False Statements and Fraudulent Debt Collection
A federal statute known as the Fair Debt
Collection Practices Act (often called the "FDCPA"),
15 USC 1692, gives you specific legal
rights to sue debt collectors who unlawfully threaten, berate, intimidate or
harass you; call you during odd hours, make false representations about the
debt or their intentions, or otherwise act in ways proscribed by the act (and
their are many). False statements may include (and this list is just a small
example) threats to:
Attach your wages when unlawful or
not intended-this includes threats to take more wages that is permitted by the
federal limitation (wage attachment for a credit card debt, a non-student loan
or for an obligation that is not support is generally illegal in Pennsylvania,
however, now that law has been expanded to rent and lease damages in some
cases-you should check the statute to be sure);
Contact your employer about the
Call you "everyday until the debt is
Sell the debt to another company for
the purposes of continuing collection on a time-barred debt;
Contact neighbors about the
Contact the Department of Homeland
Security about your alien status;
Threaten imprisonment or criminal
Report a financed vehicle as "stolen"
because you missed one or more vehicle payments;
File or threaten to file criminal bad
check charges on a post dated check that the collector solicited from
Immediately evict (by an agent for a
landlord); lockout, or seize personal property where such relief is limited by
Sue, where no suit is intended,
e.g. a collector requested "settlement prior to possible legal action" where
the collection agency had no authority to sue, or to retain counsel. This
action was held to be deceptive and violative of the FDCPA by a federal court
Or, a threat implying that the
collection agency has multiple employees or investigators working to collect
the debt, where only one or two people work for the agency.
Collect or sue for "collection costs,"
"attorney's fees," (see also below) interest not pre-agreed to in excess of
that allowed by statute, "fines," or any other fee in excess of the actual
amount due, unless the original agreement provides for the amount the collector
threatens to collect. For instance, the collector cannot threaten to add
attorney's fees or his fees where the agreement you signed does not
specifically provide for them. Let's say you went to the dentist and just
signed consent form and a medical history. You agreed to pay for all charges if
your insurance did not. Nothing is mentioned about anything else. The collector
cannot add any other fees or even and especially, his costs, late
fees or other charges.
Add "collection costs, attorney's
fees" and similar additional charges have also been held to be deceptive and
misleading, because they do not state exactly what debt is being
Sue or bring any kind of legal action
where the threat is not followed through (i.e. a scare tactic), or any number
or other threats designed to demoralize, humiliate, degrade; embarrass or
intimidate a debtor into payment.
Or any threat where the collector says
he is legal counsel or an attorney/lawyer when he is not;
Or a threat or attempt to mislead a
debtor that a claim will be transferred to an attorney or separate department
of a collector (e.g. "This will be transferred to our legal department for
further action"). Letters misrepresenting that the account has been transferred
to an attorney may include an attorney's letterhead with threats of legal
action. Have you ever received a letter from a lawyer who purportedly collects
for a major creditor? Has the lawyer been out-of-state? Has the lawyer
threatened to sue if payment was not made?
Other Little-Known Tactics that are also illegal:
It is unlawful under the FDCPA to
threaten suit if no such action is intended.
This even applies if the collector says if you
don't do something within a certain time period,
something else may happen.
See discussion below in the case of Brown v.
CSC. The attorney cannot sue you
in a state that is not your home state, under the FDCPA. Therefore, the threat
is an empty one. Empty threats are punishable under the FDCPA!
Legal letters that are not
reviewed by a lawyer. It is unlawful for such a letter to be sent unless
the lawyer reviews the letter? Do you believe that when thousands of
letters issue the lawyer reviews each one? Do you also believe in the tooth
fairy? Where the correspondence is not reviewed by counsel, the correspondence
violates the FDCPA. Look at the letters you receive from lawyers. Were they
signed by hand? If not, perhaps they were not reviewed by a lawyer. You may
have a case under the FDCPA.
The collector's threat to "make
this go legal" or to "turn the matter over to the legal department" may violate
the FDCPA where the collector has no legal department. Do you think that the
collector may be a collection operation only? If so, perhaps they have no legal
department, i.e., the legal aspect is handled outside of the company. In this
scenario is another violation of the FDCPA.
It is also a violation to send
a letter stating that the collector will "recommend litigation" or "advise
the creditor to sue." Some of such correspondence has been found to violate the
FDCPA because it, in essence purports to give legal advice to the creditor. The
collector is not permitted to give legal advice, unless, of course, if the
collector is an attorney himself.
Sophisticated Consumer Standard: Did you also know that it does
not matter if you believed the threats or that a person of your
intelligence would not have believed the threats (i.e. the collector threatens
to have you arrested for not paying Sears. You as an intelligent consumer
believe the threat is ridiculous since the U.S. Constitution prohibits such
actions). The FDCPA's standard is the "least sophisticated consumer standard."
That is, would anyone believe the threat. Perhaps some guy name Cletus
living in a shack on a mountain in Arkansas might believe the threat (he also
believes he had an alien enema that morning). This would be enough to sustain
the standard and your burden of proof if the court believes that the threat
occurred. The courts have consistently said: The
concept of deception protects even the ignorant, unthinking and the credulous,
least sophisticated consumer.
See discussion below and Jeter v. Credit Bureau,
Inc., 760 F.2d 1168 (11th Cir. 1985)
It is also unlawful to sue a
consumer in a remote jurisdiction that is not where the consumer resides,
or the one in which the contract was made. It is also unlawful to charge for
items not due under the contract.
PA R&D Enterprises, and their
sister corporation Judgment
Busters, Inc. (pretty despicable sounding name, huh?) were in the business
of purchases uncollectible judgments for rent. The reason was that although
there is no wage attachment in Pennsylvania, generally, rent judgments were an
In one case, PA R&D
purchased a judgment for rent against a consumer in Delaware County, PA. PA
R&D exported the judgment to Luzerne County, some 115 miles away from the
consumer. PA R&D's front man, Dwayne Gida, then added more than
$1,100 to the judgment as "costs & attorney's fees." There was a slight
problem: Neither PA R&D nor its officer was an attorney. In effect, they
gave themselves a pay raise, just like Congress!
PA R&D, acting
through Mr. Gida, decided the judgment should be higher than it was because, he
testified, "I believe it will take me almost three years to collect the
judgment and I have costs of doing business..." Mr. Gida decided that his costs
could be simply added to the judgment, so he just added them.
the really neat part! Mr. Gida could not collect the extra money he needed
alone. No, he needed the help of a Luzerne County, Pennsylvania judge.
So, he went to see one; by himself.
Yes, without notifying the
debtor, he simply walked into a judges chambers and got the judge to sign. One
would think that the debtor might have liked to have his say. Mr. Gida didn't
think so. He wanted it his way. Nice and private. And he got it that way.
Fortunately, the debtor's employer, Tier DE Inc was smart enough to smell
something was not right and contacted this office.
Since the debtor was
in a chapter 13 at the time, the first case was filed as an adversary
proceeding (a civil action) before the Bankruptcy Court in Philadelphia. The
complaint alleged violations of the
FDCPA, Pennsylvania Fair Trade Practices Act, and common law fraud. The matter
was dismissed for other non-substantive legal reasons and then re-filed in the
U.S. District Court for the Eastern District of Pennsylvania. Here is a copy of
the refiled complaint. The result (to
date) of the case is below.
Update on PA R&D. PA
R&D, Judgment Busters and Dwanye Gida
were the subject of class action suit. The outcome is unknown.
Award: A panel of arbitrators
in the United States District Court for the Eastern District of Pennsylvania
entered this award for $1,000 in
damages and $7,000 in counsel fees for a total of $8,000. This is in spite
of the fact that the plaintiff never lost a dime in the attempted wage
attachment. Note: This was appealed by the
Outcome: The defendant's settled with the plaintiff and concluded the
litigation. The plaintiff received his $1000 and this office accepted $5,000 in
have decided thousands of cases on the subject of FDCPA violations and it is
impossible to list all prohibited types misconduct and threats. Suffice it to
say that if it seems wrong, it is worth speaking to a lawyer in your locale who
is familiar with the subject.
There are literally dozens of ways in
which a debt collector and often a collector can break the law. Each time a
collector breaks the law, you may be entitled to damages in an amount
commensurate with the gravity of the violation (however, most courts limit the
liquidated damages to one instance in each case-see your lawyer about this).
