Archive for 'Minnesota'

Debt Collection Default Judgment Legislation Introduced in Minnesota

Tuesday, January 22nd, 2013 at 6:57 pm  
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On January 14, legislation was introduced in Minnesota that would mandate that debt buyers who seek to obtain summary judgments against consumers in court provide the court with documentation about the debt. Introduced as H.F. 80 in the House of Representatives and S.F. 33 in the Senate, the bill would require debt buyers to provide the court with evidence of a contract between the consumer and the creditor; evidence establishing that the consumer owes the debt; evidence that the debt amount listed is accurate, and enumeration of fees, interest, and interest rates; evidence that the debt was included in a bill of sale from the previous owner to the debt buyer; proof that the consumer was properly notified of the lawsuit and didn’t respond; and proof that the consumer was properly notified of the default motion hearing.

The House version of the bill was referred to the House Judiciary, Finance and Policy Committee; the Senate version of the bill was referred to the Senate Judiciary Committee. If passed and signed into law, the legislation would take effect on August 1, 2013. You can obtain a copy of the actual bill here.

U.S. Attorney’s Office Charges Debt Collector with Fraud

Saturday, December 22nd, 2012 at 5:00 am  
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According to a report from WCCO, the U.S. Attorney’s Office has charged debt collector Khemall Jokhoo with mail fraud, bank fraud, impersonation of a U.S. employee, and identity theft. Jokhoo was the owner of First Financial Services, a Minnesota debt collection agency, until the agency was shut down by authorities in 2009. The criminal charges carry a maximum 30-year prison penalty.

Minnesota Attorney General Obtains Consent Judgment Against Midland Funding

Thursday, December 13th, 2012 at 6:17 pm  
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robosignMinnesota Attorney General Lori Swanson, who has a strong track record of going after the bad players in the debt collection industry, announced that the court has approved a consent judgment against Midland Funding to settle a robo-signing case brought last year. According to Swanson’s press release, Midland Funding, one of the country’s largest debt buyers, was alleged to have “filed thousands of collections lawsuits against individuals in Minnesota courts, often supported by unreliable ‘robo-signed’ affidavits…. Several Midland employees admitted in sworn testimony to signing up to 400 affidavits per day, either without reading them, without personal knowledge of their contents, and/or without verifying the accuracy of the information contained in them.”

The consent judgment requires that, before filing a lawsuit, Midland must provide consumers with debt validation, verify the address of the consumer, and investigate disputes. It even goes a step further, prohibiting Midland from reselling an unsubstantiated debt and requiring that unsubstantiated accounts be closed and adverse credit reports be corrected.

The judgment also mandates that Midland follow procedures to stop robo-signing practices, to prevent lawsuits on debt that is past the statute of limitations, and to ensure that consumers can respond to lawsuits in a meaningful way. Further, the company will pay $500,000 to Minnesota.

The press release also contains an interesting factoid: “Along with its parent corporation (the publicly traded Encore Capital Group, Inc.), Midland has paid more than $2.1 billion to purchase about 40 million accounts with a face value of about $66.4 billion, or an average of three cents on the dollar to acquire the debt.”

Accretive Health to Pay $2.5 Million to Minnesota

Friday, August 3rd, 2012 at 5:00 am  
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The New York Times reports that Accretive Health has settled with the Minnesota Attorney General’s office for $2.5 million over allegations that it violated federal law. Minnesota Attorney General Lori Swanson went after Accretive Health with a vengeance amidst allegations that the debt collector intercepted patients in the emergency room in an attempt to collect past healthcare-related debts. The Times quoted Swanson as saying, “A hospital emergency room should be a sanctuary for the sick and wounded, not a hunting ground for collectors.” The settlement also prevents Accretive Health from contracting with Minnesota hospitals for a period of two years, and requires the company to obtain permission from the AG’s office before operating in Minnesota for the following four years.

The allegations against Accretive Health prompted U.S. Senator Al Franken (D-MN) to hold hearings on patient access and privacy, and the U.S. Treasury Department to propose regulations that would, among other things, protect patients from abusive debt collection practices in a healthcare setting.

Minnesota AG Broadens Charges Against Accretive Health

Friday, June 22nd, 2012 at 5:30 am  
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Minnesota Attorney General Lori Swanson broadened the charges against Accretive Health, filing an amended complaint against the debt collector. Accretive Health’s alleged practices of waylaying emergency room patients in an attempt to collect debts gathered steam, and hospital and Accretive officials found themselves in an unwelcome spotlight when they testified before a hearing called by Senator Al Franken.

