Basically, the “company” is calling people and telling them they owe money on a payday loan. Some of the common characteristics of these fake collection calls are:

• Invariably the so-called collectors have moderate to heavy Indian accents. Presumably they are operating out of one of the thousands of offshore call centers in India.
• They start the call in most cases by telling the victim that they need to call their lawyer and appear in court the next day.
• These “collection agents” usually claim to be from some government agency, even claiming to be prosecutors in many cases. For some reason, they usually claim to be associated with the state of California.
• These fraudsters have a good bit of personal information on the people they are calling. They usually have some combination of Social Security Number, bank account and date of birth for the victim.
• They usually ask for a relatively large sum of money, about $1500 in most cases I’ve heard of.
• In some cases, through coincidence or otherwise, they actually claim to be representing a payday loan company that the victim actually owes money to.

The disturbing thing about this collection scam is that they actually appear to have a great deal of information and are targeting payday loan customers. I believe that they must have posed as a lender trying to buy information from payday loan lead generators in order to have so much information on people. Alternatively, they may be gathering information illicitly from insecure payday loan websites.

It is likely that they may change their name or some of their tactics since the word is getting out about this scam. However, it would seem unlikely that they will be able to change the accented workforce that they are using to perpetuate this fraud on innocent payday loan customers.

Even the real “American Credit Service” here in the US, has placed this scam alert on their home page.

For more detailed information on this scam, see the links below:

• Complaints Board
• ABC News Report
• RipOff Report

They also appear to be using the following phone numbers often:

• 941-961-8518
• 714-845-0766
• 714-409-0250
• 310-208-3170
• 714-400-0563
• 213-221-1002
• 213-995-3046
• 310-362-4319
• 714-333-2951

If you have any questions about this scam, please us the Ask Brent section to send me a question.

New York AG Cuomo Closes Collection Agencies

New York Attorney General Andrew Cuomo is continuing his crusade against rogue debt collectors. His office announced on Wednesday that they have launched a statewide inquiry into debt collection agencies.

In addition, they have obtained a court order against Lamont Cooper and his two debt collection companies, Emanee Development, Inc. and Dial Tech LLC, under which the companies will shut down and Cooper will be forced to pay restitution to consumers statewide.

According to Cuomo’s Office, Cooper’s collections companies unlawfully lied to consumers, threatened to arrest them, and intimidated them into paying debts that they sometimes did not even owe. They would often call third parties like neighbors or employers to further embarrass and harass consumers. Emanee and Dial Tech allegedly did business under the names of various shell companies and fictitious law firms across the state, including: Claims Process Services, Claims America, CMC Recovery Services, Lomax & Barnes and Murray, Bradshaw & Associates.

Cuomo also announced that his Office has subpoenaed nearly 20 other debt collectors across the state of New York in his ongoing investigation into various practices of the debt collection industry.

Attorney General Cuomo has subpoenaed nearly twenty companies and law firms operating as debt collectors throughout the state. The subpoenas included requests designed to discover the policies and procedures the debt collectors have implemented to comply with federal and state laws, how the companies respond to complaints about their collection practices, as well as how individual collectors are compensated.

The companies subpoenaed by Cuomo’s Office include:

• Cavalry Portfolio Services, LLC
• Cohen & Slamowitz, LLP
• Debt Recovery Solutions LLC
• Eltman, Eltman & Cooper
• Forster and Garbus
• LHR, Inc
• Mel S. Harris & Associates, LLC
• Med-Rev Recoveries, Inc.
• Mitchell N. Kay, P.C.
• NCO Portfolio Management, Inc. and NCO Financial Systems, Inc.
• North Shore Agency, Inc
• RJM Acquisitions LLC
• Rubin & Rothman LLC
• Sharinn & Lipshie P.C

You may remember LHR from the Dateline NBC special about a month ago. Perhaps Cuomo will thank Chris Hansen and Dateline for helping him out on this investigation.

Also, several of the agencies above were involved in a previous action by Cuomo.

Read the full press release HERE.

Read the Business Week Report on this HERE.

The jurors in the cases cited Credigy Services Corp. used intentional and systematic efforts to cause emotional distress for the consumers, Manuel G. Fausto and his wife Luz.

Credigy Service Corp’s lawyers said it’s too early for them to comment on the jury’s decision. U.S. District Court Judge James Ware has yet to enter judgment on the case. If he does not approve the verdict, that could give Credigy’s attorneys an opportunity to get it overturned.

This is certainly a huge win for consumers, not to mention the Fausto’s. Let’s just hope the judge upholds the jury’s decision and sends a message to debt collectors who violate state and federal laws.

UPDATE: The Faust’s lawyers have sent me a link with more details on this debt collection lawsuit.

