Posts Tagged ‘Fair Debt Collection Practices Act’

Alleged Collection Mill Agrees To Settle Class Suit Over Cursory Case Handling

Hackensack law firm Forster, Garbus & Garbus has agreed to pay $35,000 to settle claims that it filed hundreds of debt collection suits against consumers without individual attorney review.

The firm allegedly violated the federal Fair Debt Collection Practices Act, 15 U.S.C. 1692e(3), by giving a false impression that an attorney was involved in the filing of those complaints, when in fact they were mass-produced.

The suit, Krug v. Forster, Garbus & Garbus, 10-cv-1844, touches on an inchoate area of law — namely, how much investigation an attorney must perform to determine the validity of an alleged debt before filing a collection suit.

“It’s a new area and the case law hasn’t developed yet,” says the named plaintiff’s lawyer, Philip Stern, head of a Maplewood firm.

A joint motion filed Monday in District Court in Newark seeks approval of the settlement, which calls for Forster Garbus to pay $7,500 to class members and $27,500 in legal fees.

The plaintiffs are debtors who were served with complaints filed by Forster Garbus on behalf of Arrow Financial Services in Special Civil Part in Cumberland County for a one-year period starting in April 2009.

Named plaintiff Karl Krug, of Millville, was alleged to have defaulted on a $4,947 credit card bill to Washington Mutual Bank. The bank sold the debt to Arrow Financial Services of Nile, Ill., which, in turn, retained Forster Garbus in an attempt to collect from Krug.

In April 2009, Forster Garbus sent Krug a dunning letter which stated, in part, that “at this time, no attorney with this firm has personally reviewed the particular circumstances of your account.” In June of that year, a nonattorney at the firm left two phone messages on Krug’s answering machine. On June 5, the firm sued Krug on behalf of Arrow. Partner Glen Garbus signed the complaint.

Krug retained Stern, who won dismissal of the collection case in April 2010 after Arrow was unable to present business records to show the debt was valid. The current suit was filed that month.

Stern says a ruling in the Eastern District of New York, a few months before Krug’s suit was filed, was the first to hold that an attorney violated the FDCPA by filing a collections suit without anything more than a cursory inquiry into whether the debt is valid. In Miller v. Upton, Cohen & Slamowitz , 687 F. Supp. 2d 86 (E.D.N.Y. 2009), which stemmed from an alleged default on a Lord & Taylor charge account, the court rejected the lawyer’s assertions that his general knowledge of credit practices at the retailer and its national collections counsel were a substitute for specific knowledge of an individual file.

Krug’s complaint cited New Jersey Court Rule 1:4-8, which requires a lawyer signing a complaint to have read it and to have conducted a reasonable inquiry that the allegations of the case have factual support.

The suit also claimed that Forster Garbus placed telephone calls to class members that falsely conveyed the impression that the person calling was an attorney, and those calls failed to provide meaningful disclosure of the law firm’s identity as caller or to disclose that the firm is attempting to collect a debt and that any information obtained will be used for that purpose — all in violation of the FDCPA.

Of the $7,500 payable to class members under the settlement, $2,500 is to go to Krug and the rest will be distributed among the roughly 200 class members, who stand to receive around $25 each. Stern says that although the recovery may seem modest, it’s more than the class members would get as damages under the FDCPA if the case were tried.

The pool of $5,000 distributed to class members is greater than would be available if the case was tried, says Stern. The FDCPA limits recovery in such cases to the 1 percent of the defendant firm’s net worth, but Forster Garbus agreed in the settlement to go over the 1 percent limit, says Stern. He is bound to keep the firm’s net worth confidential.

Forster Garbus was represented in the case by Gregg Kahn of Wilson Elser in Newark, who did not return a call. Garbus, a named defendant, also did not return a call.

Source: New Jersey Law Journal

Stop Debt Collectors before They Start: Deferments on Student Loans

Debt Collectors can be nasty and have earned their reputation for not being easy to deal with. It is easier it seems to avoid them altogether, hoping that the problem will go away on its own. Unfortunately, collection agencies have a hard time giving up. They know they are supposed to work within the rules set forth in the FDCPA and yet they often continue to violate them one way or another. They know that a debt collector can do more to make life difficult and aggravating for consumers when it comes to student loans, than other collections, and can take a judgment against you without even filing a complaint. Federal loans also carry with them the opportunity for debt collectors to have employment wages garnished or have a tax refund paid to the lender directly.

If you have a Federally sponsored student loan and cannot pay, and wish to avoid debt collectors, either write a letter demanding the collector to cease contact; or, ask in writing for a deferment on your loan; or better yet, negotiate the balance, perhaps through an attorney (not a “debt settlement company”). Because student loans are different types of debt than typical consumer purchases, debt collectors are often instructed by the lender to agree to deferments or in some cases a reduction of the entire amount, payable over time. Whether it is because of a difficult economy, finding and keeping a job, a disability, care for a family member, personal illness or military service, these options can be very helpful and make things easier for you to handle.

No Harassing Debt Collectors

The recession means more people are falling behind on their bills. The last person you want to hear from is a debt collector.

Some debt collectors are just doing their job, but others cross the line.

Fox 29 Consumer Reporter Michelle Buckman explains how to stop debt collector harassment and maybe even collect some money from them:

Read the story on MyFoxPhilly.com here: Real Deal: No Harassing Debt Collectors

Debt Collection Agencies Must Prove That Debt Exists

Consumer credit laws are being created in many states that will force debt collection agencies to prove that the debt they purchased for pennies on the dollar exists and the consumer legitimately owes the money. North Carolina recently passed a law this month that requires debt buyers who file a lawsuit to provide documentation proving that they own the debt. In Indiana, there is the Indiana Deceptive Consumer Sales Act prohibits debt collectors from intentionally overstating the amount of the debt they are trying to recover.

National consumer credit laws such as the Fair Debt Collection Practices Act already prohibit collection agencies from harassing, deceptive or unfair practices such as telling neighbors or relatives about what is owed, or calling before 8 a.m. or late at night.

Since the recession started, at least a half-dozen states have adopted additional limits, like imposing statutes of limitations on collections and adding opportunities to punish abusive practices in court. Other states may soon follow suit.

Read the full story here: States adding limits, forcing agencies to prove debt exists.

Debt Collection Calls Can Be Stopped

There is nothing more bothersome or stressful than having debt collectors call and threaten you. Pay up or we will alert your neighbors. Pay up or we will contact your family. Pay up or we will garnish your wages. The threats get more and more vindictive with each call, and often these collectors act in such a heartless way, using obscene language and making such terrible threats, that you feel you are trapped. The good news is that you are not trapped. You do have rights and you should not be afraid to use them.

The purpose of our credit law blog is to educate you on your rights under the Fair Debt Collection Practices Act (FDCPA). This law is designed to stop collectors from being abusive and unprofessional. Even if you owe money and the debt is really yours (you will be amazed at how many folks are called for another person’s debt), the collector must still treat you fairly and respectfully.

If you have been the victim of abusive or deceptive debt collection practices, please drop us a note or call us at 1-800-NOT FAIR (1-800-668-3247) and discuss your situation with us. If we can help, it’s completely cost-free to you.