the firm with a $7,500 fine. The agency reportedly received money from a debtor on behalf of their client, then simply pocketed the cash.

The Minnesota investigation revealed that Brooks, Newman & Stone were not licensed as a collection agency in the state. Requests sent to the firm went unanswered. These requests included attempts by a dental lab who assigned the debt to the agency as well as certified mail sent from the Department of Commerce.

Most debt collectors purchase the debt from their client, thereby eliminating the opportunity of fraudulent activity between those parties. In cases like this however, where a debt collector works on a contingency basis, there is no guarantee that the original debt will be paid. Furthermore, you have no guarantees that your money will be used to satisfy the debt. In this case, the debtor's payment went to line the pockets of the collection agency.

The agency has been targeted by similar allegations in the past. The Better Business Bureau issued an F rating for the firm, mostly due to its failure to respond to a number of complaints.

Despite made by the company, it is not licensed in all 50 states and cannot legally collect on debts in all states. The firm did not represent itself in the hearing, choosing instead to ignore that notice as well.

Debtors Unite strongly encourages any debtor who is contacted by Brooks, Newman & Stone to contact their original creditor instead to arrange for proper payment or settlement of their debt. Companies seeking help in collecting defaulted debt would likewise be well served to avoid the company altogether.

If you believe you have been a victim of a rogue debt collector, you are encouraged to file formal complaints with your attorney general, the Federal Trade Commission and the Better Business Bureau. We also encourage you to document your complaint at our debt collectors forum.

By Kenneth Long on June 10, 2011

Consumer advocates normally applaud news like the proposed $5.7 million class action settlement against a debt buyer who cheated clients. One problem with the terms of the settlement agreement with Midland Funding LLC is that it only provides $10 per client as restitution. Additionally, it bars that client from ever suing Midland Funding or parent company Encore Capital Group for damages.

Minnesota Attorney General Lori Swanson has been the most active litigant in the robosigned affidavit debacle that first came to light in 2008. Minnesota upped the ante in March, claiming that Midland was still engaged in unfair practices that falsely implicated some clients whose debts were never properly confirmed. Minnesota's separate lawsuit against Midland Funding was filed in May 2011 and is still pending at press time.

The ten dollars per class member is seen by many as an insignificant sum that does nothing to alleviate the indebtedness of the client. In many cases, it only offsets the interest accruing on their account by a month.

Those who actively pursue damages against debt collectors that have infringed on their rights find that the law allows them up to $1,000 in damages for each violation. By being included in the class, you release all claims against Midland Funding, thereby eliminating your rights to sue. Most importantly, when a lawsuit is granted class action status, you as a client are automatically included unless you specifically request to be excluded. This would prevent you from seeking a debt collection lawsuit against the firm.

Unless the settlement is enough to provide you with a reasonable outcome, you might be better served by excluding yourself from the class action. Of course, that may become a non-issue. With 38 attorneys general opposing the terms of the ten dollar per class member settlement, it may have to be rewritten or abandoned. In their brief filed in federal court in Ohio, the attorneys general released the following statement:

Have you been unfairly treated by debt collectors?