Some collectors have gone so far as to threaten arrest, jail, or harm to
loved ones, including informing friends and work associates of the debtor's
financial embarrassment. They often threaten wage attachment which is generally
not permitted in the State of Pennsylvania (your state is most likely
different, e.g. NJ & NY both allow wage attachments, as do most
states.). Any threat to do something that is not allowed by law is grievous
and actionable (you can bring suit).
Recent case of
v. Card Service Center, __ F.3d __, 2006 WL
2788476 (Sept. 29, 2006). The facts of the case
are simple: The debt collector wrote a letter to the
debtor saying that failure to make arrangements to pay
the debt within 5 days “could result in our forwarding
this account to our attorney with directions to
continue collection efforts” and that “refusal to
cooperate could result in a legal suit being filed for
collection.” The debtor sued, claiming that the
letter contained “false and misleading” statements
“designed to coerce and intimidate the consumer . . . by
false threat” and that the complaint suggested a
deadline for debtor action that was “false and
"But, we only said that such
action was possible, not that we would take such
action. What's wrong with that?" said CSC, the
defendant. "Nothing," said the District Court, you
have only said it was possible, which it is.
Having lost the case, Brown appealed to the Court of
Appeals for the Third Circuit.
The Court of Appeals reversed
the District Court. The court found that "it would
be deceptive under the FDCPA for CSC to assert that it
could take an action that it had no intention of taking
and has never or very rarely taken before." The
court found that
"...upon reading the CSC
Letter, the least sophisticated debtor might get the
impression that litigation or referral to a CSC
lawyer would be imminent if he or she did not
respond within five days. We do not believe that
such a reading would be “bizarre or idiosyncratic,”
and we thus conclude that further proceedings are
warranted to determine if such a reading is
“reasonable” in light of the facts of this case. A
debt collection letter is deceptive where “it can be
reasonably read to have two or more different
meanings, one of which is inaccurate.”
The court explained that basic
purpose of the FDCPA is to protect “all consumers,
the gullible as well as the shrewd,” “the trusting as
well as the suspicious,” from abusive debt collection
practices. So therefore, whether you are an Arkansas
hillbilly or a U.S. Supreme Court Justice, you have a
right to not be misled, deceived, or lied to, even if
you know better! In the Brown, the court
remanded the case back to the District Court to figure
out if CSC actually ever did refer cases like the Brown
case out to an attorney or whether it would just ship it
off to a collection agency. The 5 day deadline was
found to be deceptive and probably, a totally false
statement (but that was an issue for the lower court to
Each time a debt collector contacts you,
he must give you what is know as a "Mini-Miranda Warning" This warning received
that name because it is reminiscent of the warnings that police should give you
if you are arrested, however, "Mini-Miranda Warnings" have nothing to do with
criminal law. A "Mini-Miranda Warnings must contain the following words (or
words imparting this meaning):
"Hello, I am _________(name of
collector). I am (or this office is) a debt collector
representing____________(creditor). Information obtained during the course of
this call will be used for the purpose of collecting the debt."
If the creditor has not been advising
you as above, you may have a right to sue.
Letters you receive in the mail from
collectors also must contain similar warnings such as:
"This is an attempt to collect a debt.
Any information obtained will be used for that purpose. Unless within 30 days
of your receipt of this notice, you notify us that you dispute the validity of
this debt, it will be assumed to be correct. If you notify this office within
thirty days that you dispute the validity of the debt, we will obtain
verification of the debt or a copy of the judgment. If you request it within 30
days, we will provide you with the name and address of the original creditor
(if different from the current creditor)."
If the letter does not state the above,
or words similar or close to the above, you may also have a right of action.
Furthermore, did you know that no bill collector or creditor has the right to
contact any third person about your debt, except to get information solely to
locate you? This means that if a bill collector or a creditor tells any except
you that you owe them money, they too can be sued.
Debt Collector's Calls at Work
The FDCPA states:
Without the prior consent of the
consumer given directly to the debt collector or the express permission of a
court of competent jurisdiction, a debt collector may not communicate with a
consumer in connection with the collection of any debt -
* * *
(3) at the consumer's place of
employment if the debt collector knows or has reason to know that the
consumer's employer prohibits the consumer from receiving such
anyone can stop collectors from harassing them at work by putting the collector
on notice that the employer of the consumer does not permit him or her to
receive the calls. Do you think your employer allows you to be harassed at
work? Is this why you are paid? Probably not! Tell the debt collector this and
confirm it in a letter! Then make notes as to each time the collector violates
this warning. Bring your notes to your attorney and have him use it against the
collector in court.
Your Rights to Stop Harassment by the Debt Collectors
Insofar as collectors are
concerned, you are not required:
To discuss anything with a collector
unless you want to;
To answer a phone for a collector
(this works with called ID).
To speak with the collector if you do
To answer any questions at all posed
by the collector (collectors will often demand that you rearrange your
finances, or cut back on other expenses to pay them; there is no requirement
that you justify your lifestyle to a collector).
To say "good-bye" before you hang
To be truthful about your personal and
financial affairs (you do not have to disclose private information about assets
Important: There is no reason you need
to acknowledge that you owe the money! This is very important if the debt is
old. By acknowledging the debt, you may actually extend the time the creditor
can sue on it. All states have statutes of limitations on debt collecting. Few
states are more than six years. Many are less. You can extend this limitation
by acknowledge the debt or even by making a partial payment!
In fact, you do not even need a lawyer to
stop collectors from calling you (although one is recommended; a lawyer will be
able to point out possible lawsuits that you might be able to bring). All you
need to do is to mail the creditor or collector a "cease
communication" letter (Adobe pdf format). This request can be made any
time, but it must be made in writing (and this is important to preserve
your rights to litigate later on). It is always preferable to send the request
by certified mail and
keep a copy. You can click here for postal rates for certified mail. This copy
will be proof of your request should you need to sue the creditor. Once the
creditor (in most states) or collector receives your letter, he or she can only
contact you to inform you of any action he or she intends to take, or to tell
you that he is terminating efforts to collect the debt. This letter is enough
for you legally stop further contact, including phone calls and dunning
letters. Your letter may state that you are refusing to pay for any reason you
choose, or are disputing the debt, but is fine and probably even better to
just request that the collector terminate contact, and leave it at that.
Writing this letter will not protect you from a lawsuit though. Likewise,
writing the letter does not excuse you from the debt. Many collectors are not
attorneys and cannot sue you! This is the reason they harass you in the
first place. We think it is analogous to some kind of bizarre sexual
frustration (but perhaps you can take up the issue with
Dr. Freud ...what? he what? When did that happen?...1938? How
was I supposed to know? Why didn't you tell...oh forget it.)
of debts and Sample Validation Request Form
The FDCPA does not
particularly care much for collection of every conceivable debt claim that a
collector assets. The Act provides that debts that are pursued by a debt
validated. Validation of the debt is every debtor's right.
You don't need a reason. The fact that you request validation is quite enough
to evoke to protection of the FDCPA. The Act provides that (paraphrasing, see
original text here) within five days after the initial
communication with a consumer in connection with the collection of any debt, a
debt collector shall (unless already provided in the initial contact), send the
consumer a written notice containing - (1) the amount of the debt; (2) the name
of the creditor to whom the debt is owed; (3) a statement that unless the
consumer, within thirty days after receipt of the notice, disputes the validity
of the debt, or any portion thereof, the debt will be assumed to be valid by
the debt collector; and (4) a statement that if the
consumer notifies the debt collector in writing within the thirty-day period
that the debt is disputed, the debt collector will obtain
verification of the debt.
This means that if you write
validation request, a sample of which is here, all communications
and enforcement must stop until the debt is validated. Yes, that means
happens if the collector refuses to validate the debt? You should only be
so lucky. If after a validation request under the FDCPA, the creditor refuses
to cooperate, then the creditor may not legally collect the debt.
If the collector does, then the law is violated and a suit for damages may be
brought. Such a suit was brought in federal court in New Jersey against MRS
Associates, debt collectors for a company going by the name of
Lake Cook Partners. Lake Cook engages in, what is
known in the business as, "bottom feeding." Bottom feeding is a term used to
mean the acquisition of "dead" or written off debts. Lake Cook purchases the
debts from credit card companies (and perhaps other companies) for pennies on
the dollar. Lake Cook then uses MRS Associates to make a debtor's life a living
What if the debt collector
ignores the request and collects the debt anyway? That happened with MRS
Associates. MRS was requested to validate a debt alleged owed by a husband of a
client who received a bankruptcy discharge. The husband claimed that he wife
had applied for the card, not him. Not that it would matter anyway; the husband
was entitled to validation under the law. If validation was not forthcoming,
too bad for the collector. MRS believed that the burden was on the debtor since
the card had been open for "21 years." MRS
refused to obtain
validation and told this office so. If you want to hear MRS's response to
the debt validation request,
(this is an mp3 file). Note the rather condescending tone and snide comment
that "if your client is not aware of this" [account after 20 years], "then
there are more issues here that I certainly am able to deal with." The fact
that it "is highly improbable" that MRS would have been able to get a copy of a
document that the debtor signed 20 years ago did not excuse MRS from obtaining
what validation that they could get. In this case, MRS did not even attempt to
get anything. Perhaps MRS did not want to be bothered to comply with
federal law. I guess it's easier that way.
