Buffalo collection firms
are part of an industry
that too often uses
threats and lies to
collect millions in
unpaid bills
By FRED O. WILLIAMS
News Business Reporter
7/23/2006
Joel Castle, a debt
collection pioneer in
Buffalo, says some
agencies need to be
reined in. "There have
been people in the past
that have crossed the
line, (but) I've never
seen it as bad as now."
Buffalo debt collectors are spreading havoc. They coerced Sally Beckmann to pay $5,300 in credit card bills - and it wasn't her card. They rained calls on Nadine Frankenfield as she tried to recover from lung surgery, then denied it. And they told Barbara Roan to pay her ex-husband's $7,300 debt or go to jail.
"I was afraid to open my door because there might be a cop there to arrest me," the Illinois grandmother said.
People don't get sent to debtors prison anymore. In fact, it's against the law for collectors to shake people down with false threats and harassment.
But that's what some collectors - even law firms - are doing. And Buffalo, a hub for the collection industry, is prominent in debtors' complaints.
"There must be something in the water in Buffalo that makes people mean," said Dale Pittman, a Petersburg, VA., lawyer who has sued area agencies. In a six-month investigation into the debt collection industry, The Buffalo News found:
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Complaints filed with federal regulators have quadrupled in four years - led by people who say they don't owe money. State regulators also see surges in complaints.
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Banks sell their old debts on a wide-open market and then turn their backs on illegal and unethical collection tactics.
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The $1,000 civil penalty faced by unscrupulous collectors has been the same for 30 years, making aggressive tactics profitable.
"The whole nature of the industry is there are incentives to be aggressive," said Peggy L. Twohig, an official in the Federal Trade Commission's Bureau of Consumer Protection. "The collector makes more if they collect more debts - the incentive is there to cross the line."
Agencies usually keep 10 cents to 50 cents of each dollar they collect, and their workers earn more the more they bring in.
Collectors say that deadbeats file groundless complaints to wiggle out of paying and that real abuses are a tiny fraction of the calls they make.
The consumer outcry "is largely due to the fact that there's a tremendous amount of bad debt that's being referred to collectors," said Rozanne M. Andersen, general counsel of ACA International in Minneapolis, formerly the American Collection Association.
Consumer debts are up 16 percent since 2001, and last year's bankruptcy law changes will make it harder to erase them. Collection agencies have added almost 10,000 jobs in the past four years.
But an increase in dunning calls isn't the whole story, consumer advocates say.
"When you compare the amount [collectors] pay for lawsuits compared to what they collect, it's a cost of doing business," Amherst consumer lawyer Kenneth Hiller said.
Fingers point at
Buffalo
Consumers are howling about abusive tactics. And while Buffalo collectors are hardly the sole culprit, many fingers are pointing in this direction.
Watchdog agencies in Maine, Idaho, Colorado and New York have come down on Buffalo-area firms, while the FTC collects more than 500 complaints a year about the area.
Consumer lawyers say Buffalo is driving many clients like Beckmann, Frankenfield and Barbara Roan to their doors. Roan laughed, at first, when the woman from Lenahan Law Office told her to pay $7,300 for her ex-husband's six-year-old credit card bills. She hadn't spoken to him for years. But the caller said she faced a criminal charge.
"She finally got me convinced," Roan said of the collector. "She kept telling me I needed a lawyer because I was going to jail - I was such a nervous wreck I went to the doctor."
Besides going on antidepressants, the incident also forced her to contact her ex-husband for the first time in years - to ask if he had accused her of fraud. "I didn't want to [call]," Roan said, "but I wanted to find out what was going on."
When another Illinois woman came forward with a tale of similar threats, a federal judge fined the Buffalo-area firm the standard $1,000 federal penalty - plus $150,000 in state punitive damages.
"Why has Buffalo become the debt collection capital of America - the steel mills are gone and this is what they chose to replace them with?" asked Richard N. Feferman, a New Mexico lawyer and Eggertsville native. "It's an industry that's a little out of control."
