Consumer Advocates Pushing for Consumer Credit Fairness Act

Pending legislation in New York would help to prevent unscrupulous debt buyers from filing an endless string of lawsuits and obtaining legal judgments against consumers for invalid debts. A coalition of organizations, including the New York State chapter of AARP, are pressing for passage of the Consumer Credit Fairness Act (S.4398-A, A.7558-A). According to a press release issued by the coalition:

“Every year, debt buyers bring hundreds of thousands of debt collection lawsuits against New Yorkers. Many of these lawsuits should not be brought in the first place. Debt buyers regularly file frivolous cases even when they have no proof that the people they’re suing actually owe the money,” said Susan Shin, Staff Attorney at NEDAP.

“These debt buyer lawsuits are especially abusive because New Yorkers often receive no notice that they were sued until after judgments have already been entered against them,” said Robert Martin, Associate Director of DC 37 Municipal Employees Legal Services. “Debt buyers wreak havoc on people’s lives by using these judgments to freeze people’s bank accounts and garnish their wages.”

If you live in New York, call your state senator and assemblymember and urge passage of the bill.

New York City Provides Debt Collectors with Guidance

According to a report by Inside ARM, the New York City Department of Consumer Affairs has responded to a letter by debt collection trade associations in which it clarified provisions of Local Law No. 15, which regulates debt collection agencies. The Department’s response said, among other things, that:

* When a debt collection agency communicates with a consumer, it must provide a call-back number that will be answered by a person, rather than a machine; the name of the agency, the name of the original creditor; the name of the person the consumer should call back; and the amount of the debt.

* “Communication” includes voice mail messages, email, and text messages.

* A debt collection agency must provide the consumer with the agency’s name, and can only use a DBA if it was included in the agency’s license application.

* The callback number that will be answered by a person (rather than a machine) must be included in every communication, including an initial collection notice.

* A debt collector can use an alias only if his employer has the alias on file and it can be tracked to the true identity of the collector.

* Anytime a debt collector calls or writes, he must state the true amount of the debt (including interest and fees) at that moment in time.

* A debt collection agency must record conversations with either a randomly selected sample of consumers or all consumers located in New York City.

Mayor Bloomberg Issues New Debt Collection Regulations

On Monday, Mayor Michael Bloomberg announced new regulations governing how debt collectors can conduct business when collecting from New York City residents. Together with the Department of Consumer Affairs Commissioner Jonathan Mintz, Bloomberg highlighted the underhanded tactics that debt collection agencies are currently using. Essentially, debt collectors take a name from their collection list and call everyone in the five boroughs with that same name.

According to the Mayor’s office, “Under the new regulations, any debt collection agency attempting to collect a debt from a New Yorker must provide proof the debt is owed at the consumer’s request. The collector must provide a copy of the original debt documentation, a copy of the final account statement of the originating debt, a document itemizing the remaining amount due, including any additional fees or charges claimed to be due and the basis of the consumer’s obligation to pay them. Other provisions of the new regulations include disclosing the consumer’s rights regarding the statute of limitations, and providing written confirmation of the debt payment schedule or settlement within 21 days of the agreement. In addition, debt collection agencies must provide New Yorkers with a phone number that must be answered by a live operator and not an answering service.”

Bloomberg noted that, over the course of the Great Recession, debt collection agencies have resorted to ever-more brazed tactics. Indeed, the Department of Consumer Affairs found that New York City residents were wrongfully pressured to pay more than $1 million in debt that they didn’t really owe. According to Mintz, “Wrongful debt collection is more than just annoying and stressful. Such wrongful collection attempts can cause serious and long-term damage to a family’s finances, including seized bank accounts, damaged credit ratings, and more.”

If you live in New York City and have been the victim of improper debt collection calls, you can call 311 or file an online complaint by clicking here.

