A consumer debt buyer recently agreed to a $12 million settlement to resolve allegations by the Massachusetts Attorney General’s office regarding various allegedly illegal debt buying and collection practices.
Specifically, the Massachusetts Attorney General has entered into a cessation insurance with the Consumer Debt Purchasing and Collections Company and its affiliates. The company has denied all allegations made in the insurance, but has agreed to pay a $4.5 million fine, cease collection activities on an additional $7.5 million in uncollected debt and to comply various restrictions on its business practices with Massachusetts debtors.
A copy of the Termination Insurance is available at: Insurance Link.
Accounts referred to a disbarred law firm
The Massachusetts attorney general alleged that the company purchased portfolios of “written off” debt from creditors that included delinquent credit card accounts and loans.
The company has contracted collection of most debts to a Massachusetts law firm. The law firm sued the debtors on behalf of the company and also allegedly used the threat of a lawsuit to induce the debtors to pay the debts allegedly owed to the company. The law firm falsified internal records to make it look like it had filed a lawsuit when in many cases it had not. In 2011, the law firm’s director was officially disbarred by the Massachusetts Supreme Judicial Court.
When the Company discovered the law firm’s misconduct, the Company recalled the debts owed to the law firm and attempted to detect and correct the information falsified by the law firm. However, the company could not detect the falsified or incorrect information and placed over 19,000 of these debts with a new law firm for ongoing collection.
According to the Massachusetts Attorney General, since many of these debtors were never sued by the law firm, the statute of limitations expired and the company and the new law firm were barred from collect debts without providing the information required by 940 CMR. 7.07(24) for such debts.
The Attorney General alleged that “the company’s new law firm proceeded to collect the debts on which the statute of limitations had run without including the language required by 940 CMR 7.07 (24)”.
Initial disclosures required by state law
Further, the Massachusetts Debt Collection Regulation, 940 CMR 7.08(2) states in part that “it shall constitute an unfair or deceptive act or practice for a creditor not to provide to a debtor or a debtor’s attorney what follows within five business days after the initial communication with a debtor in connection with the collection of a debt, unless the following information is contained in the initial communication or the debtor has paid the debt:
a) The amount of the debt;
(b) The name of the creditor to whom the debt is owed;
(c) A statement that unless the debtor, within 30 days of receipt of the notice, disputes the validity of the debt, or any part thereof, the debt shall be presumed valid by the creditor; and
(d) A statement that if the Debtor notifies the Creditor in writing within 30 days of receipt of such notice that the Debt, or any part thereof, is disputed, the Creditor will obtain verification of the Debt and provide to the debtor, or an attorney for the debtor, additional documents described in 940 CMR 7.08(2).
Under 940 CMR 7.08(2), if the debtor disputes the debt in writing, the person seeking collection must provide:
“a) All documents, including electronic records or images, which bear the signature of the debtor and which relate to the debt to be collected;
(b) A register, account card, copy of account statement or similar document, whether paper or electronic, showing the date and amount of payments, credits, balances and charges relating to debt, including, but not limited to, interest, costs, charges or costs incidental to the principal obligation that the creditor is expressly authorized to recover by the debt-generating agreement or authorized to recover by law;
c) The name and address of the initial creditor, if different from the collecting creditor; and
d) A copy of any judgment pronounced against the debtor. »
and all collection efforts must cease until the person seeking collection “has made reasonable efforts to obtain the necessary information and provide that information to the debtor”.
The Massachusetts attorney general alleged that the company failed to provide the required statement under 940 CMR 7.08.
Account Level Documentation
In addition, the company allegedly did not obtain certain account-level documents when it acquired many of the debts, including documentation provided to the debtor by previous owners of the debts, full transaction history of the debts and copies of all final judgments rendered to the seller.
The company also allegedly entered into debt purchase agreements that did not require the seller to provide such documentation at the account level, and which limited the seller’s liability for the accuracy and validity of the debts.
Excessive calls
Massachusetts Debt Collection Regulation 940 CMR 7.04(l)(f)” prohibits a debt collector from making more than two telephone calls to a debtor’s residence, cell phone, or other personal telephone in a seven-day period “. Outgoing calls which do not reach a consumer, or where no message is left for the consumer, are included as the “initiation” of communication with any debtor by telephone pursuant to 940 CMR 7.04(f).
The company did not include “outbound calls where its collectors did not reach a consumer, or decided not to leave a message on an answering machine” in its call frequency limits. “As a result,” the Attorney General alleged, “in certain circumstances, the company exceeded the number of appeals permitted by 940 CMR 7.04(1)(f) in a seven-day period.”
Collection on exempt income
“Under Massachusetts law, exempt income is categorically exempt from court-ordered payment and includes, among other things, Supplemental Security Income (“SSI”), Social Security Disability Insurance (“SSDI”) ), unemployment assistance and retirement benefits.
The Attorney General alleged that the company and its law firm received or attempted to collect exempt income from the debtor.
Insurance
The company denied the allegations but accepted a $4.5 million fine from the Commonwealth of Massachusetts. The company also agreed to a variety of restrictions regarding Massachusetts debtors and not to attempt to collect $7.5 million in debt written off from Massachusetts debtors that the company had previously purchased.
The assurance also contains a provision that if the Company acquires a debt collection entity in Massachusetts, the acquired entity will have a 90-day transition period before it must also comply with the terms of the ‘insurance.
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