The phrase "Buffalo-style collecting" appeared in a New Jersey newspaper, the Randolph Reporter, in February as a synonym for tough tactics.
The industry shows a different face to the local economy. One agency owner wears the license plate "WELUVDBT" on his Land Rover. That could be the motto for the entire region: Call centers from downtown Buffalo to rural Wyoming County make this one of the collection industry's top 10 hubs. The offices employ some 5,000 people, and the pay is good. Workers earn $34,000 a year on average. A grateful state gave $1.4 million in taxpayer money to area agencies since 2002.
"Collections is a
legitimate industry -
it's not run by a bunch
of thugs," said Larry
Costa, marketing vice
president at Capital
Management Services in
Buffalo.
A few bad apples?
The region hosts some 43 collection agencies, including an office of the nation's biggest, NCO Financial.
The actions of a few companies shouldn't tarnish the industry's reputation, Costa said. "There are good, highly reputable firms here," he said. "There may be ones that are questionable, but that's not unique."
But other collectors called for stronger enforcement to rein in harsh tactics.
"The FTC and the attorney general haven't really done what they should be doing," said Joel Castle, a second-generation collector and a founder of the industry's Buffalo presence.
"There have been people in the past that have crossed the line, [but] I've never seen it as bad as now with these law firms that are in collections," he said.
Several collection offices that operate as law firms around Buffalo are using abusive tactics, according to regulators and consumer lawyers around the country. The owners of Lenahan Law Offices went bankrupt in December under the weight of court penalties for collection abuses. Giove Law Office was banned from collecting in Idaho for threatening debtors with criminal charges. Collins Law Office agreed to stop calling Maine consumers after a crackdown by state consumer officials.
Officials also point the finger at some of the area's oldest and largest collectors. Creditors Interchange in Cheektowaga paid New York's attorney general $60,000 in 2003 to settle complaints about revealing people's debts to outsiders. The next year, Minnesota fined the company $10,000 for false threats and other violations.
Even industry leader NCO Financial, with an office in Getzville, has come under fire. In January the company paid $300,000 to Pennsylvania's attorney general to settle 800 complaints from around the country.
NCO and Creditors Interchange denied wrongdoing.
Collection is a necessary cog in a debt-fueled economy, but collectors who push too hard can jeopardize jobs with a barrage of calls to the office, damage reputations by revealing debts to outsiders and make people cower in their homes with fear.
Even worse, the pressure isn't reserved for debtors. A growing number of people say they're being hounded for money they don't owe. At the FTC, 42 percent of complaints charge that collectors had the wrong person or demanded extra money.
Paying another's bills
Seattle-area resident Sally Beckmann paid $5,300 in credit card charges in 2004 after a collector convinced her she was on the hook for her sister's bill.
"They threatened to garnish my wages and put a lien on my house," the supermarket worker said. "They had so much information, I just believed it."
The collector said her sister put Beckmann's name on a credit card application, but the sister denied it and took the collector to court. Beckmann wound up getting her money back when her sister settled with Giove Law Office in Niagara Falls. The incident tore a rift in her family, she said.
"I had put out $5,500, so I was a little irked," Beckmann said. "We wanted to retire - this put a wedge between us. It was bitter for a while."
Rodney A. Giove denied wrongdoing in court papers and didn't respond to inquiries.
Abusive practices can spread quickly, one Buffalo-area worker said. "There's so much money to be made, it's easy to cross the line," he said. At this worker's office, managers gave lucrative accounts to top performers while turning a deaf ear to their tactics. Aggressive collectors pulled down bonuses of $4,000 a month and threats became common, even though managers officially denounced them.
"The bottom line was how much money you were putting on the board," the worker said. "I heard collectors threatening children on the phone [that] the marshals would be there to take their mother and father away."
Mere telephone calls - even threatening ones - may seem harmless, but they can squeeze some people like a vise.
