A Texas woman says she has suffered immeasurably at the hands of Commercial Recovery Systems, a third-party debt collection agency. In Flynn v. Commercial Recovery Systems (U.S. District Court, Northern District of Texas, Dallas Division), it is alleged that the debt collection agency went beyond the pale in attempting to collect a debt. The complaint alleges that the debt collector called Flynn’s cell phone up to six times a day, and called her octogenarian parents at 7:00 a.m. and told them that there was a warrant for Flynn’s arrest. Moreover, the debt collector allegedly threatened to come to Flynn’s house, and to arrive with a law enforcement agent. Added to the mix are allegations that Commercial Recovery Systems allegedly failed to send Flynn the mandated 5-day notification letter, nor informed her of her right to dispute the debt. The suit, filed by Lemberg & Associates on behalf of Ms. Flynn, cites numerous violations of the federal Fair Debt Collection Practices Act, as well as the Texas Debt Collection Act.
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Amended Complaint Filed in Class Action Against Whirlpool and Service Net
We released the following press release on Monday, January 9:
Lemberg & Associates LLC has filed an amended class action complaint on behalf of a client that alleges that Whirlpool Corporation, which has merged with Maytag Corporation, and Service Net Warranty engaged in deceptive and unfair trade practices regarding the companies’ service contracts. According to attorney Sergei Lemberg, “Thousands of consumers – or perhaps hundreds of thousands – were ripped off by Whirlpool and Service Net when those companies did not repair or replace faulty appliances per the terms of the service contracts.”
According to the amended class action complaint, when he purchased his Maytag clothes dryer, the plaintiff also bought a three-year service contract that promised to repair or replace the appliance if it failed. The complaint states that it also gave the warrantor the option of “buying out” the contract by either refunding the original purchase price less the amount of claims paid, or replacing the dryer with a comparable product. Instead of refunding the original purchase price or replacing the dryer, the complaint alleges that the defendants told the plaintiff that he was only entitled to a refund for the present value of the dryer, minus the cost of the repairman’s visit. According to Lemberg, “That is absurd, since the point of buying a service contract is to avoid the cost of repair.”
The plaintiff alleges that Maytag, which was subsequently purchased by Whirlpool, and Service Net Warranty, which administers the service contracts, failed to fulfill the terms of the service contract by improperly administering buy-outs. As such, the suit alleges that the his dryer’s buy-out, and buy-outs given to similarly situated consumers, constituted breach of contract, unjust enrichment, and a violation of the federal Magnuson-Moss Warranty Act.
Lemberg concludes, “Consumers purchase service contracts to ensure that they will be protected should an appliance need repair or replacement. Corporations and service contract providers need to be held accountable to the terms of the service contracts. On behalf of our client, we are determined to do whatever it takes to give consumers who have been victimized an avenue of redress.”
This release references Sherman v. Maytag Corporation, Whirlpool Corporation, and Service Net Warranty, LLC (U.S. District Court, District of Connecticut, 3:11-cv-01010-JBA).
Newsweek Runs Excellent Story on Debt Collectors
Newsweek Magazine started the New Year right – with a great story on the seedy underbelly of the debt collection industry. A former debt collector relates that she was ordered to keep calling consumers to the point of harassment, and tells tales of threats made by debt collectors to consumers. Gary Rivlin, who wrote the piece, also delves into the world of debt buying, explaining that “zombie” debt may be pursued by three or four debt collection agencies over time, subjecting the consumer to repeated inquiries about debts that have never been validated. He even explains that many debt buyers have no qualms about collecting past a debt’s statute of limitations. He notes that one debt buyer he interviewed “doesn’t bother buying the paperwork that would substantiate the data contained in the spreadsheets he buys from other debt buyers because, he explains, that bumps up the cost of the purchase and therefore eats into the bottom line.
Sergei Lemerg is also quoted in the article, commenting on the Federal Trade Commission report that shows a huge uptick in consumer complaints about debt collectors. Lemberg says that the FTC numbers are “just the tip of the iceberg.”
You can read the full article at the Daily Beast: http://www.thedailybeast.com/newsweek/2012/01/01/america-s-abusive-debt-collectors.html
Complaint Filed in Class Action for Alleged Violations of the Servicemembers Civil Relief Act
We filed a class action complaint on behalf of Sgt. Charles Beard and other servicemembers, and issued this press release last week:
Attorneys for plaintiff Sergeant Charles Beard have filed a class action complaint that alleges that Satander Consumer USA and Triad Financial Corporation illegally and routinely repossess automobiles belonging to active duty U.S. military personnel without first obtaining a court order, in violation of the Servicemembers Civil Relief Act (SCRA). The complaint, filed in U.S. District Court, Eastern District of California, also alleges that the defendants fail to reduce the applicable interest rate to six percent for any servicemember who provides them with notification under Section 527 of the SCRA. According to Sgt. Beard’s attorney, Sergei Lemberg, “While our sailors, airmen, and Marines are exhibiting unparalleled patriotism and sacrificing so much, unscrupulous companies are stealing their cars. Violating the SCRA is simply unpatriotic.”
