Federal Judge allows a RICO case against debt collector, debt buyer, and process server to proceed
January 13, 2011 by Todd Murray · Leave a Comment
The Racketeer Influenced Corrupt Organization act–or RICO–is a federal law most famously used to prosecute members of the Mafia and other organized crime groups. But a judge in the Southern District of New York recently allowed a consumer-class action lawsuit, based in part on RICO claims, to proceed against a debt collection law firm, its debt buyer client, and a process serving company.
According to this Daily Finance story, the lawsuit alleges that the defendants’ business model is as follows: (1) buy debt with little documentation that the debt is accurate; (2) file lawsuits claiming personal knowledge of the debt but using robo-signed affidavits instead; (3) deliberately fail to tell the “debtor” that the lawsuit is pending (a practice called “sewer service”); (4) get a “default” judgment against the debtor when she fails to show up in court to defend herself; and (5) enforce the judgment, including by freezing the debtor’s bank account.
Points 1, 2, 4, and 5 are the basic formula used by debt buyers and their attorneys across the country. Where this case differs is the added allegation of an organized “sewer service” scheme. In his ruling, Judge Denny Chin ruled that there was enough evidence that the three defendants colluded to effect sewer service on unsuspecting consumers to bring the defendants under the RICO definition of a criminal enterprise.
A Lawsuit That Dirty Debt Collectors Should Be Worried About | Daily Finance | 1/4/11 (via Consumerist)
Photo: http://www.flickr.com/photos/yarwood/58256586/
Can a debt collector call my family and friends about my debt?
January 11, 2011 by Todd Murray · Leave a Comment
The Fair Debt Collection Practices Act prohibits debt collectors from calling third-parties, such as family members or friends, about your debts. In passing the FDCPA, Congress recognized your right to privacy in your finances. There’s one very limited exception to this rule, though. Debt collectors may contact third-parties to find your address or phone number. Once he has this information, however, the debt collector can’t contact the third-party again. And during his conversation with the third-party, the debt collector can’t tell the third party that you owe a debt, can’t discuss the details of your debt, and can only identify himself and his company if asked.
Although it violates the FDCPA, many debt collectors use this tactic because it’s profitable. If you’re like most people, you’re understandably embarrassed by not being able to make ends meet. It’s stressful enough to suffer this embarrassment privately. But when a debt collector tells your friend or family member that you aren’t paying your bills, your private embarrassment quickly turns into semi-public humiliation. Debt collectors know this and use the third-party calls to put pressure on you to make a payment. Debt collectors also know that most consumers don’t know about their rights under the FDCPA, so there is little chance that the consumer will do anything about the illegal third party calls. Rather than paying the debt collector to make the third party calls stop, it may be best to discuss your situation with a consumer lawyer. Paying the shady debt collector will only encourage him to keep breaking the law. But a consumer lawyer can help you hold the debt collector accountable by bringing a FDCPA lawsuit on your behalf. After being sued for violating the FDCPA, most debt collectors will think twice about violating it again.
If you’re dealing with debt collectors, make sure to download and use my free debt collection call log so that you can document all of the debt collectors’ communications. And if the debt collector does anything that you think was unfair; untrue; or harassing, oppressive, or abusive, please contact me to discuss the situation further. I offer a free case review for all FDCPA cases and if I agree to handle your case, you won’t have to pay me any money up front. My fees come from the money I recover from you if you win your case or accept a negotiated settlement.
(photo: JonJon2k8)
Can a debt collector call my parents about my debt?
January 4, 2011 by Todd Murray · Leave a Comment
Under the Fair Debt Collection Practices Act, debt collectors can only communicate with you or your attorney about your debt. There’s a very narrow exception that allows debt collectors to contact third parties, such as your parents, but only to obtain location information. Location information means your address and telephone number. During this conversation, the debt collector must tell your parents that he is attempting to confirm your location information, he can’t tell them that you owe a debt, and he is only allowed to identify his employer if asked. Of course, your parents have no obligation to give the debt collector your address and telephone number. And once the debt collector has your location information, there is no permissible reason under the FDCPA to contact your parents, or any third party for that matter. In other words, if you’ve already talked to a debt collector and he knows how to contact you, it’s a violation of the FDCPA for him to call a third party because he already knows your location information.
It’s fairly common for debt collectors to contact people’s parents about their debt. And it’s not just college students and recent college graduates. I’ve had clients in their 40’s and 50’s whose elderly parents were called by debt collectors. I suppose it’s possible that some debt collectors contact consumers’ parents by mistake. But I also think that some debt collectors call people’s parents as a collection tactic to put pressure on the consumer to pay the debt. Either way, its a violation of the FDCPA, unless it falls under the very narrow “location information” exception described above.
