Debt Collection Companies Being Sued for Harrasment & Deceptive Tade Practices in Ohio, West Virginia, & New York

Ohio Attorney General filed a lawsuit Wednesday against a Cleveland debt collection agency
after getting calls from more than 200 Ohio residents complaining of threats, harassment and deception. Read the Ohio AG lawsuit here.

National Enterprise Systems of Solon, Ohio is accused of illegal collection practices.

The lawsuit was filed in the Cuyahoga County Court of Common Pleas.

According to the lawsuit, debt collectors with National Enterprise Systems of Solon used abusive language, failed to verify debts and made unauthorized withdrawals from consumer bank accounts in violation of state and federal law.

Officials in West Virginia have also filed a similar lawsuit against the firm. Read the WV complaint here.


New York Attorney General has shut down a New York collection operation that consisted of at least nine debt collection companies across Western New York, run by Buffalo resident Tobias Boyland.

According to hundreds of consumer complaints filed with law enforcement agencies across the country, Boyland's employees violated state and federal law by routinely posing as law enforcement officials, threatening to arrest consumers and throw them in jail unless they made arrangements to pay the company immediately.

The Attorney General filed suit against Central Resource Management, Final Claims Asset Locators, Final Control Asset Locators, Interchange Payment Solutions, Next Step Services, Portfolio Asset Assurance, Silverbay Services, and Teleport..

Read the NY Complain Here.


Read the article here: http://www.dispatch.com/live/content/business/stories/2009/07/22/Collection_agency_lawsuit.ART_ART_07-22-09_A6_8LEHS6P.html?sid=101

Minnesota Attorney General Sues National Arbitration Forum for Fraud, Misrepresentation, Deceptive Trade Practices

Minnesota Attorney General Lori Swanson filed suit this week against the National Arbitration Forum of Minnesota, the nation's largest arbitration company for consumer credit disputes, accusing it of consumer fraud, false advertising and deceptive trade practices by "misrepresenting its independence" and hiding its "extensive ties" to the collection industry.

The Attorney General's lawsuit claims the National Arbitration Forum has ties to debt-collection law firms and works against consumers by virtue of having a mandatory arbitration clause set forth in a credit card, bank, or retail contracts. Hundreds of thousands of consumer disputes are resolved each year not by a judge or jury, but by a private arbitration system.

The Attorney General’s suit alleges that the National Arbitration Forum represented to consumers and the public that it is independent and neutral, operates like an impartial court system, and is not affiliated with and does not take sides between the parties.

The lawsuit alleges that the National Arbitration Forum, while holding itself out as impartial, works behind the scenes—alongside creditors and against the interests of ordinary consumers—to convince credit card companies and other creditors to insert arbitration provisions in their customer agreements and then appointing the Forum to decide the disputes.

The lawsuit alleges that the Forum pays commissions to executives whose job it is to convince creditors to put mandatory arbitration clauses in their customer agreements. The suit alleges that the Forum does this to generate arbitration filings in the Forum—and hence, revenue—for itself.

The lawsuit alleges that, despite telling consumers and the public that it is not affiliated or aligned with the collection industry, the Forum in fact has financial ties to the collection industry.

The lawsuit alleges that, beginning in 2006 and through 2007, Accretive—a family of New York private equity funds—engineered two transactions. In the first transaction, Accretive formed several equity funds under the name “Agora” (meaning “Forum” in Greek), which invested $42 million in the Forum.

In the second transaction, three of the country’s largest debt collection law firms—Mann Bracken of Georgia, Wolpoff & Abramson of Maryland, and Eskanos & Adler of California—merged into one large national law firm called Mann Bracken. Accretive then acquired the majority interest in a debt collection agency called Axiant, which acquired the collections operations of Mann Bracken. Through these transactions, Accretive took control of one of the country’s largest debt collection enterprises and became affiliated with the Forum, the country’s largest consumer collection arbitration company. The lawsuit alleges that Accretive principals remain actively involved with the Forum.

The lawsuit states that, in 2006, the Forum processed just over 214,000 consumer collection arbitration claims, of which 125,000, or nearly 60 percent, were filed by the above law firms.

Swanson said that the Forum was aware of the affiliation problem in 2006 when it negotiated its relationship with Accretive. She pointed to an email from an officer of the Forum to the hedge fund stating: “…we should certainly plan for unwinding any deal in the event shared ownership becomes an acute issue.”

We'll follow this interesting story.

View the complaint here:
http://capwiz.com/nacanet/attachments/MN_Complaint_Against_NAF.pdf

Sources:
MN Attorney General Press Release

http://www.politicsinminnesota.com/2009/jul14/3464/swanson-files-suit-against-national-arbitration-company

Business Week

Debt Solutions companies under attack by authorities

Debt settlement companies are for-profit companies that claim that they can eliminate consumers’ debts by negotiating settlements with creditors that are a fraction of the consumer’s outstanding debt. If you watch television these days, their advertisements show up as often as those for drug companies. Many of these companies accomplish very little for consumers while charging exorbitant fees and make empty promises that leave consumers in worse financial state then when they began.

These debt solution companies prey on desperation, offering false hope and no help, often driving these consumers even further into debt and ruining their credit.

Some debt solution companies advise consumers to do one of the following:

1. Stop paying debts

The Problem: this causes customers to face unforeseen late fees, additional interest, increased collections attempts, and even lawsuits by their creditors.

2. Stop paying debts and, instead, to place money into savings account so that enough money will accumulate to allow a settlement offer to be made to any creditors.

The Problem: The debt settlement companies’ saving plans are often extremely unrealistic, so that the promised negotiated settlements do not occur, but the debt settlement companies’ still take their fees. Also, the debt settlement plans are generally premised on consumers aggregating savings, over one to three years, from which both the payment of the company’s fees and any negotiated settlement are to be made. Yet most consumers who are targeted by these companies are unable to meet the savings requirements because of their precarious financial situation.

3. Ignore collection efforts or refer those efforts to the debt settlement company.

The Problem: it doesn’t work and consumers continue to find themselves subject to creditors’ collection efforts, including lawsuits, and consumers’ credit histories are further damaged when the consumers stop paying debts.

4. Seek additional sources of funds through means such as selling their blood plasma, mowing lawns, cutting down on car insurance and borrowing from their neighbors and church.

The Problem: Even for those consumers who can meet the requirements set out by a plan, their amount of aggregated savings is ordinarily insufficient to settle their debts. As a result, many consumers find themselves worse off financially because of these debt settlement plans. I suspect that much litigation will arise against debt settlement companies who engage in this type of conduct.

To read more about the actions being taken by the New York Attorney General, see here (http://www.oag.state.ny.us/media_center/2009/may/may19b_09.html)

Chris Hellums may be contacted at ChrisH@PDKHLAW.com