Nadine Frankenfield was resting at home in Bethlehem, Pa., after lung cancer surgery when a collector barraged her with angry calls. When she told him to stop because she was short of breath, the man said he "didn't call to hear about your lungs," she said in court papers.
The company, National Action Financial Services in Amherst, denied making the calls, but phone company records showed seven calls on a single day in 2003.
Frankenfield's court case turned up a training booklet that urged workers to exploit "gray areas" in rules against false threats by using "hypothetical statements" instead of explicit threats. Company officials didn't respond to questions.
Collectors explain surge
Industry representatives aren't convinced that abuses are growing. Friction with debtors is a fact of life in the collection business, and a slowdown in the rise of FTC complaints last year shows the trend is "turning the corner," Andersen of the industry association ACA said.
While collectors say that deadbeats use complaints to skip debts, consumer advocates say that many other people face threats and harassment in silence.
Buffalo isn't just a source of the problems, it's also a target. Metro area residents filed 121 complaints about collectors with the FTC last year, among 2,700 statewide.
Industry rolls on
Fighting with consumers isn't hurting the collection industry's growth. In Erie County, jobs leapt 35 percent in three years through 2004, and agencies say they're poised to expand further. Since Jan. 1, four collectors announced expansion plans that could add another 855 workers by 2008.
"In bad economic times, business is good. In good economic times, business is better," said Castle, the former head of Great Lakes Collection Bureau, one of the nation's largest agencies before he sold it in 1997. Now he's starting another agency in Amherst that he says will grow bigger than Great Lakes.
"There is a bubble coming down in debt," he said, "that I think is going to be unprecedented."
Merchants of Debt - Part
2
'I tell everybody,
'Leave your heart at the
door. This is a
business.' '
7/23/2006
Harry Scull Jr./Buffalo
News
Eric
Boryszak, a star
collector at Account
Solutions Group in
Amherst, said you need a
thick skin to make it as
a debt collector. "I've
been called a lot of
different names in the
book. I don't take it
personal."
Tall and lean with
piercing gray eyes, Eric
Boryszak has the
charisma of a natural
salesman. Not that
it helps in his job. He
never meets the people
who ultimately provide
his living - people with
unpaid car loans or
credit card bills. They
only know him from his
businesslike voice on
the phone.
The voice is enough. It
brings in about $1
million a year of unpaid
debt, putting Boryszak
among the stars at
Account Solutions Group,
an agency with 580
workers where some
collectors earn
six-figure checks.
A thick skin is
required.
"I've been called a lot
of different names in
the book," the
38-year-old said. "I
don't take it personal."
Debt collectors have a
tough-guy image, and
lately complaints about
the industry have
exploded. But the people
making the calls reject
the stereotype of a
burly, cigar-chomping
tyrant.
Collectors say they're
just trying to make a
living under sometimes
extreme conditions.
They're under pressure
to bring in thousands of
dollars a month without
resorting to threats or
snapping back at irate
debtors.
"Rarely do I raise my
voice," Boryszak says.
"If it gets to that
point, I get up and walk
around."
The Tonawanda resident
is one of the thousands
of people who make
Western New York a hub
for debt collection. The
industry journal
Collections & Credit
Risk recently profiled
the area as a mecca, and
the numbers bear out the
claim.
Erie County had 3,600
collection jobs in 2004,
putting it among
industry centers like
Houston and New York,
according to the U.S.
Bureau of Labor
Statistics. Add another
1,100 jobs at Pioneer
Credit Recovery in
Wyoming County.
Low rents and wage rates
make Buffalo attractive
for call center
businesses, including
collections. Beyond
that, agencies here say
they actually benefit
from the region's harsh
winters, which keep
workers at their desks
during tax refund time -
prime time for
collecting debts.
Area collectors "work
paper" for retail
chains, car finance
companies and credit
card issuers like
Capital One and Bank of
America. Agencies'
help-wanted ads offer
jobs with no experience
necessary - sometimes to
people who are
"aggressive, assertive
and $$$$$$$ hungry."