If you’re dealing with debt collectors, make sure to download and use my free debt collection call log so that you can document all of the debt collectors’ communications. And if the debt collector does anything that you think was unfair; untrue; or harassing, oppressive, or abusive, please contact me to discuss the situation further. I offer a free case review for all FDCPA cases and if I agree to handle your case, you won’t have to pay me any money up front. My fees come from the money I recover from you if you win your case or accept a negotiated settlement.
Photo: http://www.flickr.com/photos/randya38/3151772326/
Investigation reveals troubling problems with Minnesota’s debt collector licensing process
December 16, 2010 by Todd Murray · Leave a Comment
The results of a Minneapolis Star Tribune investigation suggests that Minnesota’s procedure for registering debt collectors is broken. Under Minnesota law, individual debt collectors are required to register with the state and obtain a license. And if a person has been convicted of “fraud or any felony,” they are supposed to be prohibited from obtaining a license and working as a debt collector. The reasoning behind this law is fairly obvious: debt collectors have easy access to hundreds, or even thousands, of social security numbers and bank and credit card account numbers, which makes stealing someone’s identity a pretty tempting, and easy, thing to do.
But the Star Tribune’s investigation revealed that since 2005, the state has registered 111 people as debt collectors that should have been barred because of prior fraud or felony offenses. The Star Trib also found that approximately 75% of people that applied for a debt collection license lied about their criminal background. Although many of these people’s crimes would not have barred them from working in collections, it’s still very troubling that the state’s failure to conduct routine background checks before issuing a license is encouraging chronic lying on the license applications. Perhaps even more troubling is the fact that many collection agencies don’t conduct criminal background checks before hiring, apparently because they incorrectly believe that the state is doing it for them.
The story details a number of anecdotes about collectors being licensed that had previously been convicted of widespread financial fraud and violent crimes such as assault, battery, and even rape. It should be no surprise when these convicted felons, after getting jobs in collections, resort to harassing and abusing debtors.
So what is the solution here? Allocating more state money and resources for comprehensive background checks is an unrealistic option with the massive state budget deficit. One suggestion, made by state Senator Ron Latz, DFL-St. Louis Park, is to allow consumers to file state lawsuits and seek damages when collection firms hire criminals who harass them. “The only language that corporations speak is financial,” Latz said. “Either they pay for their negligence, or nothing changes.”
Criminals land jobs as debt collectors | Star Tribune | December 14, 2010
photo: http://www.flickr.com/photos/dyanna/3036833911/
Recent lawsuit alleges that debt collector used Facebook to harass woman into paying debt
December 1, 2010 by Todd Murray · Leave a Comment
A Florida consumer, Melanie Beacham, has sued a debt collector for allegedly contacting one of her family members by using Facebook. The lawsuit alleges that Mark One Financial created a Facebook account using the pseudonym “Jeff Happenstance” and sent a message to Beacham’s cousin asking him to have Beacham call a number that leads to a Mark One collection representative. Beacham also maintains that Mark One used Facebook to contact her sister.
When reached for comment by the Huffington Post, a Mark One spokesman denied any knowledge of “Jeff Happenstance” and claimed that the company only uses Facebook when there is no other way to contact a debtor. In Beacham’s case, however, Mark One called her numerous times before resorting to Facebook, which indicates that Mark One already knew how to contact Beacham and resorted to Facebook to attempt to shame her into paying the debt.
The lawsuit, which seeks to restrain Mark One from using Facebook to contact debtors, appears to be the first one of its kind. But others are almost certain to follow as the economy continues a slow recovery and Facebook and other social media grow in popularity. And the use of social networks to contact debtors raises a number of interesting questions. For example, the Fair Debt Collection Practices Act requires that every communication from a debt collector contain a notice that “this communication is from a debt collector.” Does a message through Facebook fall under the FDCPA definition of “communication” and therefore require the notice? I say yes, but the ultimate answer will be up to the courts.
If you live in Minnesota and have been harassed by a debt collector through Facebook or other social network sites, feel free to use the contact form in the upper right corner of this page to contact me for a free case evaluation.
Woman Sues Debt Collectors Over Alleged Facebook Harassment | Huffington Post | November 17, 2010
Photo: http://www.flickr.com/photos/fbouly/3568409530/sizes/l/in/photostream/
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