Outcome: The foregoing message was in large part the
reason that MRS settled with the debtor for $4,500. Needless to say, the debt
was never validated. The debtor would have been forced to pay over $10,
Not even two weeks after
the $4,500 payment, the same client was contacted by Creditor's Interchange,
Inc., ("CI") a debt collection outfit in Buffalo, NY. The collector calls this
office and this is what transpires:
A Richard Kerns who says he works for
We answer the phone saying "law
offices" as is called for by our business procedure.
Kerns asked for the debtor (name
withheld for privacy).
I identified himself as "Mr.
(debtor's) attorney, Larry Rubin.
Kerns says, "I did not know he had an
Kerns is assured by me that I
represent the debtor for all purposes.
Kerns asks if I am an
I tell him that I am and ask for debt
Kerns then demands payment from the
l say, "we are requesting validation
of that debt."
Kerns states, "Validation? What
validation? He owes a debt!"
Kerns then states, "Listen smart guy.
You know what? I'm going to call your client!"
I learn that Kerns is collecting the
same debt that MRS was trying to collect. As a matter of fact,
the same creditor, Lake Cook, is now collecting under a different corporate
name, Hilco Receivables.
Outcome: CI & Hilco settle the next case for
$5,000 for one phone call. That is $9500 in settlements paid to the same client
on the same debt.
Some collectors do just about everything
wrong. We recently brought a case against an attorney in
The complaint alleged text book examples of what not to do when collecting a
debt and are outlined in the
complaint with the appropriate sections
alleged to be violated. It should be noted that this debtor sent out a cease
and desist letter immediately after the first contact. This collector ignored
the notice. The notice was sent by certified mail.
Initially, the plaintiff's young
daughter was tricked into giving out her mother's work number.
15 U.S.C. § 1692e(10)
The collector then neglecting to
advise plaintiff and her daughter that the defendant was a collector and that
any information obtained will be used for that purpose.
15 U.S.C. § 1692e(11).
Then the collector threatened a wage
attachment (illegal in Pennsylvania); then threatened to "put a lien" on her
income tax refund; then threatened suit; and then threatened to serve legal
process upon plaintiff at her place of employment, none of which could be
legally accomplished by defendant, because defendant was not an attorney
licensed to practice law in Pennsylvania!
15 U.S.C. § 1692e(5)
The collector then violated
15 U.S.C. § 1692e(10) by suggesting to plaintiff that
she could and should skip payments to her basic
utilities payments in
order to pay the defendant instead.
The collector then violated
15 USC §1692g by making threats of suit during the debt
validation period (see above for explanation) in a manner that overshadowed the
notice of validation rights. This means that the debt collector told plaintiff
in a letter (like he should have) that the plaintiff had the right to have the
debt validated if she did so within 30 days. Then the collector demanded
payment within 30 days, thus overshadowing or nullifying her rights. In
a sense, taking away what right she had been advised of. The creditor told
plaintiff that she had had ample time to pay the creditor.
The collector then spoke with the
employer of the plaintiff in order to get "payroll" information and to advise
him that legal process would be served there. In other words, that his employee
was a no-good deadbeat. Thus the collector disclosed this private information
to a third party, a big "no-no" under the FDCPA.
15 USC §1692c(b)
At one point, the plaintiff's employer
heard her speaking to the collector. The employer took the phone from the
plaintiff and told the collector that such calls were not allowed. The
collector called back in 10 minutes!
15 USC §1692d(5) and
15 USC §1692c(c) . Clearly the
collector knew that he was not to call the plaintiff at her place of work, but
did it anyway. The collector the stated he just wanted to know where to serve
the "summons", something a New Jersey attorney cannot do in
Case was settled by defendant.
Another case was recently
filed against a collector in Florida. This
collector persisted in embarrassing the debtor at work,
demanding to speak with the employee's supervisor and
actually doing so, calling him out of important meetings
with customers, and eventually calling his sister in
another state, to keep the pressure on. All of these
tactics were egregious and particularly outrageous for
what they were. The collector actually
phoned the job so much, the debtor was in danger of
termination, not to mention the extreme embarrassment
and humiliation in front of his peers. A copy of
complaint with all the allegations is
Gerald E. Moore and Associates -
Phone conversation recording: Is it legal? We often
receive complaints from potential clients against Gerald
E. Moore and Associates. Our latest civil action
filed in the Philadelphia District Court is
In this case Moore's office requested that the debtor
pay an alleged obligation by debit card. the
client, wanting to reach an honorable settlement,
foolishly gave this collector her debit card number.
Moore's office proceeded to charge her a "billing fee"
of $8.50. In other words, Moore charged her money,
to pay his office. To make matters worse, this
additional fee was never disclosed to the client.
The client was thus "nickeled and dimed" out of $8.50
for the privilege of cooperating with Moore.
Besides the normal collector shenanigans that we have
come to expect, another disturbing issue arose in this
case: an admission that all conversations were
being recorded without the knowledge of the debtor.
Is this legal? Since we are a
Pennsylvania law office, we cannot and will not offer an
opinion as to other states. Pennsylvania, however,
prohibits this pursuant to 18 Pa.C.S. §5725 and §5703
(relating to wiretapping). Can out-of-state
collectors record Pennsylvania residents? That is
the issue. We think that this plaintiff is
entitled to damages just for that alone.
Outcome: Case settled in late
September, 2007. Plaintiff agreed to a
non-disclosure agreement on the matter.
...and once again, Creditor's
Interchange (CI). This firm's name surfaces more
times than it should associated with appalling collection
tactics. Not that it is the only one; it is just
one of the more recent ones. The most recent case arises in
the U.S. Bankruptcy Court for the Eastern District of
Pennsylvania. The Bankruptcy Court has concurrent
jurisdiction with the U.S. District Courts respecting
matters raised by persons who are already debtors in a
bankruptcy proceeding. The good thing about
litigating in Bankruptcy Court is that if you are already
a debtor in a bankruptcy proceeding, you can then use
that court without paying anything additional in filing
That will save you $350 per case (which is the filing
fee as of late May, 2008). Not that anyone would
file bankruptcy just to save that fee, of course.
case (see complaint filed with court) someone
identifying himself as "Mr. Zimmer" phoned the
plaintiffs' and stated "We have a problem. You are
trying to steal from Chase. You owe $10,700 and are not
willing to pay.” Zimmer then tried to
terrorize the plaintiffs by telling them that that his
company was “in the works of litigation” and that he
would “take 27% of [the] husband’s take-home pay each
week.” He then claimed that he would “put a lien”
on their house and that “PA is the worst when accounts
went to court,” and whether she was "aware of the number
of sheriff sales in PA?"
There are several obvious problems
with these threats, the least of which is that none of
them are true.
First: The collector
used the word "steal." Stealing is a crime.
Borrowing money and not being able to pay it back is
not now and has never been a crime in the United
States. Threats to bring criminal action is a major
violation of the FDCPA and may well be criminal
Second: It is also a
violation of the FDCPA to claim that litigation is
"pending" or implying immanency when it is not.
Collections agencies generally cannot sue since they
are not attorneys. Therefore, any threat of
litigation is, in the vast majority of cases, an
Third: At least in
Pennsylvania, where these actions took place, no
creditor of one spouse can ever get a lien on real
property that is jointly held by a husband and wife.
Of course, no creditor can ever "place a lien" at
all without suing and winning in court. And
then it would only become a lien (in PA) if the real
property was solely in the name of the person sued.
Lastly, the statement that PA
is the "worst" when accounts go to court, is pulled
from thin air and is completely meaningless.
"Worst" compared to what? Worse than under
Stalin? Perhaps even worse than a North Korean
military tribunal? Is Pennsylvania now a military
dictatorship? The truth is that, in fact,
Pennsylvania has a very good record of upholding
consumer rights and has taken many progressive
steps to ensure that debtors are protected from abusive
collectors, which included expanding consumer's
FDCPA rights to include creditors (only debt
collectors are covered under the FDCPA), as well as debt
collectors. See, 73 P.S. § 2270.4, the
Extension Uniformity Act.
