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.
Graduation season is upon us. On campuses around the country the sights of robes and graduation caps, the sounds of “Pomp and Circumstance,” and the photos of loved ones celebrating the day fill the senses of graduates, friends, and families as one chapter comes to an end and they embark on a new one. Unfortunately, as the excitement calms, many recent graduates are confronted with the harsh reality of overwhelming amounts of debt. Most will then truly enter the world of responsibility by having to come up with ways of paying down their debt and fielding the phone calls from debt collectors. So, how can they pay down debt and stop collection calls?
Inevitably, that credit card is the main source of problems. Students spend more than they can afford and as they transition to their adult lives, and the interest payments alone can be overwhelming. It doesn’t take long after graduation for the bills to start coming in. Just as they congratulate their kids on a job well done, parents undoubtedly ask their children in shock, “You owe how much?”
A blog post on Forbes.com says that credit card companies want college students to be in debt because, frankly, that’s how they make money, pointing out that “students are easy targets” because they live in the moment, and are “deluded into thinking the credit card won’t present a problem when it comes time to pay.” Just when it couldn’t get any worse, the collection calls begin.
Even grads who have secured a job in this difficult economy may find it all too easy to fall behind on their bills. Defaults and past-due balances go from being something on paper to something they are confronted with in their lives. The same students that were “easy targets” for credit card companies now are “easy targets” for collectors and their tactics. They must come up with a plan to address their immediate financial well being and their long term needs, and they must learn what rights they have to stop the collection calls once and for all. Here are some tips for the indebted and the frustrated grad:
1. Take any job. You may not find your dream job right way, but you will be making money and creating networking opportunities.
2. Learn to save. Throwing away money at the club like you did in college has to become a thing of the past.
3. Deal with student loans NOW if at all possible. Pay what you can. If you don’t have a job, contact the lender and work out a plan.
4. Stop collection calls. This is easy. Consumer lawyers can stop the collection calls quickly and without charge. Learn your rights under the FDCPA and hire an attorney if you are experiencing debt harassment.
5. Pay off credit card debt and stop using that card! Spend only what you can pay in a 30 days cycle and don’t overdo it. Come up with a payment plan to get out of the red and into the black.
The Federal Trade Commission (FTC) alleges that debt collection agency, West Asset Management, violated the Fair Debt Collections Practices Act (FDCPA) on multiple occasions, leading to thousands of consumer complaints.
Century Negotiations President Amy Michalo-Rojas urged clients, and the general public, to stay informed about these types of cases so they can recognize when a debt collector violates their legal rights.
West Asset Management allegedly violated the FDCPA—the law designed to protect consumers against deceptive and harassing debt collection tactics—by calling consumers multiple times a day, using rude and abusive language, taking funds without consumer permission, falsely claiming consumers would be jailed or sued, and even contacting consumers regarding debts that did not belong to them.
“Many factors can inspire a debt collector to break the law, from an unethical work environment to the challenge of collecting in a recessed economy,” explained Michalo-Rojas. “But individual consumer awareness and reported complaints can stop these violators and warn potential lawbreakers against similar behavior.”
The Fair Debt Collections Practices Act, or FDCPA, was enacted to protect consumers from overzealous debt collectors whose methods include harassment, threats and coercion. To these businesses a consumer is nothing more than a number representing dollars and cents, part of the profit margin and nothing more.
These debt collectors view their violations of the FDCPA as a business decision instead of a lawful requirement that may must abide by. Their disregard of this law is clearly expressed in the following insider marketing documents that were sent out to various debt collectors offering litigation services.
Each year the Federal Trade Commission (FTC) provides Congress with a report on the Fair Debt Collection Practices Act (FDCPA). While the report focuses heavily on the number of complaints received from consumers, it also summarizes actions that the FTC has taken to “curtail deceptive, unfair, and abusive debt collection practices.”
As in years past, the FTC received more complaints about the debt collection industry than any other industry. In 2009, the FTC received 119,364 complaints about first- and third-party debt collectors, up from 104,766 in 2008—an increase of nearly 15,000 complaints. With that said, it is important to point out that the FTC does not investigate each complaint to determine if there was an actual violation of the law. The FTC acknowledges that not all of the complaints received are violations of the Act. It is also worth noting that although the total number of complaints increased, so did the number of consumers who fell past due on credit obligations. An increase in the number of past due consumers opens the door for an increase in the number of complaints.
We encourage you to download and review the 2010 FDCPA report in its entirety to become familiar with its contents, and if you haven’t reviewed the Fair Debt Collection Practices Act lately, you might consider doing so while this article has your attention.
We review the top five FDCPA complaints received by the FTC in 2009 and point you to the corresponding section of the FDCPA.
#5 Communicating with Third Parties Repeatedly to Obtain Location Information.
“This past year, 19.2% of complaints, or 16,926 complaints, claimed that collectors called a third party repeatedly to obtain location information …”
The FDCPA §804(3) says: A debt collector shall not communicate with a third party more than once unless requested to do so by the third party, or unless the debt collector reasonably believes that the earlier response of the third party was erroneous or incomplete and that the third party now has correct and complete location information.
#4 Threatening Action Which Cannot or Is Not Intended to Be Taken.
“In 2009, 20.9% of FDCPA complaints, or 18,438 complaints, reported that third party collectors falsely threatened a lawsuit or some other action that they could not or did not intend to take…”
The FDCPA §807(5) says: A debt collector shall not threaten to take any action that cannot legally be taken or that is not intended to be taken.
#3 Failing to Send the Required Validation Notice.
“Last year, 25.7% of the FDCPA complaints, or 22,708 complaints, reported that collectors did not provide the required notice….”