Former truck driver Jim
Kuklewicz carved out a
living as a collector
when a layoff snuffed
his job at a linen
service in 1994.
"After a month I was
ready to quit because I
didn't think it was for
me," he said. A manager
turned him around and
now, at age 46, he is a
manager at Northstar
Group in Amherst, making
$70,000 to $100,000 a
year.
Kuklewicz coaches
struggling collectors to
improve, and his advice
is stern. "I tell
everybody, "Leave your
heart at the door. This
is a business.' "
Some collectors say
their companies boost
results by tacitly
encouraging hardball
tactics beneath a facade
of upright behavior.
When he went to work at
Redline Recovery in
Getzville, Frank J.
Bennett received a
squeaky clean telephone
script to use with
debtors.
That was in training. In
reality, the rules
against threats and
harassment went out the
window in the fervor to
bring in money, the
Youngstown man said.
"They're so hungry for
profits they'll cut
every corner," said
Bennett, 44.
One collector urged a
woman to get her son to
pay his debt, Bennett
said. Others mocked the
spiritual message on a
debtor's answering
machine and used racial
slurs in conversations
that could be overheard
by debtors, he said.
When Bennett objected,
he was told to ignore
what he overheard. He
said he was fired in
June after run-ins with
managers, having failed
to meet his monthly goal
of $3,500.
Joseph Moran, head of
the Georgia-based
company's Amherst
office, denied running
roughshod over
collection rules, saying
that would put his
company at risk.
"Our clients are
national banks," he
said. "If we get
ourselves in trouble,
they will pull their
business."
Collectors'
bland-looking call
centers are really
pressure cookers,
workers say. While top
performers earn big
money, others burn out
from sparring with
debtors - or bail out
after struggling to meet
quotas. How much, or
little, they have
collected is displayed
on white boards for
co-workers to see.
"It's competitive," a
Buffalo agency official
said. "If your name's
not up there, you've got
some explaining to do."
At Account Solutions
Group in Amherst,
Boryszak watched batches
of former co-workers
fail. "You have to have
- I don't want to say an
edge - you have to have
control of the
conversation," he said.
On the first day of one
recent month, he was at
his cubicle before 8
a.m., getting ready to
call 87 BMW drivers. Or
rather, ex-drivers whose
bimmers had been towed
back to the lot.
Boryszak's voice was
hoarse, having worked
the previous eight days
leading up to the
end-of-month "closeout,"
when bonuses are
determined.
At the
end of a month "I'm
walking out of here
thinking, "God, I'm
beat' - then you come in
the next day and you've
got to start all over
again."
- Fred O. Williams
Merchants of Debt - Part 3
Rogue
debt collector operated
under watchdogs'
noses—with taxpayer
money By
FRED O. WILLIAMS
News Business Reporter
7/24/2006
Edmund Vandeganachte of
Albion was threatened
with arrest and
prosecution by a debt
collector from Ohio,
over a bill he believes
he paid. He sued the
collector and settled
for an undisclosed sum.
Lenahan Law Office
didn't look like an
ordinary law firm.
It had six offices
around Buffalo, 100 to
200 debt-collection
workers, and just three
lawyers.
Then
there's its court
record. Not cases it
worked on, but civil
charges against it for
alleged shakedown
tactics.
More than 30 people
across the country -
including Maine's
attorney general -
alleged that Lenahan
bullied debtors for
money, even when they
didn't owe a dime. One
judge called its tactics
"egregious."
A dozen courts gaveled
down judgments totaling
$800,000, but the firm's
owners filed for
bankruptcy in December
before
paying the
penalties.
Collectors say they face
tight regulation under
debtor-protection law,
but Lenahan's story
raises questions about
the power of watchdog
agencies to stop abuses.