Wallace went on the threaten that he, or the law firm, had commenced litigation against the plaintiff in the above amount, plus collection fees,
and late fees in the courts of New York State. Wallace further stated that he had a “case number,” and that was “C-104-729.”
Of course, the entire claim was bogus; a
complete fabrication meant to intimidate the debtor.
what's worse, it was reasonably believed by the debtor and
threw his entire household into chaos. Many debt
collectors operate in this way; a kind of commercial
terrorism. They figure, who pays someone who asks
politely? So what's the point if you want to make a
living? fortunately, the U.S. Congress has not and
still does not agree.
The aggrieved debtor filed a
complaint. Neither Paystar nor Gary Wallace showed in court. A judgment was entered against both in the amount of about $8,000. The judgment has not been collected.
Moral? Lawyers are not in the habit
of calling people personally and harassing them for money.
If someone calls and says he is a lawyer and you owe money,
check them out, and seek out your own (real)
attorney. Do not make promises to pay without speaking to a
lawyer. Do not send partial payments
without receiving competent legal advice. Making
partial payments extends the statute of limitations. Lastly, parsons aggrieved by dishonest or criminal debt collection tactics may find it very difficult to collect from a collection agency. These companies are sometimes worse pays than the people they pursue (see our
experience with Commonwealth Financial,
Unscrupulous collectors can pressure
unsophisticated debtors to pay in many ways, one of the
more insidious ways is to send embarrassing mailto the
debtor. The marking on the outside of an
envelope can be such an embarrassment. A letter with
a return address such as “collections department” or “deadbeat division” can, in an of itself, pressure people into payment, simply to avoid others seeing the envelope.
states that there can be no indication of indebtedness on the outside of the envelope. The law states:
A debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Without limiting the general application of the foregoing, the following conduct is a violation of this section:
* * *
(8) Using any language or symbol, other than the debt collector’s address, on any envelope when communicating with a consumer by use of the mails or by telegram, except that a debt collector may use his business name if such name does not indicate that he is in the debt collection business.
Perhaps you are unsure as to what is
meant by this:
Here is an example of an actual envelope received by a
debtor. This is an actual company in Chicago that is
named CBO Collections Division. Use of the word
"collections" on the outside of the envelope clearly
indicates that the collector "is in the collections
business," and most people would not assume that the word
refers to the collection of Beanie Babies. Here, the
envelope itself becomes the debt collector in your mailbox.
The envelope referenced above is the
basis of an actual lawsuit now (6/24/09) pending. the
result of the suit will be published later.
Damages Under the
The FDCPA provides for a private right of
action against violators. This means that you can get a lawyer and sue for
damages. A partial list of damages that are awardable are:
Statutory damages up to $1,000 for
each case. This means that the violator can be charged even though there are no
other damages (see below).
Attorney's fees. You can make the
violator pay for your lawyer. This is big advantage; lawyers are
Actual damages including:
Stress related injuries:
Heart attack, angina, chest
Loss of appetite;
Nightmares; insomnia, night
Inability to think or function
Anxiety, nervousness; fear and
Hypertension (elevation of
Indignation and pain and
suffering. And this is just a partial list!
Payment of a debt barred by
the statute of limitations;
Taking one's property
unlawfully or intimidating a debtor to return property by violating the FDCPA,
e.g. "If you do not return your DVD player to the store, we will bring criminal
Long distance telephone
charges for phone calls to a collector who states that you must call him
Attorney's fees to defend a
prior suit brought in violation of the FDCPA;
Damages for intentional infliction
of emotional distress generally (see above).
Your attorney may use medical
(psychiatric/psychological) testimony, but does not need to. Damages for
emotional distress can be claimed even without medical support. This does not
mean they will always be believed, of course. It is up to the judge or jury to
decide if the plaintiff is telling the truth. Anyway, the plaintiff in the
FDCPA lawsuit starts with a tremendous advantage, proof-wise.
Cease Communication Form
Still are not sure what to do? You're in
luck. This is your chance to be erudite. Just
go here (this
form will be generated in a new browser window, so come back here when you are
done) print out the form, add the relevant information, and mail it to the debt
collector. This is an Acrobat PDF form, so you will need Adobe Acrobat Reader.
You can get a free copy
here. Be sure to keep a copy and mail your form certified mail (come on,
I know you can spring for it).
FDCPA Cases, Complaint Forms and Their Results
The law states that FDCPA cases can be brought in any court of
competent jurisdiction. This means that you can bring actions against harassing
collectors, and under some state laws, creditors as well, in small claims court
even without an attorney. You do not need to use a small claims court; Federal
District Courts are the natural "home" for this type of litigation. It is not
recommended that you start an FDCPA lawsuit without an attorney because it
takes some fluency in the act to know what to ask of the court.
Many magistrates or small claims court
judges are unfamiliar with the act. If you want to go ahead despite this
warning, you can see how a typical action was brought in a District Justice
Court in Pennsylvania. "DJ" Courts are generally small claims in PA, having
jurisdiction up to $8,000. This case was brought against a collector in New
York for violations of the FDCPA's verification and cease communication
provisions. A copy of the complaint
can be inspected here in PDF (Adobe)
format. The case settled for a gross sum of $975.00 which included counsel fees
of an unspecified amount.
If you are in PA and need a similar
(blank) form (this can be used in any type of civil action), go
here. This page
has filing instructions as well. Be careful though. Be aware that if
the creditor has a claim against you on a debt, the creditor may
counter sue you on that debt. This means that it may be better to
bring this action as a counterclaim and not as an independent action if you owe
more than the claim!
In most cases, it is better to bring the
case in U.S. District Court. This office recently sued a national law firm in
the District Court in Philadelphia. The name of the firm is withheld out of
courtesy, since the case was settled within four days after suing; at least the
firm had the integrity to admit the error and correct it. This firm is engaged
in debt collection practices on a national scale. They are based in Long
Island, NY and has offices in Philadelphia and elsewhere. Their website claims
they have "national ability." In reality, this "national ability" previously
led to a previous class action against this firm (not brought by this office)
which settled for more than $453,000! (E.D. Pa. 2000). This firm, among other
things, threatened have an agent of theirs come "come to [the plaintiff's]
house" and inventory all of plaintiff's personal property for sale! Jeez! What
power! What abuse! Of course, this made plaintiff's wife panic. It also did not
sit to well with the plaintiff's nerves, either.
Here is the
complaint that was used. Of course the name of the plaintiff is withheld
and so is the name of the firm. If you are real clever, perhaps you can solve
the name of the mysterious firm. If you do, there is a major cash prize! And by
"major cash prize" we mean us saying, "...oh, good for you... [yawn]."
Case outcome: The defendant paid
plaintiff $1500, plus $2,000 in attorney's fees (the best part) and also paid
off those nasty guys at Ford Motor Credit. Value of settlement all together?
About $7,500 +/-. Not bad for a few phone calls and a terse letter (why can't
these guys call me?...). Oh yes, by the way, the names of the parties involved
in the transaction are real, and Orlando Perez (the man who phoned the client)
reportedly lost his job, however, this has not been verified.
Another case involved a man known as
"Jack Storm" (probable alias-many collectors have a good
reason to avoid their real name) and
Collection Specialists, Inc. CSI attempted to add all kinds of extra charges to
the debt and collect against a non-obligor. The complaint is
Dental Health Group was also sued for encouraging and requesting the services
of CSI. Exton did not have to pay in the end.
Outcome: A flat $5,000 for the plaintiff paid by
Collector's Best Friend-
The Credit Card Arbitration Clause (see updates below..)
As a consumer law
attorney, there is nothing more annoying to me that the
latest trend in oppressive tactics employed by credit
card issuers: compelled arbitration agreements. In
short, arbitration "agreements," and I quote that word
because most of the time the consumer is unaware he or
she has "agreed," deprive the consumer of his right to
contest the claim for judgment by a credit card company
in court. in other words, the credit card company
simply brings its claim to a friendly forum and requests
an award. That forum is often theNational Arbitration
NAF is one of the country’s
three largest arbitration companies. Believe it, the NAF
is no friend to consumers, and why should they be?
