Payday loan company Quik Cash has agreed to pay $170,000 to settle a collections fraud lawsuit filed by the Attorney General of Arizona. The lawsuit was originally filed in 2009 by former Arizona Attorney General Terry Goddard. Goddard lost a bid for the Governor’s office last year and is well known for his battles with payday lenders in Arizona. Payday Loans are now illegal in Arizona, largely due to Goddard’s efforts to eradicate the industry.

The lawsuit alleged that Quik Cash’s collections practices “raised an onerous burden” for the customers that they sued. Quik Cash claims it did not do anything illegal, but the Attorney General disagreed. Basically, Quik Cash sued Arizona customers over payday loan debts of $500 or less. However, they sued all of their Arizona customers and even some Nevada residents in Pima and Maricopa counties.

The catch? Many of these clients received loans at locations hundreds of miles away. This made it extremely difficult for the cash-strapped payday loan or cash advance customers to attend the hearings. Therefore, default judgments and subsequent garnishments were easy for the company to obtain.

According to a press release from the Arizona AG:

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In an amazing story, a Pennsylvania debt collection company has been sued by the Pennsylvania Attorney General for using a fake courtroom to attempt to collect debts from consumers. According to the AG the company used a fake courtroom “to mislead, confuse or coerce consumers.” The main issue in the complaint is that bogus “hearings” were allegedly held in a company office that was decorated to look like a courtroom.

Corbett said the civil lawsuit was filed by the Attorney General’s Bureau of Consumer Protection against Unicredit America Inc., with corporate and business offices located at 1537 West 39th St., Erie, also identified as the “Unicredit Debt Resolution Center.” “This is an unconscionable attempt to use fake court proceedings to deceive, mislead or frighten consumers into making payments or surrendering valuables to Unicredit without following lawful procedures for debt collection,” Corbett said. “Consumers also allegedly received dubious ‘hearing notices’ and letters – often hand-delivered by individuals who appear to be Sheriff Deputies – which implied they would be taken into custody by the Sheriff if they failed to appear at the phony court for ‘hearings’ or ‘depositions’.”

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Texas Attorney General Greg Abbott has charged an Oklahoma based payday loan company with impersonating a state official. Patrick D. “Dylan” White, whose businesses operate in Texas as CASHMAX, Fed Cash, TOPCASH and Cash Service Center, is owner of Federal Cash Advance of Oklahoma, LLC, and maintains offices in Dallas County.

According to State investigators, the defendant sent deceptive collection letters to Texans with outstanding payday loan debts. The letters were delivered in envelopes that contained the Dallas County Clerk’s forged signature and improperly bore the official seals of both the State of Texas and Dallas County. Inside the envelopes, the defendant inserted notices of debt collection that instructed recipients to call a telephone number, which belonged to Federal Cash Advance’s CASHMAX offices.

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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.

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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.

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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.

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.

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While the IRS has stopped working with private collectors, many local District Attorney’s offices have not. A company called American Corrective Counseling Services provides for-profit services to local District Attorney’s offices, including Los Angeles County. The company sends out letters on District Attorney’s letterhead threatening prosecution and jail time for writing bad checks, even though there is little chance that the District Attorney’s will ever follow through with any action. They also charge hundreds of dollars in fees and share a portion of them with the DA’s offices they contract with.

Now if a private debt collector makes threats that they do not intend to or have the means to follow through on, they are in violation of the Fair Debt Collections Practices Act or FDCPA and can pay hefty fines. However, apparently those rules don’t apply to District Attorney’s and ACCS, since they joined together to convince House Rep. Barney Frank to support exempting them from FDCPA in 2006.

This certainly seems like a double standard and could really be an issue with loans secured by a check, namely payday loans. DA’s and ACCS could be inadvertently helping payday loan collectors falsely threaten prosecution against consumers who simply defaulted on a high interest, unsecured loan.

Press Release
March 13, 2009

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.