A settlement between the New York Department of Financial Services and automotive lender Condor Capital Corp., as well as Condor’s owner, Stephen Barron, was approved this week by the United States District Court for the Southern District of New York.  The settlement will result in total payments to the State and consumers of up to $12 million by Condor.

In the lawsuit, Lawsky v. Condor Capital Corp., Case No. 1:14-cv-02863, the Department of Financial Services alleged that Condor Capital had hidden customers’ positive credit balances and had paid refunds only to customers who overpaid and had requested the refunds.  The Department also alleged that Condor had not properly secured customers’ personal information.

The settlement requires Condor and its owner to pay back, with interest, customers who were harmed, and also includes a $3 million penalty.  Under the settlement, Condor will eventually sell off its loans and relinquish its business licenses throughout the United States.

The Condor Capital case is particularly notable given that it represents the first time a state regulator used powers granted to it under the federal Section 1042 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to bring an action in federal court.  Financial institutions should view this case as part of a new wave of state regulatory enforcement action that will likely be seen with increasing frequency in 2015 and beyond.