New York Attorney General Eric Schneiderman has reached a settlement with one of the state's biggest collection agencies over the agency's targeting of New Yorkers who have purchased so-called "payday loans."

Officials with the AG's office says these payday loans are illegal in New York, since their interest rates exceed state limits - they're often 300% or more.  They say the state's position is that since the loans are illegal in New York, efforts to collect on the loans is also illegal.

The settlement with Forster and Garbus requires the law firm and collection agency to not collect on any loan unless they confirm it is not a payday loan.  The agency is also required to refund any money collected for payday loans and vacate any judgments obtained.  In addition, Forster and Garbus must pay $10,000 in costs and penalties.