Debt Buyers Prey on New Yorkers

It isn’t a surprise that a recent study issued jointly by the Legal Aid Society, Neighborhood Economic Development Advocacy Project, MFY Legal Services, and Urban Justice Center found that debt buyers are abusing the legal system to prey on lower-income New Yorkers.

Debt buyers are companies that purchase debt from original creditors who have written off unpaid balances as “uncollectible.” Debt buyers buy this bad debt for pennies on the dollar, and then turn around and put the squeeze on consumers to pay the full amount.

The report explains that publicly traded companies like Asset Acceptance Capital Corp., Asta Funding, Encore Capital Group, and Portfolio Recovery Associates have to reveal more about their practices than private companies, which the study says number around 500. It notes that debt buyers often don’t have the documentation to back up their claims against consumers, saying, “Debt buyers usually receive an electronic file that includes only a person’s name and social security number, last known address, the amount allegedly owed, the charge-off date, and the date and amount of the last payment. The portfolio does not include documentation of the debt, such as the governing contracts and account statements. This information is insufficient to ensure that the debt buyers collect the correct amount from the correct person. Debt portfolios are regularly sold on an ‘as is’ basis, without consideration for whether collection of the debts in the portfolio is legal.”

In New York, debt buyers are filing an unprecedented number of lawsuits against consumers – disproportionately lower-income consumers – without ever providing people with legally mandated notifications. The result? People never know they’re being sued, so they don’t show up for court. When they don’t show up for court, the judge rules in the debt buyers’ favor and people have their wages garnished, their bank accounts cleaned out, and their credit ruined.

The study found that these “default judgments” happen over 94% of the time, and that 95% of those who have default judgments against them live in low or moderate income neighborhoods. Even more outrageous is that only 1% of consumers in New York City who are sued by debt buyers are represented by an attorney.

Reading the study will make your blood boil, but it’s a crucial first step in putting an end to these predatory practices. You can download a copy of the report at Urban Justice Center.

Asset Acceptance and Other Debt Collectors Try New Trick

creditcardsAccording to a report in the Roanoke Times, Asset Acceptance Capital Corp, Access Acceptance LLC, and Genesis Financial Solutions may be trying even sneakier ways to get consumers to pay up. A lawsuit filed against the three companies, which buy old debt for a song and then try and get consumers to pony up, alleges that the debt collection agencies are sending credit card offers to consumers, telling them that if they transfer debt to the credit card, they won’t face collection. The sleight-of-hand comes into play in two ways. First, the fine print says that the debts are subject to collection. Second, consumers who agree to the card may be agreeing to pay debts that are past the statute of limitations or that have been discharged in bankruptcy proceedings.

Why It’s Important to Open Debt Collectors’ Mail

Many smaller newspapers routinely report on community issues, and publish police logs, fire logs, and even public court records. In perusing the online edition of the East Oregonian, from Portland, Oregon, we ran across a list of court actions taken on Monday, May 1. Click on the link in the previous sentence and scroll down, looking at the “Suits Filed” and “Judgments.” You’ll see that some of the biggest debt collection agencies are filing small town lawsuits against consumers. For this one day, the big dog third-party debt collectors who filed lawsuits included Midland Funding, NCO, and Asset Acceptance. Those that had their day in court and were granted judgments against consumers included Arrow Financial Services, along with (we assume) original creditors American Express, Capital One, and Discover Bank. The judgments ranged from $1,600 to $11,700, PLUS interest, costs, and attorney fees.

This is just one day in one small city in America. It brought into sharp relief just how relentless debt collectors are. More importantly, we couldn’t help but wonder whether the consumers named in those suits, and who now have judgments against them (which can lead to wage garnishment, among other things), even knew about the lawsuits or showed up in court to defend themselves.

All too often, people either avoid opening the mail when the sender is a debt collection agency. When they do open the mail, they often can’t make heads or tails of the legalese contained in some of the letters. As a result, they don’t know that they have to respond to a lawsuit. When they don’t show up in court, the judge has no option but to assume that the debt is valid and rule in favor of the debt collector.

