NEW YORK -

The Dodd-Frank Act provided the foundation for more regulation of auto financing by federal regulators. Now a state-level agency is leveraging Dodd-Frank to seek orders against a New York-based subprime lender.

Benjamin Lawsky, who is New York’s Superintendent of Financial Services, obtained a temporary restraining order in federal court this week against Condor Capital Corp., a subprime auto lender headquartered on Long Island, and its owner, Stephen Baron.

Lawsky explained a DFS investigation uncovered that allegedly Condor has engaged in a longstanding scheme to steal millions of dollars from its customers — among other unfair, abusive, and deceptive practices.

As part of its ongoing legal proceeding, DFS is seeking restitution for Condor consumers, disgorgement of profits, the appointment of a receiver to wind down Condor’s operations, and other remedies.

Lawsky indicated the proceeding against Condor is the first legal action initiated by a state regulator under section 1042 of the federal Dodd-Frank Wall Street Reform and Consumer Protection Act. Lawsky noted that provision empowers state regulators to bring civil actions in federal court for violations of Dodd-Frank’s consumer protection requirements, and obtain restitution for abused customers and other remedies provided for under that law.

“When companies abuse New York consumers, we will use any tool at our disposal to get restitution and help make things right,” Lawsky said. “As alleged, the defendants bilked millions of dollars from vulnerable borrowers who could least afford it. We are taking swift action today to stop them from abusing any more consumers and help obtain relief for those who were victimized.”

Condor is a finance company that acquires and services loans to customers in New York and more than two dozen other states, including:

—Alabama
—California
—Colorado
—Connecticut
—Florida
—Georgia
—Iowa
—Illinois
—Indiana
—Kansas
—Kentucky
—Maine
—Maryland
—Michigan
—Minnesota
—Missouri
—Mississippi
—North Carolina
—Nebraska
—New Jersey
—Ohio
—Oklahoma
—Oregon
—Pennsylvania
—Tennessee
—Texas
—Virginia
—Washington
—West Virginia

According to its website, Condor was founded in 1994 by a management team with more than 50 years of auto financing experience.

“Our commitment is to provide the best customer care to consumers and the thousands of dealers we service. Our goal is to train and equip our staff with state of the art technology to serve our customers in the most courteous and professional manner possible,” company officials said.

The company located in Hauppauge, N.Y., also mentioned the suit on its website.

“Pursuant to a court order, Condor Capital Corp. is not currently accepting new loans or applications for new loans,” officials said. “Existing and former customers of Condor Capital Corp. continue to have access to their accounts through this website.

“If you are a current or former customer of Condor Capital Corp. and you believe that you may have a positive credit balance owed to you, you may file a complaint with the New York State Department Of Financial Services,” the company goes on to say.

According to Condor’s most recent annual report filed with DFS, at the end of 2013, Condor held more than 7,000 loans to New York customers with total outstanding balances of more than $97 million. That reported showed Condor’s 2013 loan portfolio contained aggregate outstanding loans of more than $300 million nationwide.

For the year, Condor reported net after-tax income of approximately $7 million on operating income of approximately $68.7 million, DFS said.

According to the complaint brought by DFS, Condor is alleged to have systematically hid from its customers the fact that they have refundable positive credit balances.

“A positive credit balance is money owed by Condor to a customer as a result of an overpayment of the customer’s account that can come about in several different ways,” DFS officials said. “For example, a customer might pay more than the outstanding loan balance, a car may be destroyed (or totaled), and the insurance proceeds might exceed the outstanding loan balance, or a customer might trade in the car that is the subject of the loan and receive a credit greater than the outstanding balance.

As alleged, rather than notifying customers of positive credit balances and promptly paying them refunds, agency officials said Condor has “for years knowingly and systematically hidden the existence of the positive credit balances and retained them for itself, and has maintained a policy of refusing to refund them except when expressly requested by a customer.

“Condor has ensured that such requests will occur rarely, if ever, by actively concealing the existence of positive credit balances to prevent customers from detecting them and requesting refunds,” they continued.

For example, DFS alleged that Condor has deceptively programmed its customer-facing Web portal to shut down a customer’s access to his or her loan account once the loan has been paid off, even if there is a positive credit balance due to the customer.

Condor is also alleged to have endangered the security of its customers’ personally identifiable information, placing them at serious risk of identity theft.

Among other information-security lapses, the DFS examiners found stacks of hundreds of hard-copy customer loan files lying around the common areas of Condor’s offices.

State officials noted that Condor also has failed “despite repeated directives from DFS” to adopt basic policies, procedures and controls to ensure that its information technology systems and the customer data they contain are secure.

DFS said it reviewed and analyzed numerous complaints about Condor.

“Multiple customers have alleged that Condor has harassed and threatened customers and friends and relatives of customers, including for accounts that are current,” officials said. “Other customers have alleged that Condor has reported inaccurate information to credit agencies, imposed fees or late charges where none are appropriate, or has failed to properly apply payments to loan balances.

Still other complainants — including complainants that are not Condor customers — have alleged that Condor has made unauthorized charges to their credit cards or unauthorized debits from their bank accounts,” DFS went on to say.

The allegations in DFS’s complaint remain subject to proof at trial. The court has scheduled a hearing on DFS’s request for a preliminary injunction for Tuesday at 10 a.m.

To view the entire complaint, click here.