According to the New York Times, New York’s State Division of the Budget is seriously considering subcontracting collection activity to private debt collection agencies. This move can be considered either ironic or hypocritical, since the state’s Attorney General and Governor-elect Andrew Cuomo has prioritized cracking down on unscrupulous debt collectors, and has rarely had a kind word to say about the industry. According to the Times, the Budget Division will hand over at least $425 million in uncollectible debt, but will not do engage the services of any debt collection agency that has run afoul of the Attorney General. Still, given the huge amount of business the state represents, it will be tempting for debt collection agencies to underbid the contract (likely a percentage of the money recovered), and then to go to any means to collect as much as they can.
During this midterm election cycle, some candidates are directly or indirectly going after the debt collection industry. New York Attorney General Andrew Cuomo, who has been dogged in rooting out the bad players in the debt collection industry, is running a debt collection-related campaign ad in the New York gubernatorial race.
Here’s the ad:
Debt collection industry publication, Inside ARM, says that some call Cuomo’s efforts a “jihad,” and that this represents “the first time the industry has appeared in a political ad.” While it acknowledges that Cuomo has gone after the truly bad guys, it also seems to take offense at the Attorney General touting his record. You can’t have it both ways.
New York Attorney General Andrew Cuomo has been doggedly going after abusive debt collectors, particularly those that operate shady operations in what might be termed the debt collection capital of the U.S., Buffalo, NY. Although we’ve witnessed a range of mind-boggling debt collection abuses, the latest Cuomo target takes the cake. According to a press release from his office, Cuomo has filed criminal charges against Lamont Cooper, who has allegedly been running a debt collection agency while incarcerated in a federal prison.
Cuomo’s complaint alleges that, despite a 2009 prohibition against doing so, Cooper ran CMC Recovery Services and Legal Action Recovery while in prison. Moreover, it alleges that Cooper’s debt collectors “routinely pose as law enforcement officials and threaten to arrest consumers and throw them in jail unless they made arrangements to pay the company immediately.”
New York Attorney General Andrew Cuomo filed criminal charges against a dozen employees of debt collection agencies in the Buffalo area. The charge? Posing as law enforcement officials and threatening to throw consumers in jail unless they immediately paid debts they were told they owed. All of the debt collection agencies were owned by Tobias Boyland, the subject of a Dateline NBC “sting” earlier in the year. Cuomo shut down the agencies in June, and has compiled more than a thousand complaints against the companies.
According to an AG office press release:
“The tactics allegedly used here are some of the worst of the worst in the debt collection business,” said Attorney General Cuomo. “The defendants’ alleged lies, deceit and intimidation caused many innocent people to pay money they didn’t owe just to stop the terrifying calls. My office will continue to seek out and punish companies that prey on consumers and violate clearly written laws regarding debt collection.”
According to the felony complaints, the defendants stole thousands of dollars from consumers from across the country by using the threat of criminal charges and incarceration to collect debts that often did not exist, had passed the statute of limitations or had been previously discharged through bankruptcy. The collectors also regularly inflated the amount owed on an actual debt and would falsely tell consumers that they were being sued in civil court.
The complaints allege that the collectors used false law enforcement identities to coerce and cajole terrified consumers into agreeing to make the payments. Frightened at the prospect of arrest and humiliation, consumers authorized withdrawals from their checking accounts, wired money, or sent money orders to the collectors. Consumers were intentionally given misleading names, addresses and telephone numbers that led them to believe the businesses were located far from the Buffalo area.
Andrew Cuomo, Attorney General of New York continued the fight he announced last week to make debt collection agencies accountable for their illegal and deceptive tactics.Yesterday he announced that three NY debt collection agencies will pay a total of $245,000 in penalties and agreed with his office they need to change their collection techniques.
The AG’s office received numerous complaints that these agencies violated state and federal Fair Debt Collection laws including: contacting consumers after being asked in writing to stop; contacting them at their workplaces after being told that employers didn’t allow those calls; discussing their debts with third parties (i.e. employers, neighbors, etc.); falsely claiming that they were acting on behalf of an attorney; threatening them with legal action; and failing to verify the debts.
In our years helping people who are harassed by debt collectors, we’ve seen actions such as these and worse. In fact Lemberg & Associates is very familiar with one of the agencies, Tri-Financial, LLC—and their deceitful tactics, as we have had a number of successful cases filed against them on behalf of our clients.
Will the AG’s action prove to be a lesson to collection agencies to follow the law? Cuomo’s urging other debt collection agencies to follow the example of these three companies, but we’ll wait and see. It’s hard for us to believe the claim that management of all three agencies made in excuse of these tactics as “poor oversight of employees” rather than admit that their management techniques train and encourage employees to use these tactics. Collection agencies have been able to get away with illegal practices for decades because they know that the vast majority of consumers are unaware of their rights under the federal Fair Debt Collection Act and other state laws.
Cuomo said in a press release that his office will “continue to investigate the myriad deceptive practices that debt collection companies, debt settlement companies and others employ as a means to exploit consumers who are already down on their luck.” Besides the investigation, we hope that part of Cuomo’s fight will be to get the word out to consumers everywhere that they don’t have to take debt collector’s abuse.
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