According to the Chicago Tribune, Swanson’s office filed an amended complaint against Accretive Health because additional consumer complaints surfaced regarding the company’s aggressive debt collection practices. The Tribune reports that the amended complaints includes 27 testimonials, and goes on to say, “Some allege that they were asked to pay money in the emergency room while they were suffering from chest pain, strokes and kidney stone attacks. Others said they were asked for money while they were confused, dazed and disoriented.”

According to the Attorney General’s amended complaint (which can be downloaded from http://www.ag.state.mn.us/), the AG is alleging that Accretive Health violated the Health Insurance Portability and Accountability Act (HIPAA) as well as the Minnesota Health Records Act and Minnesota debt collection statutes and consumer protection laws. The complaint alleges that Accretive Health “has orchestrated and implemented practices to collect money from Minnesota patients in hospital emergency rooms, at patient bedsides, and at hospital registration desks in ways and using tactics that violate Minnesota law.”

Minnesota AG Investigates Medical Bill Debt Collector

Wednesday, April 25th, 2012 at 2:50 pm  
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Credit Check 1The New York Times reports that Minnesota Attorney General Lori Swanson is investigating Accretive Health (NYSE: AH), a debt collection agency that collects medical debts. The Times article describes shocking debt collection practices, such as posing as hospital employees and demanding past due payments from patients waiting to been seen in emergency rooms. The article cited documents indicating that “Employees were told to stall patients entering the emergency room until they had agreed to pay a previous balance.”

The Attorney General noted that corralling patients seeking emergency care is a violation of the Emergency Medical Treatment and Active Labor Act, and that providing debt collectors with health information is a violation of the Health Insurance Portability and Accountability Act. While Attorney General Swanson is focused on activities taking place in Minnesota, Accretive Health is active in hospitals around the country. She is working with other state and federal regulators to coordinate a response to the company’s practices.

The Attorney General’s six-volume compliance review of the hospital’s management contracts with Accretive Health can be downloaded here: http://www.ag.state.mn.us/

Minnesota Department of Commerce Targets NCO Financial’s Hiring Practices

Wednesday, February 29th, 2012 at 5:00 am  
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The Minnesota Department of Commerce has ordered NCO Financial Systems to change its employee screening procedures at its 49 debt collection agencies and pay the State $250,000 in penalties. NCO Financial agreed to a consent order that included allegations that the company hired debt collectors who were convicted felons and that it didn’t notify the Commerce Department when a registered debt collector was fired for violating the Fair Debt Collection Practices Act or Minnesota law.

According to a press release issued by the Department of Commerce, NCO Financial Systems was ordered to establish an employee screening process to weed out those who are not allowed to become debt collectors under state law, ensure that those currently working at NCO’s Minnesota office pass that screening process, and audit employment records of those who were fired to determine if they were terminated because of FDCPA or state law violations.

Minnesota Department of Commerce Tackles Debt Collection Business Practices

Monday, October 10th, 2011 at 2:14 pm  
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Minnesota Department of Commerce Commissioner Mike Rothman announced that seven debt collection agencies signed consent orders and agreed to pay fines after being investigated by the state agency for business practices that violated state law. Charges were brought against an eighth debt collection agency, but that agency is fighting the charges.

The consent orders read like a Who’s Who of the debt collection industry. Here are excerpts of the charges, as enumerated in the Commissioner’s press release:

Allied Interstate: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing debt collectors with prior felony convictions; and 4) failing to report when its registered debt collectors were fired for failing background checks, swearing at debtors, theft of debtor’s financial information, or falsifying debtor records.

Bureau of Collection Recovery: 1) directing employees to change the dates of scheduled payments; 2) changing the dates of deposit for postdated payments; 3) failing to establish adequate screening procedures when hiring collector applicants; 4) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 5) employing collectors with felony criminal backgrounds; and 6).failing to notify the Commissioner of employee terminations for using profanity, third party disclosure violations, and harassing debtors.

AllianceOne: 1) failing to establish adequate screening procedures when hiring individual collector applicants; and 2) employing debt collectors with prior felony convictions.

Van Ru Credit Corporation: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing three collectors with felony criminal backgrounds; and 4) failing to notify the Commissioner of at least 15 employee terminations for verbally abusing debtors, using profanity, and third party disclosure violations.

IC System: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing collectors with felony criminal backgrounds; 4) failing to notify the Commissioner of at least 10 employee terminations for using profanity, third party disclosure violations, and repeatedly calling debtors at their places of employment; and 5) allowing at least 23 debt collectors to work at locations that were not licensed.