New York Attorney General Sues Lawyer for Illegal Debt Collection Practices

justiceNew York Attorney General Andrew Cuomo filed a lawsuit against a New York lawyer who allegedly allowed a debt collection agency to use the lawyer’s name in order to intimidate and threaten consumers with bogus legal action. According to the lawsuit, John P. Nicolia was paid $141,000 by Eastern Asset Management debt collection agency, so that Eastern Asset Management could use his and his law firm’s name – without ever doing any actual legal work for the debt collector.

In a statement issued on Thursday, Cuomo said, “The lawsuit alleges that this attorney knowingly allowed a debt collection firm to use his name to threaten, intimidate, and harass consumers, while he sat back and profited without having to do any actual work. Our investigation into illegal debt collection practices has uncovered layer upon layer of abusive acts, and we will continue to root out the bad players in this industry.”

Both the federal Fair Debt Collection Practices Act and New York debt collection and consumer protection laws prohibit debt collection agencies from posing as an attorney or threatening legal action that cannot be taken. Cuomo’s suit alleges that Eastern Asset Management’s debt collectors told consumers they were calling from the Law Offices of John Nicolia and sent “settlement” letters to consumers saying that “…our legal counsel, John Nicolia, Esq. may review the status of your particular case at anytime.”

Kudos to Attorney General Cuomo, who has been vigilant in fighting illegal debt collection practices.

Buffalo Debt Collector Imprisoned for Weapons, Freed on Appeal Bond

New York Attorney General Andrew Cuomo made news last year when he shut down Tobias Boyland’s Buffalo debt collection agency after an investigation revealed that his employees resorted to violence to collect debts and sometimes masqueraded as police officers.

According to the Buffalo News, Boyland was subsequently arrested and convicted of weapons charges after authorities discovered an AK-47 and six handguns in his home. Although he was sentenced on April 1 to a prison term of 15 years, he was recently released on an appeal bond – over the strong objections of prosecutors, who said that Boyland represents a flight risk. Prior to starting his debt collection agency, Boyland had been imprisoned for robbery.

Buffalo Collections Industry Profiled in AP Story

About 10% of all complaints received by the Better Business Bureau last year involved a company in western New York.  One of the largest industries in the area is debt collection. A recent AP story, published in the New York Times, briefly profiled the Buffalo-based collections industry.

Debt collection companies were drawn to Buffalo by its inexpensive office space, affordable work force and government grants.

Almost everyone knows someone whose son or daughter has worked for a collection agency,” said David Polino, president of the Better Business Bureau of Upstate New York. ”This is one of the industries that used to be Bethlehem Steel, the Chevy plant — all the places where you used to get out of high school and find employment 35 or 40 years ago, it’s now call centers.

The debt collection industry has brought many jobs to Buffalo. The article reports that between 5,000 and 6,000 people work at 110 collection agencies in and around Buffalo, the nation’s third-poorest city of its size. However, state and federal authorities have increased scrutiny of abusive debt collection practices in Buffalo.

Debt collectors, some of them convicted felons, have illegally posed as lawyers or unlawfully browbeat people — threatening to have them arrested or stripped of custody of their children — to scare them into making payments.

There are law-abiding collections firms in Buffalo, however, we have heard from many consumers who have been harassed by collectors based in the area. Glad the issue is getting some press attention!

Nationwide Asset Services Must Post Bond to Do Business in NY

New York Attorney General Andrew Cuomo recently won a lawsuit against Nationwide Asset Services. The court’s decision mandated that the company pay $200,000 in penalties and post a $500,000 bond if it wants to do business in that state.

Nationwide Asset Services is a national debt settlement company that promises consumers a 25 to 40 percent reduction in their debt. According to Cuomo, only a fraction of one percent saw such savings, while the vast majority continued to be harassed by debt collectors.

A press release issued by the Attorney General’s office quoted Cuomo as saying, “This company made promises to people who were searching for financial help and trying to turn their lives around. But the promises never came true and, in many cases, New Yorkers were left in worse condition than when they started. Thanks to this ruling, the company has to put its money where its mouth is with a performance bond if it wants to do business in New York.”

The decision also applies to the company’s affiliates, ServiceStar and Universal Debt Reduction, as well as its marketer, FGL Clearwater (dba American Debt Arbitration).

