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.

New York Attorney General Andrew Cuomo

Attorney General Andrew Cuomo announced criminal charges today against Long Island-based American Legal Process (“ALP”) and its CEO and President William Singler for a fraudulent business scheme in which the company allegedly failed to provide proper legal notification to thousands of New Yorkers facing debt-related lawsuits, causing them unknowingly to default and have costly judgments entered against them without the chance to respond or defend themselves.

According to the court papers filed today, ALP, as a legal process server, was hired by high-volume debt collection law firms in New York to serve legal papers, usually a summons and complaint, notifying individuals that they are being sued and must answer the complaint.

ALP, however, allegedly engaged in “sewer service,” which is basically where the process server does not make any legitimate attempt to notify the consumer of the lawsuit. As a result, thousands of judgments were allegedly obtained against unsuspecting New Yorkers, many of whom first learned they were being sued when they found their bank accounts frozen or their wages garnished.

In addition, Cuomo announced his intent to sue one of ALP’s largest customers, the collections law firm of Forster & Garbus, for violations of New York State’s consumer protection laws. According to Cuomo, Forster & Garbus used ALP to serve over 28,000 summons and complaints across the state, but failed to supervise the company and relied on legal papers from ALP that it knew or should have known were false.

“The laws of this state are supposed to ensure that each and every New Yorker has their day in court,” said Attorney General Cuomo. “If proven to be true, the schemes detailed in the cases filed today undermined the legal rights of thousands of citizens by corrupting our legal system and abusing individuals who happened to have consumer debts.”

The catalyst for this investigation by Cuomo was a report from non-profit MFY Legal Services. The report, titled Justice Disserved, detailed abuses by 7 top law firms in New York and their process servers. The report by MFY Legal Services showed that these 7 law firms filed over 180,000 cases in New York City Civil Court in 2007. The law firms mentioned in the report are:

1. Mel S. Harris & Associates, LLC – 43,506 cases filed
2. Cohen and Slamowitz, LLP – 41,480 cases filed
3. Rubin and Rothman, LLC – 31,661 cases filed
4. Forster and Garbus – 30,032 cases filed
5. Wolpoff and Abramson, LLP – 19,028 cases filed
6. Pressler and Pressler – 8,647 cases filed
7. Eltman, Eltman and Cooper – 5,823 cases filed

Carolyn Coffey, an attorney with MFY Legal Services, a nonprofit provider of free legal services, said: “The consequences of sewer service are profound, especially on vulnerable New Yorkers. In MFY’s 2008 report, Justice Disserved, we documented many victims of improper service who had judgments unknowingly entered against them, often to devastating effect. In one case, a disabled senior citizen who was a victim of sewer service attempted to withdraw money from his ATM to purchase medicine when he discovered his bank account was frozen. In another case, a single, working mother of two children who had no idea she had ever been sued, was buying food at a supermarket checkout counter when she learned her debit card would not work.”

ALP and Singler are both charged with Criminal Possession of a Forged Instrument in the Second Degree (a class D felony), three counts of Offering a False Instrument for Filing in the First Degree (a class E felony), and Scheme to Defraud in the Second Degree (a class E felony). Singler is also charged with being a Notary Public committing Fraud in Office (a class A misdemeanor).

It is really great to see AG Cuomo going after these collection law firms and their potentially criminal tactics. However, it is important that we note that most of the credit should be given to MFY Legal Services for their efforts in exposing this sham and providing assistance to New York Authorities. Without their efforts to work for the benefit of consumers, it is likely that ALP and Forster & Garbus would still be using their “sewer service” methods to collect debts in New York.

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.

Harvard Law Professor and Debt Expert Elizabeth Warren

This episode is a must see for anyone interested in debt and debt collection. So, if you had better things to do on Friday night than sit around and watch TV shows about debt collection, the complete episode in 6 segments is below with a summary of content of each section.

The first two sections feature profiles of debt and an interview with Harvard Law Professor Elizabeth Warren. Professor Warren says in this segment that credit card debt is a huge problem in the U.S. today and is destroying the middle class. She sites the “tricks and traps” that credit card companies use to lure consumers into debt: “Credit card companies have put the loan sharks out of business… [they] would make Tony Soprano blush.” Pretty strong words against the credit card industry, but Professor Warren has never been afraid to take credit card debt issues on head on.

SEGMENT 1

SEGMENT 2

The next section begins the focus on debt collection agency abuses. First, Chris Hansen focuses on Academy Collection Service. Academy Collection Service, Inc and its owner Keith Dickstein (appropriate name) were ordered by the Federal Trade Commission to pay a $2.25 million fine late last year. According to the FTC Press Release: “its collectors misled, threatened, and harassed consumers; disclosed their debts to third parties; and deposited postdated checks early, in violation of federal law. This is the largest civil penalty the FTC has obtained in a debt collection case.”

Well, it seems that Dickstein and his crew are likely to be back in court as Dateline claims to have obtained a recorded message of someone calling from their offices threatening to rape a female debtor. That’s right, not a typo. The caller clearly threatened to rape the debtor and then laughed.

Additionally, Collection Attorney Pete Barry, who has tried many cases against debt collectors is interviewed and overs some insight as to why these collection agencies break the law so often. He states, as I have here often, that for many of these rogue collection agencies, settling lawsuits is simply a cost of doing business.

SEGMENT 3

The next 3 segments focus on Lewis Hastings Receivables and their wonderful employees. Dateline catches these employees using a hidden camera outside of a bar near LHR’s offices, and they don’t have to work too hard to get every one of them to admit to violating Federal Collection Laws. LHR subsequently issued a comment that those employees had been fired, but it is obvious that this was not an isolated issue, but rather a consistent method of operation for Lewis Hastings.