General Revenue Corporation: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing a collector with a felony criminal background; and 4) failing to notify the Commissioner of at least 40 employee terminations for using profanity, third party disclosure violations, and threatening an alleged debtor on MySpace.

Nationwide Recovery Systems: Commingling trust account funds collected for creditors with the agency’s operating fund, thereby engaging in an act or practice that demonstrated the firm was untrustworthy, financially irresponsible, or otherwise incompetent.

Commercial Recovery Corporation: 1) failing to pay vendors, including CP Office Products (Circle Pines, MN); 2) failing to collect thousands of dollars from alleged debtors and failing to remit those payments to clients, including Brown & Bigelow (St. Paul, MN) and ADvantage Tape (Edina, MN); 3) holding a negative balance on one or more of its trust accounts; 4) providing false information to the Commissioner; 5) failing to pay rent in the amount of $99,700; 6) failing to retrieve sensitive records from the company’s landlord following eviction; and 7) defaulting on a Promissory Note due to CRC’s bank in the amount of $278,809. Commercial Recovery did not sign a consent order.

Minnesota Attorney General Goes After Midland Credit Management

Tuesday, March 29th, 2011 at 4:04 pm  
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robosignOn Monday, Minnesota Attorney General Lori Swanson took the first step toward filing suit against Midland Credit Management when she asked a federal court to clarify that a pending class action settlement didn’t preclude the state from pursuing an enforcement action against Midland.

In a press release issued by her office, Attorney General Swanson charged that Midland defrauded Minnesotans and Minnesota courts by robo-signing affidavits, which where then filed in order to obtain judgments against consumers. She specifically went after Midland as a debt buyer, and noted that Midland Funding and Midland Credit Management have bought $54.7 billion in old debt, and have filed 245,000 lawsuits against consumers since 2009. In Minnesota, the company has filed over 15,000 lawsuits since 2008, and has obtained default judgments against consumers in 98 percent or more of the cases. Default judgments are typically awarded when the consumer doesn’t appear in court to defend himself or herself – either because he or she isn’t aware that there’s a pending lawsuit or because the consumer doesn’t understand that there is recourse available. The AG’s press release noted, “Some citizens sued by Midland state that they did not contest the lawsuit because they were not served with it, could not afford an attorney, or did not recognize the name of the debt buyer, since they had never done business with it.”

At issue in the Attorney General’s filing is “robo-signing,” which her office’s press release describes as “the practice of signing off on mass-produced, computer-generated legal documents without reading them or verifying the accuracy of the contents in order to speed up the collection process.” Debt collection agencies must provide courts with proof – in the form of affidavits – that the consumer named in the lawsuit actually owes the money According to the AG’s press release, “The affidavits, however, did not constitute “proof” of the debt because they were robo-signed by people who did not read them and/or who had absolutely no knowledge about the alleged debts to which they attested.”

The AG’s actions are yet another step in Minnesota’s journey to make debt buyers and debt collectors act in good faith and abide by the law. In its investigative reporting series, “Hounded,” the Minneapolis Star-Tribune did an outstanding job highlighting the ways in which debt collectors routinely flout the Fair Debt Collection Practices Act. U.S. Senator Al Franken (D-MN) introduced the End Debt Collector Abuse Act in the last Congress. Minnesota is sending a clear message to debt buyers and debt collection agencies that they need to clean up their act; let’s hope that other states are as dogged in their enforcement efforts as Attorney General Swanson.

Major Debt Collection Agencies Targeted by Minnesota

Friday, January 28th, 2011 at 6:48 pm  
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We regularly discuss the problem of debt collectors crossing the line into abhorrent behavior. What isn’t as well-known is that some debt collectors have criminal histories. The Minneapolis Star-Tribune has done an outstanding job of investigating the underbelly of the debt collection industry, and recently reported that the state’s Commerce Commission, Mike Rothman, has put debt collection agencies on notice. State law says that debt collection agencies must conduct criminal background checks on their collectors, but Rothman is alleging that some of the major players have failed to do so.

Rothman notified Allied Interstate, AllianceOne, Bureau of Collection Recovery, I.C. System, Financial Recovery Services, NCO Financial Systems, Receivable Management Solutions, and Van Ru Credit Corp. that he’s prepared to go after their business licenses, and that his office must review their screening procedures. The Star Tribune found that one in 12 debt collectors had criminal records in Minnesota.

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