Credit card issues have billions of dollars to spend,
consumers have, well, they are the ones being sued,
after all. The NAF actively courts credit card
issuers and often makes no bones about where their
sympathies lie. The NAF will almost never dismiss
a case brought by a credit card issuer; will never hold
that creditor to the same standard of proof that the
courts will and you will never see a consumer attorney
on an arbitration panel. In short, there would
sooner be a Taliban in the Oval Office before they would
hire me to be an arbitrator. The NAF has even been
the State of California for refusing to disclose its
internal operations and follow that state's consumer
How can an
arbitration award be resisted after it is entered
against you? This will not work in every state, and in
fact, the following was successfully tried by this
office in Pennsylvania. The arguments can be tried
in other states, however, you are advised to seek the
advice of a local attorney before employing this tactic.
In other words, there may be other more compelling
arguments in your state. In this case, the
defendant was brought before the NAF on a debt. He
did not participate in the process before the NAF.
The NAF entered an award against the defendant.
Wolpoff and Abramson, a national debt collection law
firm brought a motion before the Common Pleas Court in
Scranton, PA. There is presently law in Pennsylvania
that limits the viability of arbitration awards.
The defendant filed an
answer and a motion to vacate the arbitration award.
Wolpoff thereafter withdrew their motion. Did the
defendant win? Yes, for now. Wolpoff can still sue
the defendant, unfortunately. However, then the
defendant has all of his defenses in a real court of
Private arbitration awards are not enforceable in
Pennsylvania except by new court rules.
If you live in
Pennsylvania and are sued in the National Arbitration
Forum (the "NAF") or before any other private arbitration
organization, in most cases, these awards may not
be enforceable unless certain procedures are followed. The Pennsylvania Superior Court has affirmed the lower court case of
Bank One Delaware N.A. v. Mitchell (and
here is the decision affirming it.). In
response, the state legislator passed a
new set of court
rules related to arbitration. What does
this mean? It means that as of now a debtor must
be represented by competent counsel familiar with these
new laws in order to stand any kind of a chance in such
a case. It is strongly recommended that you do
not ignore arbitration notices or any kind of court
papers no matter how they are served upon you.
More that ever it is critical that you hire the right
attorney; one who is familiar with this rather
complicated process. It is not recommended that
you respond or participate in any arbitration proceeding
before any private arbitration company without
assistance of a lawyer familiar with the consequences. In other words, if you are sued
in court or before the NAF or brought before any
arbitration company, do not go it alone! Don't be your own
What if you were
already brought before the NAF, or there is already an private arbitration
award, or an award that was entered as a judgment?
In that case, immediately
seek legal help. You will need to ask the court
that entered the judgment to vacate it. Be aware
that a judgment entered upon such an award may be
challenged upon a number of grounds, but you need a
lawyer who knows what he or she is doing.
If the awards are not enforceable, does the arbitration
then violate the FDCPA? I think they do. If you
have such a claim, contact this office.
Gerald E Moore and Worldwide Assets' (WWA) use of NAF
arbitrations. We recently (May, 2009)
brought litigation against
Worldwide and Gerald Moore, LLP based upon illegal usage
of the NAF, as well as illegal collection activities in
their attempt to collect counsel fees and other
unauthorized charges (the agreement allowed collection
of counsel fees only in the event that
Citibank did referred the collection of the
account to a lawyer, which it didn't, since it simply
sold the account to WWA), as well as the remoteness of
the NAF arbitration, violating
15 U.S.C. §1692i.
Refer to the complaint for further details. This
is a relatively new matter and will be updated.
Regarding NAF Arbitrations:
Thanks to the good
work of the Minnesota Attorney General's Office, the NAF
has agreed to completely get out of the business of
consumer credit card arbitration. See video below
(Published : Sunday, 19 Jul 2009, 8:59 PM CDT)
Debt Collector Tactic-
The "Check by
Personally, it is my opinion that
you would have to have a screw loose somewhere to give
anyone (save your mom) your checking information over
the phone. Keep in mind that there is no deal, and
I mean no deal in the collection industry that
can't wait three days for a letter to arrive.
Let's face it, we are no talking of asteroids crashing
into the earth, tsunamis or heart attacks here. We
are talking of about money. I have never
heard of any creditor's business exploding because a
check arrived a week late. Understanding this
proposition, do not be fooled that the deal you receive
is a limited time offer. No offer that is so good that a debt collector is
willing to make it, will turn unacceptable in a week.
Here's an industry trade secret. Please clear the
room of persons without top secret clearance. Are
you alone? Pssst. Money does not spoil!
That means that there is no reason to give a check by
phone. A check by phone hands your checkbook over
to the debt collector. Would you trust a debt
collector with your checkbook (and of course, you have
also signed all your checks in blank).
What's more, you have just told
your adversary where your checking account is! He
may have not known this before. in fact, it is
very difficult to determine where someone banks.
Don't let your creditors know this by:
Giving them a check by
Sending them a personal check
on your or your wife's account;
Keep your private information
private dummy! Better yet, why don't you just not talk
to them. Better yet, seek out and hire good legal
I am sometimes asked this question: "I needed to give the check by phone because the collector refused to accept payment in any other form. I wanted to pay the debt; what was wrong with that?"
There is absolutely nothing wrong with paying off a legitimate debt. The problem is that you may not actually be paying the proper party; the company you are paying may be a fraudulent organization collecting money
by a clever fraud. The person on the phone may not be your creditor;
the caller may be a criminal posing as your creditor. No legitimate company will not take payment by check, money order, other certified funds or cash.
If the caller will only accept a check over the phone,
this is highly suspect. Do not pay him! Do not believe that the "deal expires today." No company cannot wait a few days for mail; they have waited this long already, right?
Also be aware that making a partial payment will renew the period of the statute of limitations of your state. If the whole debt is not paid, you have just given the creditor another 4-7 years to collect the debt (depending or your stat's statute).
It is always better to ask a lawyer what to do, first.
What If You Cannot
Raise an FDCPA Defense or Claim?
1. Commonwealth Financial Systems v. Larry Smith
Buyer Becomes the Debtor)
There is simply not an available FDCPA
claim available in every case; some collection cases simply
need to be defended. Just because you cannot claim
that the collector violated the FDCPA, that does not mean
that the collector should win. This is where skilled
defense counsel is critical. Almost any collection
case is winnable, given proper representation. Counsel should be
familiar with the rules of evidence in your state.
Commonwealth Financial Systems brought a case
against a client on a disputed debt. The case was
tried before an arbitration panel (court arbitration, not
private). Commonwealth lost since they were unable to
muster a sufficient foundation for admission into evidence
of their financial records. Upon appeal, Commonwealth
brought a witness, but was still unable to lay the
evidentiary foundation to get satisfy the Pennsylvania
Rules of Evidence. Commonwealth's witness, it's
vice president, Dan Venditti, testified that although he was familiar with the record keeping procedure of his company, he could not testify as to the computer accounts, the backup methods, the manner of input of the original creditor. In fact, Venditti testified that his company, Commonwealth, was
the second owner of the debt. This turned out to be false, since Commonwealth purchases some
(or much) of its portfolio from a company known as
any rate, now it seemed that Commonwealth was twice
removed from the original creditor. Therefore, if they had a tough time testifying about the record keeping
practices of the creditor they purchased the debt from, they would have an impossible time testifying about the record keeping practices of the original creditor.
Part of the problem was also that Patricia A. Cobb, Esquire, EVP, signed a verification of the complaint, probably without reading it, since it swore to dates of payments that were contradicted at trial. This proved critical, since the debtor was able to raise a statute of limitations defense, and Venditti, the vice president of the company, was forced to contradict his own boss. This is not an admirable
position to be in if you are trying to oppress a consumer with a warmed-over questionable debt claim.
Commonwealth attempted to admit a
cardholder agreement into evidence. You know the
kind, tiny type,
indecipherable language. The agreement called for counsel fees for the party that prevailed in court. Commonwealth then attempted to secure counsel fees for its attorney, Edwin Matzkin, an attorney from Willow Grove, Pennsylvania. What was not anticipated by Commonwealth was that their own cardholder agreement could also be used against them.
The court later entered
judgment for the defendant and
against Commonwealth. Then upon motion, the court
for the defendant.
Commonwealth filed a new trial motion
and a motion for reconsideration of the counsel
fee order (denied
by the court). Commonwealth refused to pay the court-ordered counsel fees of $11,552. This eventually led to a levy on Commonwealth's bank
account and the forcible taking of the money. And they call
Commonwealth's motion for post-trial relief (motion for a new trial), was denied by the court
in just one day after oral argument. At the end of November, 2009,
Commonwealth appealed to the Superior Court of Pennsylvania, but later withdrew
it because it was untimely.
Commonwealth appealed the main case.