Chris Hansen also has an interesting piece on Final Claims Asset Locators of New York. They seem less like a renegade collection agency and more like a fraud ring or crime syndicate. Although they are being investigated by the New York AG and the FBI, they are still open for business.

SEGMENT 4

SEGMENT 5

SEGMENT 6

I have to commend Dateline NBC for reporting on this important issue facing Americans. Although others will complain that this is a one-sided view of the collection industry and collection agencies, they are completely missing the point.

First, agencies like LHR are not the victim of a handful of rogue collectors. It is clear that they allowed and rewarded this behavior despite what they may claim once they are aired on national television, and it is a collection agency’s ethical responsibility to insure that its employees do not break the law. When you have these employees flagrantly bragging about breaking the law to deliver results, its obvious that their actions are condoned by their collection agency employer.

Second, it does not make sense to blame Dateline NBC for presenting a one-sided story as collection industry guru Mike Ginsberg does here:

“The comments shown on Dateline are not representative of the ARM industry as a whole,” said Mike Ginsberg, CEO of ARM advisory firm Kaulkin Ginsberg. “Dateline’s approach was to over-exemplify the renegade practices of a few individuals rather than portraying the ethical, law-abiding practices of the masses of collection professionals every day.”

The Dateline NBC story clearly shows that this is not an issue of a “few renegade individuals,” but rather the industry is plagued by many bad actors at the owner level. In fact, the representative of the Collection Agency Trade Association, ACA International, even admits that enough is not being done to stop the bad actors when interviewed for the show. How can the story be one-sided when Dateline NBC interviewed a representative of the industry and she admitted there is a problem?

NOTE: Dateline NBC has a wealth of resources on their website.

Dateline NBC's Chris Hanson

Debt Collectors will get the Dateline NBC treatment on Friday night, March 27th at 10pm Eastern and Pacific. Reporter Chris Hanson, most famous for his work exposing child predators on “To Catch a Predator,” will “expose dirty tactics used by some collection agencies.” According to NBC, hidden cameras will be involved, so this should be a really interesting show to watch on Friday night.

The episode of Dateline is titled “Debt in America and Its Collectors” and is part of a series called “Inside the Financial Fiasco.” Collection agencies abusing consumers is a serious issue in our country and it is great to see Dateline NBC and Chris Hanson tackling this issue with their trademark style.

However, everyone is not so excited. Without even having seen anything but the preview (below), Patrick Lunsford of InsideARM is lamenting the fact that it will be unfair and biased, with this from his article on the show:

To pre-suppose that the show will be an unfair view of the ARM industry is a bit beyond us at this point. I seriously can’t imagine what manner of awfulness will be foisted upon the public in this segment. I guess that we should withhold judgment until the piece airs, but I can’t see a piece that touts itself as a hidden camera expose of the ARM industry being even-sided.

While it’s always great to see “foisted” used in an article, I’m not sure how Patrick already knows the show will be so unfair? Maybe, it’s because Patrick, as an InsideARM expert, is well aware that there are a lot of debt collectors out there breaking the law every day, and if Chris Hanson is on the case, he’s bound to expose a number of them on national TV Friday night. Even better than Patrick’s “warning” to fellow debt collectors are the comments below the post. Apparently it’s not required to take an economics class to be a debt collector.

Tune in on Friday night or check back here on Saturday for an update on the episode.

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.

Well, it turns out Pressler & Pressler fought back and filed a claim against Scott Mills for libel. However, on Friday the judge dismissed the preliminary injunction motion in a victory for Mr. Mills.

To add insult to injury for Pressler, Scott’s website and his story were picked up by a Huffington Post blogger who wrote this article on Scott and his case.

Seems like a bad week for Pressler & Pressler. However, at least they’re not collecting on dead people! For more on their practices, see the video below:

West Virginia Attorney General Darrell McGraw today announced that his office has entered into a settlement agreement with Brady and Caruso which will provide $9287.87 in refunds and $282,953.84 in debt cancellation for approximately 174 West Virginia consumers. Brady and Caruso, LLC, doing business as Brady, Caruso, and Associates, LLC, is a Nevada limited liability corporation that collects debts from its headquarters in Amherst, New York.

The Attorney General’s investigation was prompted by a complaint that a consumer received a collection call from Brady and Caruso but was not able to dispute the debt or determine whether she owed it because the collector could not verify the debt that she allegedly owed. Under federal law, debt collectors are required to send consumers a written notice within five days of their initial contact. The notice is required to provide the amount of the debt and the name of the creditor to whom the debt is owed. The consumer has 30 days from the date of this notice to dispute the debt in writing. If the consumer disputes the debt, the debt collector is required to provide verification of the debt, including the name of the original creditor, or a copy of the judgment. If the collector cannot provide such verification, it must stop all collection efforts. The Attorney General’s investigation of Brady and Caruso also revealed that it was not registered or bonded to collect debts in West Virginia.

The consumer also complained that the debt collector threatened to place a lien against her property if she did not pay the debt. Under West Virginia law, liens may not be placed against property unless the creditor first sues the debtor and obtains a judgment in court. West Virginia law prohibits the use of threats and coercion in debt collection and explicitly prohibits threatening that nonpayment will result in the taking of any action that requires a court order if the collector does not tell the consumer that it must obtain a court order before such action can be taken.

Under the terms of the settlement, Brady and Caruso will close all the West Virginia accounts, write those accounts down to a zero balance, take the necessary steps to delete any negative credit reporting in connection with those accounts, and refund any amounts paid on the accounts. The settlement also requires the collector not to resell the accounts. Consumers who are covered by this settlement will receive letters confirming the amount of debt cancellation and refunding any payments they made.