"There always seem to be
rogue debt collectors
who consider [penalties]
to be a cost of doing
business," said Robert
J. Hobbs, deputy
director of the National
Consumer Law Center in
Boston.
Steve Tripoli, a
spokesman for the
center, added, "There's
a new breed of company
that has figured out
there's very little
chance of penalty from
breaking the law."
For years, the Lenahan
offices collected a
million dollars a month
or more while leaving a
trail of browbeaten
people from Maine to
California, regulators
and court records say.
Now some of the former
Lenahan offices continue
to operate under new
names.
And instead of cracking
down on the abuses,
public officials might
have subsidized them
with taxpayer money. In
2003, agencies handed
nearly $600,000 in job
grants to a Buffalo
company whose owners are
accused of being the
real operators of the
collection outfit.
"Why do these guys with
a dismal track record
and a staff of two-bit
thugs . . . deserve a
half-million dollar
grant?" asked one
California woman who was
harassed by a collector
with a wrong number.
Maine's attorney general
says that a company
called Account
Management Services and
its owners, Mark Bohn
and Douglas MacKinnon,
operated the collection
business under the
Lenahan name.
"What we have seen in
your area are companies
that are, by all
appearances, simply debt
collectors but have
connected themselves
with some law firm, said
William N. Lund,
director of Maine's
Office of Consumer
Credit Regulation.
The collectors get the
leverage of a law firm's
name, as well as cover,
to avoid blame for
abusive practices, Maine
officials said.
Bohn said his company
buys up bad debt and
hires lawyers to
collect, including 18
firms around Buffalo.
Lenahan was what he
described as a
"pre-litigation" firm
that collected debts
with little courtroom
work.
Bohn denied that his
company ran the Lenahan
operation but
acknowledged that it did
provide office space. He
was disappointed with
the firm's record of
complaints, he said, and
both companies agreed to
part ways last summer.
"I can tell you it was a
life lesson learned
about attorneys and how
to monitor them," he
said during an
interview.
Getting taxpayer money
While it squeezed money from debtors, the Lenahan operation might also have collected from taxpayers.
In the
spring of 2003, Bohn and
MacKinnon created a
company called Account
Management Services of
New York LLC that
quickly won approval for
nearly $600,000 in
public subsidies. The
company was based at a
building on Great Arrow
Drive in Buffalo, a call
center it shared with
Lenahan Law Office.
Bohn's company promised
to save some jobs being
erased by the shutdown
of a company called
Telespectrum Worldwide,
the former occupant of
the Great Arrow Drive
building.
Empire State Development
Corp. awarded the
company $350,000 for
preserving 400 jobs at
the former Telespectrum
building. The Buffalo
and Erie County
Workforce Investment
Board granted an
additional $234,000 to
help train 395 workers.
Bohn denied that the
grant to AMS funded
training of Lenahan
workers, although he
says he does not
remember whether all 395
trainees covered by the
training grant were on
the AMS payroll.
"I don't think we were
ever sharing employees,"
he said.
The subsidies for AMS of
New York came during a
rush to replace jobs
being erased at
Telespectrum, officials
said. James Finamore,
director of the
workplace training
agency, said Erie County
Executive Joel A.
Giambra made a special
appeal.
"The county executive
sent us a letter
[urging] to do anything
we could for laid-off
Telespectrum employees,"
Finamore said.
Empire State Development
is suing the company in
an Albany court to get
its money back.
Who was in charge?
In court papers, the
owners of the Lenahan
firm, John D. Lenahan
and his daughter,
Danielle, painted a
different picture of
their links with Bohn's
company. Their testimony
was compelled by
lawsuits in Maine and
Texas.
Bohn and MacKinnon's
company did more than
supply accounts for
collection, the Lenahans
testified - it also
hired the workers,
provided office space,
handled the money and
kept the records.
The father-daughter team
and one associate were
the only lawyers at the
firm, they said. The
attorneys worked in a
small office in West
Seneca, separate from
offices where the
collectors worked.