Oregon Attorney General John Kroger

In an effort to increase debt collector regulation in the state, Oregon Governor Ted Kulongoski has signed a new law that allows the the Oregon Attorney General to sue debt collectors in the Beaver State. The Attorney General’s ability to regulate debt collectors will grow significantly under this bill and offer Oregon debtors a degree of protection from harassing collectors that many states do not.

The legislation will allow Attorney General John Kroger to sue debt collectors who harass Oregon customers by violating their legal rights under Oregon collection law. “This important legislation will help us crack down on debt collectors who routinely violate state and federal law,” AG John Kroger said in a Thursday.

Oregon Senate Bill 328 will allow the state’s attorney general to go to court to enforce a 1977 law against illegal collection practices, the so-called Unlawful Debt Collection Practices Act. Currently, the Oregon attorney general can sue collection agencies under Oregon’s Unlawful Trade Protection Act, but not under this consumer protection law.

Last year, the Oregon Justice Department received 834 written consumer complaints about debt collection agencies and 254 about first-party debt collectors, the attorney general’s office said.

This is a great step that Oregon is taking to make sure that enforcement of collection law is available to their AG in his efforts to protect Oregon consumers.

Just this week we saw this editorial from InsideARM, which offers some pretty good rebuttals to all the collection agency boneheads that were posting on that site. All of their comments since the airing have been about how unfair Dateline’s treatment was of the “Asset Receivable Industry.”

Then, of course, you have NARCA (National Association of Retail Collections Attorneys) coming out with their press release arguing about how unfair the treatment was by NBC’s Dateline.

The point that these debt collectors continue to miss is that Dateline NBC and reporter Chris Hansen never claimed they were showing typical behavior of the debt collection industry. They simply were showing that in many cases (and they did show a number of them), there were horrible debt collectors, such as LHR, out there that are violating debtors’ rights with little or no regard for the law. “Where’s the Outrage” from Paul Legrady makes that point very well and challenges his colleagues in debt collection to try and work toward fixing the bad actors and not just griping about press coverage.

I could not agree more.

Horsham, Pennsylvania’s NCO Group, Inc. reported a net loss for the full year 2008 of $337.1 million. In the fourth quarter of 2008 alone, the company reported a net loss of $286.6 million.

Mike Barrist, NCO Group Chairman and CEO, said that the company had achieved its objectives for the 2008 calendar year. The company’s EBITDA (earnings before interest, taxes and depreciation) for 2008 was $95.5 million. “As we continue to navigate through 2009, we believe NCO is well positioned among its peers within each of its core markets to capitalize on all available opportunities,” said NCO CEO Mike Barrist.

NCO Group acquired OSI in early 2008 and that acquisition contributed to the record revenue of $1.51 billion in 2008. $1.22 billion of that revenue was generated by NCO’s Collection Agency business. The company noted in an SEC filing that 60 percent of the ARM unit’s revenues were generated “from the recovery of delinquent accounts receivable on a contingency fee basis.” NCO also stated in an SEC filing that they spent $126.5 million purchasing debt portfolios in 2008.

In addition to being the world’s largest debt collector, NCO is infamous for a 2004 FTC Lawsuit which it paid the largest civil fine ever for an FCRA case, $1.5 million.

It seem that a Poy Sippi, Wisconsin Collection Attorney was the victim of an attempted scam.

These scams are actually pretty common against collection agencies and collection attorneys. Basically, the collectors are usually contacted by a company regarding a large corporate debt that they are trying to collect. These types of debts can be a windfall for an agency, since the amount owed on one debt can be well into the 6-figure range. So, the attorney or agency takes the case and soon the debtor agrees to pay.

This is where the scam against the collector starts. The payment is usually made via a fake cashier’s check or an ACH. The con artists hope that the collector will remit their portion of the “payment” to them before the collector notices that the cashier’s check is forged or fake. If they ACH’d the money, then they will probably revoke the authorization once funds are remitted.

Just an interesting look inside the woes of debt collectors for a change.

**Read the full article here.**

Washington Governor Gregoire

Washington State Governor Gregoire signed a new law today that restricts check cashers’ and payday lenders’ ability to collect on consumer debts. Payday Loans have gotten a lot of attention in the Washington Legislature this month, but this bill is very interesting in its definition of “harassment.”

This bill has some relatively benign elements, such as making it illegal for payday loan companies to impersonate a police officer and make false threats to consumers. I’m pretty sure these are already illegal activities in all 50 states, right?

Yet, this bill also bans the so-called “field calls” frequently used by payday loan collectors. Employees of payday loan companies often take off into “the field,” showing up at consumers homes or places of work, usually delivering a letter that notifies them of their payday loan debt. This is the definition of harassment, since the same payday companies have already called 2-3 times per day to remind the customer that they have fallen behind on their payday loan. It is good to see this horrible collection tactic put out of commission in Washington, at least for payday loan collectors.

