This week, the Massachusetts Senate took a giant leap forward in protecting consumers who face property seizures for uncollateralized debt. The Boston Globe reports that creditors who win legal judgments against consumers can’t wipe out their bank accounts, take their cars, or touch Social Security or disability income. Previously, the law allowed collectors to seize cars worth more than $700 or all but $125 from a bank account. The legislation, which still needs to be approved by the House, raises the limit for cars to $7,500 and for bank accounts to $2,500. Definitely a step in the right direction.
Pulling the Curtain Back on Debt Collection Lawsuits
The New York Times published a phenomenal article on a disturbing debt collection trend: at a time when taxpayer-funded court systems are trying to do more with less, debt collection agencies are stressing the burdened justice system with sometimes frivolous lawsuits against consumers. Andrew Martin reports that Cohen & Slamowitz, for example, file around 80,000 lawsuits each year.
Martin crunches the numbers, and determines that the average number of lawsuits filed per Cohen & Slamowitz lawyer is 5,700 – an astronomical number that is only made possible by automating the process using computer software. The result is that numerous cases are filed on the basis of a law firm having only the consumers, name, address, and alleged amount owed.
Martin reports that this approach is problematic on a number of levels, in that the wrong person may be named in the suit, the amount owed may be incorrect, and the plaintiff in the lawsuit may not even legally own the debt. Unfortunately, in a large number of cases, the consumer isn’t represented by an attorney, or doesn’t appear in court to defend him or herself, and judges have no choice but to rule in favor of the debt buyer.
The article also discusses some states’ efforts to curb debt collection lawsuit abuses by forcing debt collection attorneys to provide further substantiation of the debt, and the pushback by the debt collection industry.
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.
Lemberg is Proud to be “Most Active Consumer Attorney”
A debt collection industry trade publication, Inside ARM, reported that lawsuits against debt collectors are averaging 800 per month. It also noted that, year-to-date, our own Sergei Lemberg was the “most active consumer attorney.”
Lemberg embraces that label, saying “I’m passionate about empowering my clients to stand up against debt collection agencies that use illegal tactics and break the law. If that makes me a target of the debt collection industry, so be it.”
Although the debt collection industry points the finger at consumer attorneys and websites for the uptick in lawsuits, Lemberg says that the spike is the result of increasingly aggressive tactics by debt collectors who often violate the Fair Debt Collection Practices Act. “When debt collectors harass consumers, engage in deceptive practices, and prey on consumer ignorance, they must be held accountable,” said Lemberg. “Under the law, the only way a consumer can fight back is to sue the debt collection agency that breaks the law.”
Here’s to fighting the good fight, and doing whatever it takes to make sure that debt collectors follow the law.
Utah Issues Alert About Debt Collection Scam
Earlier this week, the executive director of Utah’s Department of Commerce alerted consumers to a debt collection call scam. The Utah Division of Consumer Protection received complaints whereby people “are targeted by offshore scam artists using pre-paid cell phone numbers who give verbal threats that they are going to damage a person’s Social Security Number, file a lawsuit against them and other actions unless the victim sends them money.”
While Utah raised the red flag, you can be sure that these scam artists are calling consumers all across the country. This serves as a reminder not to give personal information, like your Social Security number, over the phone, and that the Fair Debt Collection Practices Act requires debt collection agencies to send you a written notification within five days of contacting you. Once you receive the written notice, you have the right to request that the debt collector validates the debt.
In the meantime, if you’ve been called by one of these scam artists, contact your state’s attorney general. You can find your attorney general’s contact information by clicking here, and then clicking on your state.
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.
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.
Uncle Sam Settles Debt Collection Class Action for $7.4 Million
You know times are tough when even the US government is being sued for abusive debt collection practices, reports InsideARM. The U.S. government has agreed to settle a class action lawsuit brought by military vets for $7.4 million.
The issue was the government’s practice of “administrative offset,” or intercepting federal payments, such as income tax refunds and social security, to pay debts owed to the US. The vets alleged that the government miscalculated fees and interest, failed to send proper notice, and used the “offset” to collect debts that were beyond the statute of limitations. Over 6,700 vets will receive $10,000 each as part of the settlement.
FTC Orders Debt Collectors to Disclose Detailed Portfolio Information
In response to consumer complaints that debt collection firms have attempted to collect from the wrong individuals or collect incorrect amounts, the Federal Trade Commission has ordered that certain debt buyers make disclosures to the agency.
Thomas Kane, an FTC attorney, said the firms were selected because they are large. In fact, they represent approximately 75% of the debt purchased in the U.S.
As reported in a recent article, the FTC has given the firms until February 25 to comply with the order. Each firm must provide the following data for 2006 through 2008:
- Total annual sales and earnings from collecting on purchased debt, selling debt portfolios, and other debt collection-related activities.
- The number of debt portfolios purchased each year and their identification number.
- The portfolio seller’s name, and number of customer accounts in each portfolio.
- The age and types of accounts included (i.e., credit card, medical, auto, etc.).
- The face value of each portfolio and how much the company paid for it.
- The number and face value of accounts sold without collection attempts.
- The number and average accounts purchased from the original creditor or owned previously by one or more debt buyers prior to the company’s purchase.
- To whom the debt buyer resold accounts, and how many accounts the company sold to each purchaser.
Some in the debt collection business are concerned about the FTC scrutiny. However, those of us in the consumer protection industry are quite pleased by it.
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!
