Why would the New York State Attorney General pursue a Debt collection company?

The New York State Attorney General’s job is to protect the citizens of the State from bad actors. That would include pursuing a Debt collection company that acts deceptively and fraudulently.

New York State Attorney General Letitia James may be most recognizable from her high-profile cases including the current case against Donald J. Trump and charges brought against former Governor Andrew Cuomo.

But not all of the AG’s cases are as high profile.    Many are against lesser-known companies and individuals.

The role of the Attorney General (AG), head of the Department of Law, is “both the People’s Lawyer and the state’s chief legal officer…serves as the guardian of the legal rights of the people of New York, its organizations, and its natural resources.”

As guardian of the rights of the people (and small businesses) the New York State Attorney General pursues bad actors. Some Debt collection companies act wrongly and engage in Fraudulent and deceptive behaviors.

Here is an extreme situation of a bad actor detailing what the New York State Attorney General would pursue a Debt collection company:

Filed in 2020, the NYS Attorney General partnering with the Consumer Fraud Protection Bureau (CFPB) shut down a Buffalo collection agency.

The agency, its affiliates and owners were ordered to pay 4 million in fines and penalties. 

Those involved were forever  banned from working in the debt collection industry. .  

“This debt collection operation consisted of interrelated businesses based out of a location in Getzville, New York. Together, they purchased defaulted consumer debt for pennies on the dollar. The debt came from high-interest personal loans, payday loans, credit cards, and other sources. The operation then attempted to collect debts from up to about 293,000 consumers, generating gross revenues of approximately $93 million between 2015 and 2020. 

….. falsely threatened consumers with harsh consequences if they did not pay, inflated the true amount of debts owed, and contacted consumers’ friends, family members, and employers to harass consumers

Attorney General James and CFPB alleged that the operation used deceptive and harassing methods, violating several state and federal consumer protection laws. Specifically, the complaint alleged that the owners, managers, and companies used the following illegal tactics to collect debt: 

• Falsely claimed arrest and imprisonment: On occasion, collectors working for these companies falsely threatened consumers with arrest and imprisonment if they did not make payments. In fact, consumers are not subject to arrest or imprisonment for failure to pay debts. 
• Lied about legal action: The companies falsely threatened consumers with legal action, including wage garnishment and seizing property.
• Inflated the debts and misrepresented amounts owed: The defendants deceptively inflated the amount owed to convince people that paying the amount they actually owe represents a substantial discount. To coerce consumers even further, collectors said it was an offer that would only be available for a short period of time. 
• Created “smear campaigns”: The collectors contacted consumers’ immediate family members, grandparents, distant family members, in-laws, ex-spouses, employers, work colleagues, landlords, Facebook friends, and other known associates, to pressure people to pay. The collectors did this even after consumers told the collectors to stop contact. Victims described these tactics as “emotional terrorism.”
• Harassed people with repeated phone calls: The collectors repeatedly called people multiple times every day over periods lasting a month or longer. Collectors were, in fact, instructed to let the consumer hang up on each call so they can maintain a pretense in their call logs that they were disconnected, and then call back as soon as the next day. The collectors also used insulting and belittling language and engaged in intimidating behavior when calling. 
• Failed to provide legally mandated disclosures: The collectors did not provide to consumers the statutorily-required notices, which detail their rights. When people asked for them, some collectors refused to provide them.This case follows a long line of actions taken by Attorney General James to seek justice on behalf of consumers in New York state.”

There have been other cases such as the 2019  case resolved in 2020 from the collection industry for allegedly collecting debts using similar deceptive and illegal tactics.

 In 2019, Attorney General James announced a $60 million judgment against debt collection kingpin, Douglas MacKinnon, who engaged debtors using similar deceptive and illegal tactics. Attorney General James and CFPB have been taking vigorous steps to enforce this judgment, including bringing a civil contempt motion against MacKinnon.

Preserving your reputation is a priority.  A collection vendor can do more damage than failing to collect a receivable.  Make sure you are using a reputable company that represents your values and offers a good return on investment.  

Have questions about collecting a debt in New York State?  

Contact Jocelyn Nager (jnager@ffgnesqs.com ). We have the experience that pays……