A lawsuit says a Hutchinson company with ties to KC’s payday-lending industry uses some nasty tactics

On August 8, 2013, a St. Louis man named Calvin Williams received a phone call from a collections agent at a company in Hutchinson, Kansas, called National Credit Adjusters. He was informed that NCA had purchased debt that he owed from a payday loan he had taken out from an online lender called Castle Payday. He was then told, his attorneys allege in a lawsuit being heard in U.S. District Court for the Eastern District of Missouri, that he owed NCA a $200 fee for taking over the debt, plus the balance of his original debt.

Williams said he had never agreed to that fee, and it didn’t sound legal to him. He asked the NCA representative for documentation of the alleged debt. This request, Williams says, set in motion several weeks of calls to his workplace and his cellphone by NCA agents who threatened to have him arrested.

An agent named Victor Perez left this message on Williams’ answering machine: “These fucking guys, man: fucking niggers. Never fucking pay back shit. Man, these fucking niggers. Fuck ’em.”

A different NCA agent told Williams on January 2 of this year that she hoped he had enjoyed his Christmas because if he didn’t pay his debt, “This might be the last Christmas for you.”

In the debt-servicing business, this kind of thing is known as “hard collecting.”

In an answer to Williams’ petition, NCA denies that it used these tactics. But Lee Anderson, a civil rights lawyer in Kansas City representing Williams, has recordings.

“I was pretty shocked when I first heard the facts of the case,” Anderson tells The Pitch. “It’s a violation of the Fair Debt Collection Practices Act, which is a federal law, and the Merchandising Practices Act, which is Missouri state law. Debt collectors aren’t allowed to tell a lie, which means they can’t threaten arrest because you can’t be arrested for not paying a debt. They can’t be racially or verbally abusive. The tactics they [NCA] used are just very belligerent.”

Castle Payday, the originator of Williams’ loan, is based in Michigan. But at least two other online payday lenders who sell consumer debt to NCA have Kansas City ties. In fact, both were busted by federal agencies on the same September morning earlier this year: CWB Services, headquartered in Mission, Kansas, and controlled by Tim Coppinger; and Hydra Group, Richard Moseley’s Waldo-based operation. As The Pitch has reported, both stand accused of issuing unauthorized loans to consumers and then charging exorbitant interest and fees on those bogus loans.

The exact nature of the business relationships between Coppinger and Moseley’s operations and NCA is hard to pin down; the parties did not respond or they declined to comment. But an investigation of NCA by the New York City Department of Consumer Affairs lists Hydra and Cutter Group (a co-defendant entity in the Federal Trade Commission’s case against Coppinger-controlled companies) as lenders on whose behalf NCA worked when attempting to collect from New York consumers.

It’s common in the world of consumer debt collection for a company like NCA to buy a portfolio of debt — “paper,” it’s called in the industry — from loan originators, like CWB Services or Hydra Group, for a fraction of the original debt, often pennies on the dollar. “Generally speaking, debt collectors will buy a bunch of delinquent loan accounts at the same time,” Anderson says. “It will often be written into the contract of that sale that the seller is not guaranteeing that all the debts are valid. Some might be expired, some might not even be actually owed. But the debt collectors will try to collect on all of them regardless.”

A person familiar with the industry describes the arrangement this way: “If you’re an online payday lender, 30 percent of the people you loan money to will immediately default. That’s just incorporated into the business model. At first, the lender will do a soft collect: sending e-mails, etc., trying to get the consumer to pay up. They’ll do that for about four weeks, and then they bundle up all the bad loans and send them to a company like NCA, which is trained in federal collections laws and specializes in getting that money collected.”

Sometimes these debt-collection agencies are employed by the lender to collect on the debts, and sometimes the lender simply sells the debt portfolio to the debt-collection agency and says, “Have at it.” Either way, NCA ends up with access to the borrower’s name, bank routing information, and Social Security number — valuable tools whether the collection method is soft or hard. And the profit margin can be phenomenal.

“Let’s say CWB Services lent out $300, and the borrower defaulted right off the bat, and CWB ends up selling that loan to NCA as part of a debt portfolio,” the source says. “It’s a credit file that’s worth $300, that NCA gets for maybe $15. CWB doesn’t care because it’s got all these other borrowers who are paying $90 in fees every two weeks on top of the principal, and they don’t want to deal with collecting on difficult borrowers. To NCA, all they really need to do is collect more than $15 and they’re coming out ahead. Lots of times, their agents will call the borrower and restructure the agreement. They’ll say, ‘I see the original agreement was that you had to pay $90 every two weeks. That seems a little high. How about you just pay me $20 a week for 50 weeks and we call it even?’ So now NCA has a little revenue stream coming in. And there’s such a huge volume of payday loans out there, you can really clean up if you’re buying the right debt portfolios.”

In 2013, the New York City Department of Consumer Affairs denied NCA’s application for a debt-collection license. Its evaluation of NCA’s application found several false statements, mostly about NCA’s failing to disclose to the state that it was the subject of government-agency investigations and civil charges alleging violations of the Fair Debt Collection Practices Act. In fact, NCA has been sued for illegal collection practices by persons in California, Colorado, Texas, Kansas, Missouri, Ohio and New Hampshire.

NCA was also sued by the attorney general of Arkansas. The company was subsequently fined $200,000 and forbidden from collecting on payday loans in that state. And West Virginia’s AG ordered NCA to “permanently refrain from collecting Internet payday loans in the state.”

Who is running this business? Filings with the Kansas Secretary of State’s Office provide some clues.

Brad Hochstein signed the company’s most recent annual report with the state, through a limited liability company called Fourth Avenue Holdings, which is incorporated in Delaware. Fourth Avenue Holdings lists as a member of a business called Huskers Inc., which was incorporated by Hochstein in Kansas in 2002. Other filings list as partial owners of NCA a company called 4 Sum Inc. (incorporated and owned by Mark Huston), the C-Team Inc. (incorporated and owned by Shawn Gylling) and the Richard E. Smith Trust.