A large debt-collection business with a corporate office in Charleston will pay $175,000 and drop lawsuits seeking to recoup about 400 soured loans under a legal settlement with the state of New York.

N.Y. Attorney General Eric Schneiderman announced the deal with Sherman Financial Group LLC on Thursday. His office had alleged that the company violated state law by going after debts that were considered too old.

The amount of money Sherman Financial was pursuing wasn't immediately available.

Schneiderman also announced a parallel $300,000 settlement with another large debt collection firm, Portfolio Recovery Associates LLC of Norfolk, Va.

Under the two agreements, nearly 3,000 court judgments totaling about $16 million will be vacated, according to a statement. Also, any efforts to recoup that money will be halted.

Under New York law, collection firms have up to six years to sue delinquent borrowers. They have even less time if the debtor lives in a state with a shorter statute of limitation.

"Debt collectors must follow the same rules the rest of us do when bringing lawsuits - in this case, suing for debts that were not enforceable in the first place," Schneiderman said in a statement.

The companies did not admit or deny the allegations.

Sherman Financial, which also has an office in New York, did not respond to an email from The Post and Courier seeking comment.

Bloomberg Businessweek received a response Thursday from the firm's Greenville-based Resurgent Capital Services LP subsidiary. "We are pleased that we were able to reach an amicable resolution," said Tom Thurmond, executive president of Resurgent Capital Services. He also said Sherman Financial is "committed to working proactively with all regulators."

Sherman Financial buys delinquent consumer debts at a discount, mostly from credit card issuers, and then tries to collect the balances. It's one of the largest companies in that industry.

The company's chief executive officer is Ben Navarro. He's known locally for spearheading Meeting Street Academy, which provides a private-school education to low-income students at virtually no cost to their parents.

Sherman Financial pays for the program, which is featured on the company's website.

Contact John McDermott at 937-5572.