The lawyers were
supposed to train and
monitor employees, but
they were not even aware
of all the offices that
operated under their
name. Danielle Lenahan
said she learned of one
Amherst location after
seeing the address cited
in a lawsuit against
her.
"I was shocked," she
said.
In return for
supervising collectors,
the Lenahan firm was
supposed to receive a
cut of the take, a deal
that yielded $5,000 to
$10,000 a month, the
Lenahans said. The
offices took in anywhere
from $1 million to $6
million a month, they
said.
Asked how many times he
had been sued for
collection activities,
John Lenahan testified,
"I couldn't even guess."
In an interview,
Danielle Lenahan
defended the firm's
collection record. She
said her offices made
dunning calls on
thousands of debtors, so
some complaints are
normal. "It's part of
the business," she said.
The court penalties
against her and her
father lack foundation
because the lawyers were
not able to defend the
cases, she said, leading
to one-sided "default"
judgments.
"Those were just
allegations," she said,
declining to comment on
individual cases. John
Daniel Lenahan did not
respond to requests to
comment.
But judges and
regulators across the
country decided that
they had seen more than
allegations.
Bankruptcy Judge Trish
Brown in California
called the firm's
tactics "egregious" for
threatening a woman
whose debts had been
erased in bankruptcy.
The collector falsely
said that "prosecuting
attorney Lenahan" had
filed a case against the
woman. And the threat,
implying criminal
charges, was left on her
mother-in-law's
answering machine.
Ignoring a state's ban
Maine's consumer credit
regulator banned Lenahan
from calling the state
in 2004 after seeing a
pattern of threats, but
even that did not end
the calls. After the
ban, someone from the
firm tried to collect
$1,800 from a woman who
owed about $500.
"Testimony from
witnesses revealed a
clear and consistent
pattern of illegal
behavior on the part of
Lenahan's collectors,"
Lund wrote after a
hearing in 2004.
Federal Judge Julie E.
Carnes in Georgia
penalized the firm
$135,000, including
$50,000 in punitive
damages, after hearing
Mary Ekers' story. Ekers,
a disabled factory
worker who needed a
wheelchair and an oxygen
tank to get to court,
said Lenahan took more
money from her checking
account than she
authorized, using an
account number she had
provided as part of a
payment plan.
When she complained, the
collectors threatened
that she would be hauled
into court. Three other
Georgia residents
supported Ekers' story
of being threatened by
Lenahan workers.
"She slept dressed in
her clothes because she
was afraid the deputies
would come, and she
didn't want to go to
jail in her nightgown,"
said Ekers' attorney,
Kris Skaar.
How could licensed
attorneys pile up a
record of misdeeds in
plain sight and keep
going for years?
Maine regulators would
like to know the answer.
Lund said he filed a
complaint with lawyer
overseers after banning
the Lenahan firm in
2004.
"We sent a complaint to
them right away, because
there were pretty clear
violations of federal
and state law," Lund
said. "We were expecting
a pretty quick response,
and we didn't get it."
The Attorney Grievance
Committee, an arm of the
state appeals court,
investigates allegations
of attorney misconduct.
Deputy Principal Counsel
Vincent Scarsella said
committee rules block
him from discussing any
particular case. This
confidentiality rule
protects lawyers'
reputations from
groundless complaints,
he said.
The committee may take
"a week to two years" to
complete an
investigation, he said,
before taking action
against a lawyer.
"That's the process - it
sometimes takes a long
time," he said, "but . .
. it's the guy's
livelihood."
No hard-and-fast rule
defines how much
involvement lawyers must
have in a firm that
bears their name, making
it difficult to crack
down on collectors that
masquerade as law firms.
"Different courts have
said different things -
it's kind of a gray
area," said Cindy White,
executive director of
the National Association
of Retail Collection
Attorneys in Washington,
D.C. "We do have firms
with hundreds of
employees and only a few
attorneys."