However, the real ground-breaking aspect of this law is its definition of collection harassment. The new Washington law defines payday loan collection harassment as making contact with the customer more than three time in a week. Further, it defines a week as the 7 day period between Sunday and Saturday and defines a contact as a letter, e-mail, voice mail or phone conversation with a delinquent customer. This is a great achievement in collection rights, since it goes beyond FDCPA and definitively defines collections harassment.

Also of note is that this bill also applies to any debt collectors or debt collection agencies that work with payday loan companies to collect on debts of Washington consumers.

It just makes sense. If you are contacted 3 out of 7 days to be reminded about your delinquent payday loan, you are probably not forgetting about it.

My only question is why is Washington singling out payday loans and not making this law apply to all consumer debt collection in Washington? Shouldn’t Washington consumers receive the same protections from credit card debt collectors or delinquent mortgage collectors?

West Virginia Attorney General Darrell McGraw

West Virginia Attorney General Darrell McGraw is at it again… in a good way. McGraw has been on a mission to shut down payday lenders and their collection agencies that operate in his state. McGraw’s office began their crackdown on the internet payday lending industry in 2005.

Since then, McGraw’s office has successfully concluded 75 investigations of Internet payday lenders and their collection agencies, which have netted a total of $1,784,772.82 in cash refunds and cancelled debts for 6,612 West Virginia consumers.

Now, McGraw has sued not only 7 online payday lenders, but also 5 of their accomplice collection agencies. The really great thing about this is that McGraw is not just going after the lenders, but also their collection agencies.

The problem with online payday loans is that they are illegal in many states (and some are illegal in all states, as they operate offshore), yet they are using legitimate, licensed U.S. collection agencies to do their dirty work.

This means that although a state may deem a loan illegal and unenforceable, their citizens are still being reported to the credit bureaus and to bad check databases. The effect is that the “victims” have their credit destroyed and lose the ability to write checks at many nationals retailers, such as Wal-Mart.

McGrew doesn’t stop with naming the following payday lenders in his suit:

• Cash Advance Now d/b/a PeoplesPayday.com of Miami, FL
• Debt Doctor, LLC d/b/a Magnum Z, LLC of Wentzville, MO
• Direct ROI d/b/a Cashwest Payday Loans of Mesa, AZ
• E Smart Credit Network d/b/a www.YourLoanServices.com of Miami, FL
• Island Payday, LLC d/b/a www.islandpayday.com of Ogden, UT
• Platinum Finance Company, LLC d/b/a www.PaycheckNow.com of Wilmington, DE
• Sonic Cash, LLC d/b/a Sonic Cash Online Payday of Boise, ID

He also names the “reputable” and “legitimate” collection agencies below:

• A.C.A Recovery, Inc. of Ridgewood, NJ
• Capital Collections, LLC of Miami, FL
• Covenant Management Group, LLC of Gainesville, GA
• Oasis Financial Solutions, LLC of Orange Park, FL
• Westbury Ventures of Wilmington, DE

Congratulations to WV AG McGraw on this latest crackdown. Without addressing the collection agencies that are complicit in this, legislation against payday lenders will go nowhere. We are not going to stop payday lenders from operating over the internet from Costa Rica, but we can certainly stop their US-based, licensed accomplices.

Alabama State Flag

Alabama collection lawsuits are up almost 4 times according to court documents for the U.S. District Court for North Alabama. Many of these cases are related to collection agencies collecting from the wrong person, and certain companies seem to have a very high rate of suits.

Unifund tops the list with 26 suits filed in the last 12 months in North Alabama alone. Behind them is California’s Midland Credit Management with 22 suits in the last year. Here is an excerpt from the article in the Birmingham News:

California-based collection agent Midland Credit Management was sued by a woman living in Limestone County.

The problem? The woman was getting regular phone calls from Midland Credit’s bill collectors. Among the messages left by the collectors, according to the suit: “Trash like you need to pay your bills and stop ignoring them.”

The real problem was that the woman didn’t owe $1,492 to a furniture dealer for a debt allegedly incurred in 2003. Midland Credit Management was never able to substantiate the debt with receipts or signed credit agreements or other documentation, despite repeated requests, the suit said.

A spokesman for Midland Credit’s parent company, San Diego-based Encore Capital Group, said the corporation doesn’t comment on collections lawsuits. The case, like many, was settled under confidential terms.

Of course it was settled under “confidential terms.” That’s the standard method of operation for many of these collection agencies. Consistently and systematically break the collection laws that are there to protect consumers and settle any lawsuits that come up as fast and quietly as possible. Then, the lawyers representing consumers get 75% of the settlement money. Unethical collection agencies just view these lawsuits as a cost of doing business. Until there is greater enforcement from state agencies or the FTC, consumers will continue to suffer from collection harassment, while lawyers and collection agencies reap the profits.

**Read the full Birmingham News Story**