The Common Pleas Court of Delaware County wrote an
Opinion for the Superior Court. The
Opinion is a statement of the views and decision of the trial judge. In this case, Judge Burr rendered a very thoughtful, well-reasoned and scathing
quite literally decimates the all the legal arguments of
Commonwealth's counsel and questions the integrity of
Commonwealth's sole witness. The Opinion interestingly calls quantifies the "limits of Venditti's knowledge" as "vast," calls into question whether there ever was a validly proven contract between the original creditor and the defendant, and accuses
Commonwealth of pawning off "boilerplate" and unsubstantiated
assertions as evidence. The court noted with interest Venditti's inconsistencies in claiming that he was an "insider" in the credit
industry and in particular, respecting the particular account in question, while at the same time admitting on cross examination that he possessed no knowledge at all about the original creditor, its accounting systems, its record keeping, or the maintenance of its computer files. Venditti covered his utter lack of any knowledge with the "bald-faced
presumption that the records proffered as Plaintiff's trial exhibits had been 'SAS-70 qualified'". When pressed as to what that meant, Venditti
essentially testified as to what might have been printed on
the box that the software came in.
In short, the court was clearly not at
all impressed with Commonwealth, its attorney nor its witness. Judge Burr took a bold step to protect consumer rights and to make debt buyers answer to the same
standards of proof that any plaintiff would need to meet. Judge Burr found that there was no carve-out exception to the rules of evidence for any party,
not even debt buyers.
Decision of the Pennsylvania Superior Court: The Superior Court soundly rejected Commonwealth's arguments and has affirmed the trial court.
No appeal was taken and so the case is final. The Superior Court's final decision is
here. The decision
is precedential for any subsequent case in Pennsylvania or any jurisdiction that accepts Pennsylvania law as
What this means: Several important things -
Before creditors or debt buyers can have a record admitted under the business
records exception to the hearsay rule it is required to establish the document's
"circumstantial trustworthiness." This can be done with an affidavit of
the originator of the document, or through testimony that is competent and
with actual knowledge as to its creation. Most plaintiff's will need to
obtain a certification under a rule of evidence that provides for "a
written declaration of its custodian or other qualified person, verified as
provided in Pa.R.C.P. 76, certifying that the record—
(A) was made at or
near the time of the occurrence of the matters set forth by, or from information
transmitted by, a person with knowledge of those matters; (B) was kept in the
course of the regularly conducted activity; and (C) was made by the regularly
conducted activity as a regular practice.
The Superior Court further refused to follow the plaintiff's
urging that Pennsylvania should adopt the "widely held" rule that if a creditor
"incorporates" the external record into its own business records (e.g. it buys
an acoount and makes it their own, like so many debt buyers do), then by this
"incorporation" it becomes the business record of the plaintiff, e.g., the debt
buyer or creditor. The court stated:
Regardless of a “nationwide trend”
and “clear federal precedent” for allowing the introduction of business records
consisting of documents generated by third parties, the Pennsylvania Supreme
Court has not seen fit to adopt the rule of incorporation. We decline CFS’
invitation to do so.
Clearly, the Superior Court intended to crack down on what it
perceived as an abuse of the rules of evidence.
...this Court recognizes
the right of banks and their successors/assignees, holding valid credit
agreements, to receive timely payments. If they do not receive timely payments,
banks have the right to properly file actions on the defaulting debtor – seeking
payment of the balance owed. However, we also recognize that the trial court
possesses the independent obligations to preserve its judicial integrity and to
jealously guard its jurisdiction. “Neither the fluidity of the secondary [debt]
market, nor monetary or economic considerations of the parties, nor the
convenience of the litigants supersede[s] those obligations.” In re
Foreclosure Cases, 2007 WL 3232430 at *2 (N. D. Ohio 2007). Like Judge
Boyko, we reject CFS’ “This is how the industry does it” mantra: The
institutions seem to adopt the attitude that since they have been doing this for
so long, unchallenged, this practice equates with legal compliance. Finally put
to the test, their weak legal arguments compel the Court to stop them at the
For attorneys wishing to examine the trial transcript, it can
be found here.
2. Creative Use of the Statute of
(When a Written Contract is Not
This case involved a small amount of money - originally less than $1,500
(not including attorney's fees for CapitalOne, which were
claimed in an amount several times the actual amount), however, the defendant alleged that the plaintiff, CapitalOne
Bank, sued outside of the statute of limitations and
refused to cave. The
statute for Pennsylvania, the state in which the suit was
brought was four years, however, the contract provided that
"This agreement will be governed by
Virginia and Federal Law"
The question then became what is the statute of
limitations for contracts in Virginia? Unfortunately, Virginia law of the subject of credit card contracts was not particularly clear.
The applicable Virginia statute, Virginia Code Sec. 8.01-246 (Personal actions based
on contracts) provides:
Subject to the provisions of Sec. 8.01-243 regarding injuries to person and
property and of Sec. 8.01-245 regarding the application of limitations to
fiduciaries, and their bonds, actions founded upon a contract, other than
actions on a judgment or decree, shall be brought within the following
number of years next after the cause of action shall have accrued:
* * *
2. In actions on any contract which is not otherwise specified and which is
writing and signed by the party to be charged thereby, or by his agent, within
five years whether such writing be under seal or not;
* * *
4. In actions upon any
unwritten contract, express or implied, within three years.
CapitalOne's attorney, Francis Grimes,
or Stock and Grimes, Jenkintown, PA, put into evidence its cardmember
agreement; clearly this was a written contract-you could feel, see, and read it like any other written document. But was it a "written" contract under the laws of the State of Virginia?
If not, then the action was not timely and should be thrown
To determine such a question, the court was asked to
consider what the Supreme Court of Virginia said on the
subject. I the case of, Newport
News Hampton & Old Point Dev. Co. v. Newport News Ry. Co
, 32 S.E. 789 (Va. 1899). The court held that in order for
there to be a written contract, “nothing must be left open
for future negotiation and agreement; otherwise it cannot
be enforced.” In order for the contract to be considered
written, it must on its face, show a “complete and
concluded agreement. Subsequent cases expanded on the
subject: in Brown v. Harms,
251 Va. 301, 467 S.E.2d 805 (Va., 1996), the Supreme Court
of Virginia held that a written agreement must be signed by
the plaintiff and the defendant. In
Dodge v. Trustees of Randolf-Macon Woman’s College,
661 S.E.2d 801 (Va. 2008) the court held that a contract is
not valid and is unenforceable if the terms are not
established with reasonable certainty. In
Tsillus v. Wade, 2008 WL
1972952 (Va. Cir.Ct. 2002), the court held that if no date
of repayment is present on a written contract, claim of
breach is subject to the three year statute of limitations.
The case of In re Banks Auto Parts,
Inc., 385 B.R. 142 (E.D. Va. 2008), determined that
a "writing" must contain the names of the parties and the
terms of the contract in order for an agreement to be
considered a written contract.
So what was missing in CapitalOne's "written"
contract that might make it "unwritten?" Quite a bit, it
seems. For one, the original contract failed to state the interest rate; as a matter of fact, the interest rate fluctuated. Next, the card itself referred to the cardholder's presumed agreement to “Capital One’s present and future rules and regulations.” Not only were these rules and regulations not found anywhere, the future rules and regulations were not even created yet!
Perhaps CapitalOne employed the same precogs that appeared
Minority Report to figure out what those future rules
and regulations will be; we can't.
The agreement also stated that one could default by “violat[ing] any of the terms of any other agreement with us or any of our affiliates.” Not only is it impossible to know what might violate a contract whose terms are not specified, the customer does not even know who might be an affiliate of Capital One. Nowhere did the document contain a signature.
Other terms missing from the contract were:
the names of the parties, the
credit limit, the date of repayment, the duration of the
In light of all the missing elements of the
contract, the court found the "written" contract to be an "unwritten" contract. With the contract having been decided to be unwritten, the shorter three-year statute applied.
Since the case was not brought within three years, a verdict was entered in
favor of the defendant (the debtor) The
case was not appealed.
Outright Criminal Thuggery
NBC's Dateline did a really good piece on debt collection thuggery and outright extortion. It includes an interview with a
colleague in Waco, Texas, an excellent consumer advocate named John Fugate, Esquire. Although most debt collectors do not stoop to quite this level, one can never tell exactly who is behind any particular company; in this case, it was a pair of dangerous ex-cons, who are
thankfully behind bars once again.
You have probably heard about these outfits on television, or on the internet (always a reliable source for accurate info - yes, I am kidding). They regularly claim to be able to save you thousands, cutting your debt in half, or
eliminating it, in a short time period. What could go wrong? Everything.