In April, six months
after withdrawing from
the collection
operation, John Lenahan,
age 75 and semiretired,
gave up his law license,
ending whatever
disciplinary action he
might have faced.
Danielle Lenahan would
not comment on whether
she faces disciplinary
action from the
grievance committee.
The Lenahans say they
have dropped their
collection business, but
some of their former
offices continue to
operate under new names.
Timothy Collins said he
took over a former
Lenahan office in
Amherst, hired its
workers and started
collecting debts for
Bohn and MacKinnon in
the fall of 2004.
Collins Law Office, with
35 collection workers at
two locations, now
brings in about $400,000
a month.
Collins said his offices
are improving their
compliance record, now
that some former Lenahan
workers have left. "I
think its better now
than it was at one
point," he said. "I feel
a lot better than I did
a year ago."
Murky standards for
firms
Lawyers have built-in
advantages when it comes
to getting money out of
people. States
frequently waive license
requirements for lawyers
that they impose on
other collectors.
More important is the
leverage that comes with
being an attorney.
Debtors who get a call
from a law office may
envision a courtroom in
their future. They
probably don't picture a
call center. However,
vague professional
standards allow
collection operations to
wear the mantle of a law
firm, whether or not
they perform courtroom
work.
Courts have said a
lawyer needs to have
"meaningful involvement"
with an office, said
Eric Berman, a Long
Island collection
attorney and a director
of the collection
attorneys association,
but there is no
specified ratio of
lawyers to nonlawyers.
"The key thing is
supervision," Berman
said. At large firms,
many clerks and
paralegals pitch in with
the work. He said,
however, that "all this
stuff is being done
under auspices of
lawyers."
It is not necessary for
a law firm to spend much
time in court to be
legitimate, he added,
since some firms
specialize in settling
cases. Lenahan
collectors dunned people
across the country,
although the lawyers
were licensed to
practice only in New
York and Florida.
In December, John and
Danielle Lenahan filed
for bankruptcy, putting
claims against them on
hold. Some victims of
abusive collection
tactics are going after
Bohn's company, but it's
unclear whether the
penalties will be paid.
Can debt firms call
neighbors?
By Dave Lieber
Star-Telegram Staff
Writer
STAR-TELEGRAM/RON T.
ENNIS
Fort
Worth attorney Jerry
Jarzombek represents
debtors in cases against
collectors. Last month
he filed a federal
lawsuit on behalf of a
Bedford
mother and daughter who
assert they were
illegally threatened by
a New York collection
agency. On a residential
street in Kennedale,
neighbors were
getting phone calls
asking about other
neighbors.
Tiffany Dow was asked about a neighbor's son.
She
remembers asking, "Oh,
is this an emergency?
Because I can run over
and tell them."
"No," came the answer.
"We're a credit
collection agency. We're
trying to
track him down."
"How did you get my
number?" Dow asked.
She was told that her
name and address were on
the Tarrant County tax
appraisal district's Web
site and that her number
was in the phone book.
"So," Dow remembers
replying, "you're
calling neighbors to
collect your
debt? That's ridiculous.
I can't believe you're
doing that. Don't ever
call
here again." And she
hung up.
Dow, who said she
couldn't remember the
company's name, wrote
The Watchdog and asked
if such calls are
illegal.
The
answer, in this
situation, is maybe.
Debt collectors can call
a
neighbor, identify
themselves as a debt
collector if asked the
name of their
company, and explain
that they are trying to
find someone, according
to
federal and state laws.
But they are not allowed
to disclose any
information
about a debt.
Calls like those in
Kennedale now happen
more often, industry
observers say.
Contributing factors
include growing consumer
debt, new restrictions
on bankruptcy filings
and the booming
collection industry,
which is growing
almost as fast as the
debt.
Tom Kelley, a spokesman
for the Texas attorney
general's office, said
complaints about overly
aggressive debt
collectors are
increasing.
Another neighbor on
Dow's street, Christine
Williams, described a
call that
may have skirted the
legal line.