The AG’s press release noted:

Debt settlement companies represent that they can substantially reduce consumer debt by negotiating directly with creditors, on behalf of their customers, to pay off outstanding balances at less than the amounts owed. However, Attorney General Cuomo’s Office has found that many of these debt settlement plans are often flawed and, based upon complaints, often mislead consumers about the nature of their services. The debt settlement plans are generally premised on consumers’ aggregating savings, over one to three years, from which both the payment of the company’s fees and any negotiated settlement are to be made. Yet most consumers who are targeted by these companies are unable to meet the savings requirements because of their already-precarious financial situation.

In addition, the companies often take their substantial fees up-front and keep these fees even when they do not provide the promised services. As a result, many consumers find themselves worse off financially because of these debt settlement plans.

Dirty Dozen: New York AG Files Criminal Charges Against 12 Collectors

New York Attorney General Andrew Cuomo filed criminal charges against a dozen employees of debt collection agencies in the Buffalo area. The charge? Posing as law enforcement officials and threatening to throw consumers in jail unless they immediately paid debts they were told they owed. All of the debt collection agencies were owned by Tobias Boyland, the subject of a Dateline NBC “sting” earlier in the year. Cuomo shut down the agencies in June, and has compiled more than a thousand complaints against the companies.

According to an AG office press release:

“The tactics allegedly used here are some of the worst of the worst in the debt collection business,” said Attorney General Cuomo. “The defendants’ alleged lies, deceit and intimidation caused many innocent people to pay money they didn’t owe just to stop the terrifying calls. My office will continue to seek out and punish companies that prey on consumers and violate clearly written laws regarding debt collection.”

According to the felony complaints, the defendants stole thousands of dollars from consumers from across the country by using the threat of criminal charges and incarceration to collect debts that often did not exist, had passed the statute of limitations or had been previously discharged through bankruptcy. The collectors also regularly inflated the amount owed on an actual debt and would falsely tell consumers that they were being sued in civil court.

The complaints allege that the collectors used false law enforcement identities to coerce and cajole terrified consumers into agreeing to make the payments. Frightened at the prospect of arrest and humiliation, consumers authorized withdrawals from their checking accounts, wired money, or sent money orders to the collectors. Consumers were intentionally given misleading names, addresses and telephone numbers that led them to believe the businesses were located far from the Buffalo area.

New York Consumer Protection Board Takes a Stand

In an opinion piece in the Times Union New York Consumer Protection Board Chair and Executive Director Mindy Bockstein calls on the New York Senate to take action to enhance consumer protections against unscrupulous debt collectors and creditors. Bockstein says of Program Bill #61:

It increases penalties for violators; affords consumers the right to sue and receive attorney fees, court costs and actual damages for successful actions against debt collectors and creditors; compels collectors to contact debtors between 8 a.m. and 9 p.m. only; requires that notice be provided to consumers if a debt is transferred or sold; and increases the state award limit for statutory damages to $2,500 on behalf of wronged consumers, among other provisions.

She points out - and rightfully so - that “Thirty-year-old laws which do not account for new technologies and business practices or provide an adequate flow of information within the collection system to consumers and others must be changed.”

Chilling Look at Debt Collection

If you didn’t see Dateline NBC’s re-airing of “Debt Trap” last night, it’s worth watching here on the Web.

Although the segment initially takes a broad look at the state of consumer debt in our country, about halfway through it hones in on the egregious tactics of debt collection agencies - particularly those that buy up bad debt.

Because many of these agencies operate out of New York, the original March airing of this segment likely fueled New York Attorney General Andrew Cuomo’s crackdown on the debt collection industry.

If you’re been harassed by debt collection calls, the Dateline NBC episode will help you realize that you’re not alone. It clearly illuminates the lengths that thugs will go in threatening everyday people, who in turn will pay up in order to avoid the dire consequences predicted by the debt collectors. As it was so aptly described, debt collectors are often in an extortion racquet and are rarely brought to justice.

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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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