In the State of Pennsylvania, this is illegal (called
debt pooling). Even if it were
legal, these companies do nothing you could not do on your own, or, better yet, with an attorney, and for a
lot less money. Debt settlement companies charge
exorbitant sums. I have had clients that have paid up to $5,000 for services that any
honest attorney would have charged less than $1,000.
Watch the video below. If you are presently working
with one of these companies, contact an attorney to learn
what rights you may have for a refund of your money.
You may also be entitled to legal damages as well.
Our office has brought lawsuits against several debt
settlement companies. These suits have been filed as a result of the "good
work" that the companies have done for their customers. An example of this
"good work" is to collect upfront fees, presently illegal in all states as a
result of an FTC ruling, and pay one creditor while ignoring vitually all
others. Of course, this leads to lawsuits and harassment bythe other
Debt settlement companies are usually very expensive.
They tend to be much more expensive than hiring local legal counsel
(note that I say local, because most of these companies are in remote states
from their customers). Since any competent attorney can provide much more
learned, reliable and experienced service than any debt settlement company, it
makes little sense to hire such a company. For the most part, ordinary
people who simply pay attention to their financial affairs, can do a better job
than most debt settlement companies. Keep in mind that these companies are
doing nothing more than you could do by yourself, except they charge thousands
in fees in the process.
Is there ever a time when a debt settlement company is
recommended? Almost never. Pay an attorney for a consultation before
you seek these companies out. you wil have a much better chance of getting
your money's worth. Besides, attorneys are licensed, and the carry
malpractice insurance. Any debt settlement company could be shut down by
your state's government at any time.
Important note: The following threats
were all actual messages left on the answering machine or voice mail of
consumers who allegedly owe money to creditors. In some cases, no money was
owed but the collector thought so. In all cases, it was the arrogance and
stupidity of the collector provided the evidence that would later be used to
sink them. It should be stressed that none of these recordings were
Threat #1The collector (actually, this is a repo outfit) is attempting to repossess a
vehicle. What's wrong with what this collector has threatened? This
message was left on an answering machine belonging to an individual. The name
of the debtor is deleted:
The collector or creditor cannot,
"issue a warrant to the sheriff for your arrest."
The collector cannot employ criminal
process to collect a civil debt (owing money and refusing to pay it is
not a crime.
The collector cannot threaten to do
something he knows he cannot legally do (see above).
The collector cannot leave threats on
an answering machine where others can hear it.
The collector may not infer that
there is some legal duty that the debtor must call back (..."must hear from
you"). There is no legal duty to return a collectors phone
Threat #2Now listen to this next
segment and see is you can detect the problem (another repo agent).
"I gotta hear from you or I'm going
to make this thing go legal." The collector may not threaten something he
does not intend. The collector does not intend to "make this thing go
legal," he only intend to scare the debtor into surrendering his car. The
collector has probably not even consulted counsel; his job is to collect the
Again, the collector cannot threaten
to harass the debtor every day ("I'm never going away..."). The collector
intends that the debtor fear that the collector will come to his home every day
(the collector says this, in so many words).
"I will be at your door every
evening...." You wouldn't put up with this nonsense even from a relative;
why should you stand for it from a goon from a repo outfit? The last time I
checked, people do not keep motor vehicles in their living rooms. There is no
reason for this man to threaten that he will come to the debtor's door "every
evening." The creditor / debt collector has no right to harass the debtor
"every evening." Further, a threat to behave like this is itself a form of
harassment and is actionable.
"You must call here...." As
stated above, the creditor or collector may not infer that the debtor has a
duty to call back.
"This is not a threat..." What
is it then? An invitation to a dinner in your honor? This guy knows he is
not supposed to be doing this.
Threat #3Here is yet another egregious violation.
Listen closely at the beginning: "this is
Officer [deleted for privacy]." Wouldn't you believe that this "officer" is a
policewoman? Or possibly a police detective? Surprise! She is neither. She is
just a debt collector or a repossessor. What she defines as an "officer" could
be an officer of her corporation. Or possible a security officer for the repo
company or whatever. How gloriously misleading! How unlawful. The FDCPA
prohibits misleading conduct of this nature and punishes it. How stupid as
well. This message was left on an answering machine! Nobody ever said you need
to be a rocket scientist to repo cars.
Next, this "officer" says she will list
the vehicle as stolen. Theft is generally defined as an unlawful taking with
intent to deprive the owner of the property. The "officer" forgets that the
owner of the property is not the finance company, but the borrower. The finance
company has a lien, but it is not the owner. The borrower cannot steal property
This threat is very nearly extortion,
which is illegal in every state. It is most definitely punishable under the
next poor victim was being harassed by a northern New York attorney's office.
This is not the norm. Most attorneys know full well about the FDCPA and will not
call debtors just to harass them into paying. A competent attorney will send a
letter or two, with full FDCPA warnings, then sue, if it is worth it the costs
to the client. Most of the time, lawsuits are not brought (except where
significant assets are known or anticipated). In this case, the name of the
offending firm has been withheld, since remedial action has already been taken
to try to correct to the problem i.e., the collector has been fired and
apologies made, along with a proper settlement. The text transcription of the threat is
were left on a cell phone voice mail. Background: The debtor was previously
unlawfully harassed into giving the collector information sufficient for them
to take money from the debtor's checking account, e.g. check by phone. The
debtor then sought legal counsel at this office for a consumer bankruptcy.
Based upon the unlawful coercion, the debtor was advised to take action to
invalidate the check. The debtor asked the bank to place a hold on the account
pending resolution of the controversy. It was later learned that the collector
was just hired from another infamous "law firm" known as Lenehan Law Offices.
Lenehan Law Offices is well known for allowing its collectors to threaten
people with criminal prosecution for not paying a debt.
The first thing you notice about this
threat is that it lacks the "Mini-miranda" warnings, but, no matter, that is
really the least of it.
Next, since when is "lying to attorney's
office" a crime? Besides, the collector is not even an attorney! The collector
did not ask the debtor to take an oath. Lying may be dishonest and immoral, but
it is not a crime unless there is a legal obligation to tell the truth, i.e.
lying to lawful authorities, lying under a legal oath, lying in court, lying to
the U.S. Congress (even they administer an oath), etc. Go ahead, lie all you
want, just don't do it to legal authorities or under oath. A bill collector is
not a legal authority and neither is an attorney, unless the attorney acts
under authority of the court and administers an oath. The debtor here was not
given an oath, and did not lie, anyway. The checking account number was true;
the debtor later got legal advice and decided to protect assets from a
collector using coercive means to collect them. The least sophisticated
consumer (see above) would find that this could be a threat a prosecution.
Furthermore, the collector says that this lie will be told to a judge. Most
people, not to mention the least sophisticated consumer. would find that
something much worse that a monetary judgment would befall them. Most people
would believe that there would somehow be a greater penalty levied against
In fact, what the collector does not say,
and probably did not take the time to learn, is that prior negotiations toward
settlement, and irrelevant matters such as unpaid checks are not relevant (and
not admissible in evidence) to the issue as to whether the debtor owes the
creditor money. The only issue the court is concerned about in any
collection case is whether the defendant owes the plaintiff money and how
much. In short, this collector has used falsehood and deception to collect
a debt. The firm would have been wiser to have never made any calls in the
first place and just sued the debtor.
Next, the collector says the debtor must
call immediately. Why? Will the debt evaporate? Or is it another veiled
threat? What if the debtor calls in two days? Will it be too late? What will be
the consequences? Will terminating robots from the future be unleashed? Or is
the collector implying that criminal charges will ensue? Who know? Surely not
the least sophisticated consumer.
What about that "recorded line?" Did the
debtor consent to the wiretap? Recording phone calls in Pennsylvania violates
the state's wiretap statute. Guess they were too busy to check that out what
with all the people they needed to harass that day. So many victims, so little
What about the addition of attorney's
fees? Was that permissible under the contract? In what amount? Does the debtor
have to guess? Many courts have held that such vague language is itself
deceptive; and actionable.
Threat #5From the same law firm.
Listen to the
threat of "prosecution" this time! "The attorneys are under the
impression that you are giving out false information to avoid prosecution on
this case." Prosecution? And who are these nameless "attorneys that are passing
judgment?" All statements here are calculated to terrorize. The firm had no
intention of suing in Pennsylvania, where this took place. If they sue
anywhere, they are in NY, not Pennsylvania.
above New York law firm was
Bankruptcy Court for the Eastern District of Pennsylvania. Here is the
used. Action was commenced on April 29, 2004. It settled for $4,500 in
mid-May 2004 (i.e. statutory damages in the amount of $1,000, $1,500 in special
damages-emotional distress, etc., and $1,500 in legal fees).