The Fair Debt Collection Practices Act §809(a) says: Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice …” (The notice is referred to as the Validation Notice and includes the amount of the debt, name of the creditor, and important information regarding disputes and verification.
#2 Demanding a Larger Payment Than is Permitted by Law.
“This category includes two different FDCPA law violation codes. First, the FDCPA prohibits debt collectors from misrepresenting the character, amount, or legal status of the debt. Other complaints in this category state that collectors have sought to collect on debts that have been discharged in bankruptcy. In 2009, 31.1%, or 27,420 FDCPA complaints, described this conduct.”
The FDCPA §807(2) says: A debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. This includes the false representation of the character, amount, or legal status; or any services rendered or compensation which may be lawfully received by any debt collector for the collection of a debt.
#1 Calling Repeatedly and Continuously.
“In 2009, 46.5% of FDCPA complaints the FTC received, or 41,028 complaints, claimed that collectors harassed the complainants by calling repeatedly or continuously.”
The Fair Debt Collection Practices Act §806(5) says: A debt collector may not cause a telephone to ring or engage any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.”
Voicemails from bill collectors are a reality when you have been turned over to collections. The dirty secret debt collectors don’t want you to know about is that they very often violate the law (Fair Debt Collection Practices Act – FDCPA) when they leave a voicemail message.
They know they are violating the law but they still do it anyway.
There are three types of illegal voicemails:
Illegal threats or lies.
Third party disclosures.
Failure to leave the mini-miranda.
Debt collectors often call repeatedly when collecting a debt, leaving messages whenever possible and rely on the fact that consumers often don’t know their rights.
Debt Collection Harassment Attorney Craig Thor Kimmel was recently interviewed by the radio talk show, “The Voice”, on WEEU 830AM in Berks County, PA. In this interview Craig explains how CreditLaw.com helps consumers with debt collection harassment and violations of the Fair Debt Collection Practices Act while answering questions from consumers who called into the show. Please use the following link to listen to the entire radio interview:
Four hundred million times a year, employees of a little-known company called NCO dial the telephone “just to talk.”
NCO’s hope: A simple chat will convince people to pay old debts.
“We have to strike a bond with someone,” said the company’s CEO, Michael Barrist. “We want them to explain their situation to us, and we’re going to try to work out an arrangement that they and the client can live with. That is our goal, so that they can pay our client.”
Despite the best wishes of Barrist, the world’s largest debt collection company generates thousands of consumer complaints about its practices each year and has paid settlements of $1.8 million to federal and state authorities.
But officials at NCO Group, based in the Philadelphia suburb of Horsham, Pa., insist that NCO takes pains to follow state and federal laws. Abuses by NCO collectors are the exception, not the rule, Barrist said.
“People have a perception of what and who the debt collector is,” Barrist said. “That’s not us.”
With unemployment and foreclosures rising, Americans now face more pressure from debt collectors, who must work harder to squeeze out payments in lean times, according to consumer advocates and industry experts. Consumers are increasingly complaining about debt collection practices to the Federal Trade Commission, and many of those complaints are levied against the industry giant, NCO, which employs 15,000 debt collectors worldwide and holds 600 million to 1 billion collection accounts at any time.
“We clearly understand that people don’t like being called by collection agencies,” Barrist said. “And we can’t make it a pleasant experience because nobody’s ever going to say, ‘Gee, I’m glad you called today.’ But we try very, very hard to make sure it’s done professionally.”
Since 2007, NCO has generated 7,964 consumer complaints to the FTC, nearly twice as many any other debt collection company.
Many of the complaints claim the company violated federal law by misrepresenting debt, repeatedly calling other people, and failing to send written notice, according to the FTC records.
Furthermore, the rate of complaints against NCO is rising faster than the collection industry as a whole. During 2009, all debt collection complaints to federal authorities are on track to increase 6 percent over 2007. In the same time period, complaints against NCO have risen 23 percent.
“I think we have the best record in the industry, statistically,” Barrist said, since the company handling the most accounts is likely to have the most complaints. “With that said, I take every one of these complaints seriously. I’m a big believer that regardless of whether NCO is at fault or not, the first thing we should be doing is saying we’re sorry and hearing what is going on.”
The FTC disciplined NCO in 2004 with a civil penalty for $1.5 million for misreporting consumer information to the credit reporting agencies, according to the FTC. Barrist blamed the blunder on another collection company, now-defunct Commercial Financial Services, which had worked the debts before NCO.
In 2006, Pennsylvania authorities settled with NCO after the company generated 800 complaints over a two-year period. NCO paid the state $300,000 and promised to follow the law. A spokesman for the FTC declined to say if it is taking any action against NCO, and a spokesman for the Pennsylvania’s attorney general office said it doesn’t have any pending cases against NCO.
Founded in 1926 as National Collection Office by Barrist’s grandfather, the company has grown explosively in the last two decades. In 1991, NCO had 63 employees, according to a company profile at the time. Now, it has 34,000 employees, about half of whom work in collections, according to Barrist.
Consumer advocates argue that the only way to get results in tough times is to be as aggressive as possible. Ira Rheingold, executive director of the National Association of Consumer Advocates, points out that NCO pays its collectors in part based on how much money they can recover.
“You’re going to see lots of bad behavior,” Rheingold said. “Institutionally, you have created a system that will encourage abusive behavior and harassment.”
Barrist disagrees. Outrageous tactics don’t work — and they hurt a collection company’s bottom line, he says.
“If you’re abusive to them on the phone, they’re not going to pay you,” he said. “All it does is start a whole chain of complaints and problems for the company.”