The takeaway is two-fold. First, even though you want to avoid it, it’s important to open the mail. Second, if you’re being sued by a debt collector, it’s important to contact a fair debt attorney who can represent you. If the debt collector has violated the Fair Debt Collection Practices Act or Fair Credit Reporting Act, the judge may throw out the case. Even if you choose not to get legal advice, definitely show up for your day in court. The judge will listen to your side of the story, and perhaps you can avoid paying an enormous debt that includes the debt collection agency’s attorney fees.

Asset Acceptance Target of FTC Investigation

In its first quarter report to shareholders, Asset Acceptance Capital Corp. revealed that it has been the subject of an investigation by the Federal Trade Commission (which is tasked with enforcing the Fair Debt Collection Practices Act) since February 2006, and that it received a letter from the FTC in April saying that its debt collection practices may have violated the FDCPA, the Fair Credit Reporting Act, and the Federal Trade Commission Act. It appears that the FTC is proposing a settlement and fine for the debt collector.

That doesn’t seem to faze Asset Acceptance, however, as the company also reported that during the first quarter it purchased charged-off debts from other companies with a face value of $823.3 million.

Asset Acceptance Wins Award

Asset Acceptance Capital Corp., a debt collection agency notorious for hounding consumers, ironically has one redeeming quality: it seems to treat its female employees well. Industry publication Inside ARM reprinted Asset Acceptance’s press release announcing that the debt collector had been accorded an Equal Pay Day recognition by the Macomb County Commission on Women for “promoting positive work environments for women.” The company is headquartered in Warren, Michigan, which is part of Macomb County.

We can’t help but wonder if the irony was lost on the Macomb County Commission for Women, since female consumers are often at the receiving end of Asset Acceptance’s harassing collection calls.

Asset Acceptance to Announce First Quarter Earnings on April 29

Asset Acceptance Capital Corp. is one of the major players in the debt collection game. As a publicly held company (NASDAQ: AACC), they have to file regular reports with the Securities and Exchange Commission and are obligated to demonstrate to shareholders that they’re raking in the bucks.

Asset Acceptance has scheduled a shareholder conference call on April 29 to announce their earnings for the first quarter of 2010. Although questions and answers will only be accepted from analysts and institutional investors, anyone can listen to the call via a live webcast. A recording of the webcast will remain on the Asset Acceptance site for an entire year.

If you’re on the receiving end of collection calls from Asset Acceptance, listening to a portion of the webcast will put into perspective the huge amount of money the company is draining from consumers, as well as their bottom line profits.

Top Debt Collectors: #18 – Asset Acceptance

We’ve been conducting a countdown of the top 20 debt collectors. This installment is about Asset Acceptance, which ranks number 18 on the list.

Asset Acceptance Capital Corp, also known as AACC, is a publicly held company (NASDAQ: AACC), and uses the tagline, “Returning Value to Our Credit Driven Economy.” The company has three subsidiaries: Premium Asset Recovery Corp. (PARC), which specializes in collecting on health care debts; Asset Acceptance, LLC, which buys debt that the original creditors have written off; and Consumer Credit, LLC, a financing company that works through retailers in Michigan.

AACC has 1,700 collectors. The company’s main office is in Warren, Michigan, but they also have call centers in Arizona, Florida, Illinois, Ohio, and Texas. Their legal offices are in Maryland, New Jersey, and Virginia.

The company, which was launched as Lee Acceptance Company in 1962, underwent numerous expansions, becoming AACC in 2003. The following year, it was listed on NASDAQ. In 2006, it acquired PARC. Currently, the President and CEO is Rion Needs, while former CEO Brad Bradley is Chair of the Board of Directors.

On July 30, AACC announced their second quarter earnings. The company collected $87.3 million during the second quarter, and a total of $181.4 million during the first six months of 2009.

Aside from medical debt, which is purchased through PARC, AACC buys debt from credit card companies, utilities, consumer loans, second mortgages, home improvement loans, health clubs, student loans, home equity loans, and auto deficiencies.

Sergei Lemberg, Esq., focuses his practice on defending consumer rights in the areas of Fair Debt Collection Law, Consumer Fraud, Auto Warranty and Auto Injury litigation.

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