Williams said she got a
call from Ford Motor
Credit Co. asking about
another neighbor.
According to Williams,
the caller said, "We
want to know if the
people are still living
there, and if they are
still driving the
truck."
That question about the
truck, some experts say,
is possibly illegal
because
it gives the neighbor
too much information.
"I don't think we would
go so far as to say,
'Does he drive the white
truck?'" said
Louisville, Ky., lawyer
Donald Haunz, who works
at a law firm
that represents
collection companies.
"We would say, 'We are
trying to
locate Mr. Smith and do
you know him? And do you
know if he still lives
at
blah-blah address?'
"We would try to be as
unobtrusive as possible.
But we would ask
questions
that help us locate
him."
A Ford Credit
spokeswoman said its
debt collectors are
supposed to ask
neighbors for accurate
contact information. "We
would never discuss the
particulars of a certain
account with someone we
called," Meredith Libbey
said.
Beth Givens, director of
the Privacy Rights
Clearinghouse in San
Diego, said
that callers cannot tell
neighbors that "the
dirty rotten scoundrel
across
the street is not paying
his bill," but that it
doesn't take much for a
neighbor to figure out
what is going on.
She said consumers
seeking legal
representation in
battles with debt
collectors can visit the
Web site for the
National Association for
Consumer
Advocates (
www.naca.net) to
find a lawyer with that
specialty.
Doing that, I found Fort
Worth lawyer Jerry
Jarzombek. He told me
that if a
collector has already
contacted the debtor and
discussed the debt with
him
or her, then the
collector is not allowed
to contact neighbors.
That could
be considered
harassment, rather than
searching for
information, he said.
"The key in making that
determination is whether
they are really looking
to
see if the guy really
lives there," he said.
"I am someone who has a
problem with somebody
trying to use abusive
tactics to scare money
out of someone," he
added.
Last month, he filed a
lawsuit in U.S. District
Court in Fort Worth on
behalf of a Bedford
mother and daughter who,
according to the
lawsuit, were
illegally threatened by
a New York collection
agency.
Jarzombek declined to
discuss the lawsuit, but
according to the court
filing, a debt collector
who works for Creditors
Interchange on behalf of
Capitol One called a
neighbor of the family
and stated "that she was
working
with the Bedford police
to make an arrest within
the next hour."
Bedford police Lt. Kirk
Roberts told me that
police do not get
involved in
civil matters such as
debt collections.
Bedford police also have
no records
of any investigation
involving the family, he
said.
According to the
lawsuit, the neighbor
went next door, "shaking
and crying,"
to relay the message.
The next day, the suit
asserts, the debt
collector called the
family and
threatened to file fraud
charges related to their
use of a credit card.
According to federal
law, it's unlawful to
claim that someone who
owes a
debt committed a crime
or could be arrested.
I called the debt
collector named in the
lawsuit, but she
declined to
comment. I also called
Creditors Interchange,
and a spokesman said he
would call back but he
never did.
Creditors Interchange
was ordered by New York
Attorney General Eliot
Spitzer in 2004 to pay
$60,000 in civil
penalties for "illegal
debt collection
practices," according to
a Spitzer news release.
The company was also
ordered, when dealing
with New Yorkers, to
cease
violating federal and
state laws, to monitor
and record collectors'
phone
calls and to make sure
that senior management
reviews all complaints.
When I asked Givens of
the Privacy Rights
Clearinghouse why
federal and
state laws don't
prohibit calls to
neighbors, she answered
that industry
lobbyists are powerful
in Congress and state
legislatures.
"They have a lot of
money and a lot of
influence," she said.
"But they're
not universally
beloved."
News researcher Stacy
Garcia contributed to
this report.
To file a complaint
If you receive calls
from debt collectors
that you believe could
violate the
law, contact the Federal
Trade Commission at
877-FTC-HELP or the
Texas
Attorney General
Consumer Helpline at
800-621-0508.