Threat #6This was not so much of a threat, but an outright refusal to my office to
validate a debt. This was received from a collector called MRS Associates. After
listening to it, be sure to see above for the problems
with this call.
Threat #7This Chase Bank collector threatened "fraud" because the debtor had
been in bankruptcy, discharged the debt therein, and then had the
unmitigated audacity to have been born in Portugal! *gasp!* The collector tried
to get at the debtor by saying that she had left her mother "holding the bag."
Of course, this was a lie. There was no intent to prosecute for a fraud because
there was not debt. Here is the
text of the
Lawsuits under FDCPA allow for counsel
fees, damages, and costs. Each FDCPA violation can net you up to $1,000 plus
attorney's fees and actual damages. Repeated conduct will usually receive
greater damages and is less likely to a succumb to a defense of "innocent
mistake." You should be diligent in protecting your rights. The statute of
limitations for bring most federal actions of this nature is only one year
unless used as a defense to an action brought against you. Therefore, you
should protect your rights before they become unenforceable.
This threat was
also received from Chase. This woman sounds like she has the emotion of a
collection terminator. "I'm tired of playing games with you (so I guess she is
starting one of her own here). I'll call every neighbor on your block to make
sure you're in the right place." Wow! How intimidating! How illegal. Collectors
are allowed to obtain
locator information. Once the collector knows where you are,
which obviously Chase did, after all she was calling her phone, any further
calls to neighbors are no longer locator information. They are just unlawful
communications with third parties intending to humiliate and embarrass the
debtor, which it did. Furthermore, this debtor had just received a discharge in
bankruptcy! Threats 7 and 8 make up the most outrageous abuse I had seen in
years. Not only were the tactics barred by state law, and the FDCPA, they were
also barred by bankruptcy law. The caller then refers to "attorney fees, "
which also is misleading and unlawful unless the actual amount if stated. "We
have programs to help you, but you can't apply unless you call back." In other
words, "we are setting this bear trap on the ground, please cooperate by
stepping into it." Here's a little secret: the only help you will ever get from
a debt collector, is that collector helping itself to your bank accounts or
Threats #9-A & B
Threat 9A. was
received from Gerald E. Moore & Associates, P.C.
"This is John Andrews. I'm with the
attorneys at law of Gerald Moore Assoc PC. The law firm of Gerald Moore*(see
attempted to reach you with several associates contacts, the efforts have been of no avail. And we are going to forward a pending claim for litigation into
Bucks County Municipal Court. If you choose to make a statement of deferment
instead of a statement of neglect to the court judge you need to reach me at
1-800-4661505 extension 186, I need your immediate return,
There is no such thing as a
statement of neglect in a civil collection against. Again, legal-sounding
nonsense meant to confuse. Threat
received from the same attorney's office just three days later:
"Richard and Susan Hanley, this is
Attorney Gerald Moore (long pause) and associates law office Atlanta Georgia.
Susan, I spoke with you in depth, conversation this past week regarding the
severity of your case - is pending with the county municipal court. If your
return call is not received by Monday, your attitude will be recorded as
neglect. The number is 1-800-466-1505 extension 186. I'll be in today until
12:15 lunch time and Monday about 11 a.m."
In this threat, the collector begins to try to intimidate the
debtor by implying he is an attorney. You need to listen to the cadence and
parsing of this statement. "this is attorney Gerald Moore...(pause)... and
associates law office.... Is this guy an attorney? Not really, but unless you
think about it carefully, you would think he is. Listen to the recording again.
He seems to say he's Gerald Moore. The debtor is encouraged to believe this and
therefore thinks that the case warrants the attorney himself taking time out of
his busy day just to personally collect this debt. The words "severity of your
case" is also used to imply that the debtor is in some serious trouble. In
actuality, the debtor is not really in serious trouble; the debtor just owes a
small debt, which can always be settled with a lump payment, or even discharged
in a Chapter 7 or 13 bankruptcy.
Further, this so-called "attorney"
doesn't know the meaning of the word pending. He states the matter is "pending
with the county municipal court. Perhaps he should have advised the municipal
court (if there was one in the county-there is not) that they have such a case
pending-which they did not.
Again, the debtors are
misled, deceived, and tricked into believing they are being sued and singled
out for some greater liability or even punishment. FDCPA violations are
generally "in the eye of the beholder." A violation is not judged by what
someone with a professional degree would think about the threat. They are
judged by what an unsophisticated, uneducated consumer would believe, hence the
"least sophisticated consumer standard.
This matter was sued upon and settled for
a very fair amount for the debtors, a release of their so-called "debt" (if
there ever was one) and for attorney's fees as well. In short, the debtor got
everything, Moore and their client got to pay the debtors' attorney fees. Best
of all, both of these are out of the debtors life for good. If you are
interested, read of a copy of the
filed with the US District Court for the Eastern District of
Threat 10 Pinnacle Asset Group,
a debt buyer, sometimes referred to as "zombie debt" peddler, or less politely
as "bottom feeders," seems to fancy euphemisms. Inventing a new form of
they are not dead debt buyers, but a legal processing firm.
Sounds a whole lot better (and scarier), doesn't it? Now, he is "calling
today, unfortunately (they got that right), as of tomorrow at 3:30
p.m., I will be personally (they cannot afford a robo-signer) attaching my
signature to the affidavit of non-compliance (there is no such document in
collection law) of breach of contract (that doesn't make sense to me
either), in order to have the claim transferred to my assigned general
counsel in the verified (wow, he verified it! He means business!)
of Delaware County, for the purpose of having to served a summons to appear (Sounds
bad, except Pennsylvania generally does not use summons and the summons never
direct anyone to appear anywhere) and plead at either work or home....
Please keep a valid form of ID on you at all times (MY GOD! You'll need an ID,
even if you are on your couch watching Breaking Bad reruns!). "
Next the guy tells the debtor that there is an opportunity to dismiss the
claim through arbitration with his firm. Hmm; I wonder how they will
decide that case. Could they possibly be prejudice...Nah! Hey now
the legal processing firm is a court! What won't they morph into next?
The mission of Pinnacle Asset Group, LLC is to strive to efficiently liquidate
portfolios of past due receivables by helping consumers achieve voluntary and
amicable re-payment terms on their delinquent financial obligations in an effort
to assist them to re-establish their credit records while providing job
fulfillment to our team and to grow our diligent and self-motivated staff
effectively taking our company to new and uncharted heights.
It's funny how they don't mention anything about being a
legal processing or an arbitration firm. Must have been an honest mistake.
I'm sure it's in there somewhere...
Pinnacle, like all companies, looks to hire candidates that
are qualified to do the things they need done.
Here is what they say they need.
Funny, says nothing about arbitrators. It also says nothing about legal
processors, whatever that is. Basically, they want what all collection
Pinnacle again; same debtor. Larry Donahue states that his firm has
been contracted to file in an impending civil lawsuit claim.
Apparently now they are lawyers. Larry says "your file has been forwarded
to my office "for final legal review." Hey, he is a lawyer! Wait,
no... isn't this guy a collector? Well he must be a lawyer since he is
giving a "final legal review." He is deciding whether to proceed against
this guy "as early as tomorrow morning." Well, since he is in New York,
maybe he will be driving down to PA tonight, right? "So please return my
call immediately, we will be filing his by close of business today." Hey,
he said the debtor had until tomorrow morning! I guess he was just way to
excited to wait until tomorrow, being a new lawyer and all. Well if
you have any questions, you can just call him; his number is on the recording.
Both 10 and 11 contain numerous violations of the FDCPA in their confusing,
disingenuous, misleading and deceptive statements. The debtor was not sued
the next day; they are not a legal processing firm and they do not hire lawyers
to make phone calls and threaten debtors. Their website describes what
they are, and they are not who they profess to be by phone. The rampant
use of misleading statements is cause for legal action, which is what they
received in November, 2012. More on this case later.
More on creditor/debt collector
Certain states, such as Pennsylvania, may
have laws protecting consumers from harassment even though the FDCPA may not be
applicable. These laws may even expand (e.g. Pennsylvania) on the FDCPA,
broadening its scope and applicability. To see if your state has such a law,
you should consult with a local attorney. If you contact me about this, it is
unlikely that I will know about the your state's law, unless you live in New
Jersey or Pennsylvania, where I am licensed to practice.