A court-appointed receiver has recommended that Long Island's Condor Capital Corp. remain barred from writing new loans until it reforms its business practices.
A judge suspended operations at the Hauppauge subprime auto lender in April, after state regulators accused it of pocketing $11 million from customers. The receiver, who took control three weeks ago, said in a report issued late Monday that Condor still lacks key internal controls.
"Condor needs to rehabilitate itself," receiver Denis O'Connor said in his report filed in federal court in Manhattan.
Condor's lawyers declined to comment.
The New York State Department of Financial Services sued the company six weeks ago, accusing it of systematically stealing money when insurance settlements, vehicle trade-ins and other transactions caused up to 39,000 customers to inadvertently pay more than they owed.
Condor, which specializes in high-interest loans to borrowers with poor credit, has acknowledged keeping overpayments. But the owner, Stephen Baron, has said it was accidental. He also contended that the state's estimate of $11 million in overpayments is overblown, saying the figure is closer to $1.7 million.
Even if Condor manages to appease the receiver and state regulators, the company needs a new source of credit before restarting its lending operation, O'Connor said.
Condor has historically funded loans through Wells Fargo and owes the bank about $256 million. Now Wells Fargo is freezing that line of credit, leaving Condor without access to capital.
Condor, whose loan portfolio totals $350 million, has lost nearly half of its 114 employees. Two states are threatening to revoke its license. And the receiver has asked Baron to stay out of the office.
Nonetheless O'Connor said the company may survive.
"Condor appears to have the liquidity and potential equity in its loan portfolio to make an attempt in the short-term rehabilitation," the receiver wrote.