Sgt. Beard, who is in the Army National Guard, purchased a Kia Sportage in September 2007 and began making payments to Triad Financial. In August 2008, Sgt. Beard was ordered to active duty and was deployed abroad. The suit alleges that the defendants repossessed Sgt. Beard’s Sportage in February 2009, despite his wife telling them that her husband was on active duty and that a court order was required to repossess the car. A representative of the defendants allegedly told Mrs. Beard that she would go to jail for a stolen car if she did not return the vehicle. Although an Army legal assistance attorney advised the defendants that Sgt. Beard was protected under the SCRA, the suit alleges that they nonetheless sold his Sportage at auction, and kept both the auction proceeds and Sgt. Beard’s payments.
According to the court filing, the defendants’ repossession of Sgt. Beard’s vehicle in violation of the SCRA is typical, and therefore qualifies for class action status. It notes that, after reviewing many jurisdictions heavily populated by military personnel, it was found that the defendants routinely fail to determine whether a delinquent borrower is in the military or on active duty. It says, “Defendants routinely ignore servicemembers’ rights under the SCRA and wrongfully repossess their cars without obtaining the required court orders.” Moreover, the court filing notes that the defendants routinely charge more than the six percent interest rate allowed by the SCRA.
Since September 11, 2001, more than one million courageous men and women have stepped forward to defend the U.S. and its founding principles through their military service. Our nation has witnessed the focus and determination of our brave men and women in uniform – a commitment that has cost many their limbs and others their lives. Serving in approximately 150 countries around the globe, U.S. servicemembers make sacrifices on a daily basis. Says Lemberg, “The very lives of our men and women in uniform depend upon their ability to focus on the job at hand. The SCRA is meant to ensure that they aren’t distracted by matters back home.”
Lemberg notes that those in the military sacrifice tremendously for our country in the name of freedom. The case filing says, “It is against equity and good conscience to permit [the] defendants to retain the ill-gotten proceeds of the vehicle’s repossession and sale and from charging illegal rates of interest.” Lemberg concludes, “We will fight on Sgt. Beard’s behalf – and servicemembers like him – to see that the defendants are brought to justice.”
This release references Beard v. Santander Consumer USA, Inc. and Triad Financial Corporation (U.S. District Court, Eastern District of California, Fresno Division, 1:11-cv-01815-LJO-BAM).
Holly Petraeus Stands Up for Military Families at the CFPB
Holly Petraeus, who served as the Better Business Bureau’s military liaison, is now the head of the Consumer Financial Protection Bureau’s Office of Servicemember Affairs. As such, she’s redoubled her commitment to ensuring that servicemembers and their families are protected from predatory lending. If you’re part of a military family, or have friends or neighbors who serve, you should read her article on DoD Live.
Petraeus, who happens to be the wife of (Ret.) General David Petraeus, discusses the burdens that military families shoulder when they receive orders to move to a new duty station and are denied short sales and home modifications. She notes that the Treasury Department has taken steps to help, but it sounds as though there’s a long way to go. She also discusses predatory marketing by for-profit colleges regarding military education benefits, as well as scams by used car dealers involving yo-yo financing.
Petraeus also voices concern about debt collectors calling servicemembers and threatening them with the Uniform Code of Military Justice or telling them that their security clearances will be compromised if they don’t pay. She recounts, “We even heard of a debt collector telling a widow that she had to use the money from her husband’s combat death gratuity to pay the debt immediately.” That’s simply beyond the pale.
Media Coverage for Lemberg & Associates
We received some nice media coverage from the Leader-Herald. You can read the story here:
Press Coverage for Lemberg & Associates
We received some nice press coverage from the Associated Press. Here’s a link to the story:
U.S. District Court Grants Class Certification in Debt Collection Case Against Portfolio Recovery
We reached a milestone in Zimmerman v. Portfolio Recovery Associates, namely that the U.S. District Court granted our motions for summary judgment and class certification. We issued the following press release yesterday:
SEPTEMBER 20, 2011 – STAMFORD, CT – The U.S. District Court for the Southern District of New York has granted the plaintiff’s motions for summary judgment and class certification in Zimmerman v. Portfolio Recovery Associates, LLC. According to Jason Zimmerman’s attorney, Sergei Lemberg, “We are pleased that the Court ruled in our favor, granting summary judgment in favor of 990 consumers victimized by Portfolio Recovery Associates.”
The facts of the case revolve around a debt collection “Pre-Suit Package” that was sent under Portfolio Recovery Associates “Litigation Department” letterhead and included a cover letter, as well as documents that appeared to be a “lawsuit,” including a “Summons” and a “Complaint” that referenced the District Court of the County of Nassau, First District, and listed Zimmerman as the defendant. The cover letter said, in part, “Enclosed please find a copy of the lawsuit our local counsel in your state intends to file against you related to the delinquent account referenced above.” However, a closer examination of the papers revealed that the Pre-Suit Package did not contain actual legal papers, but rather were simulated legal papers made to look real.
The Court found that Portfolio Recovery Associates violated provisions of the Fair Debt Collection Practices Act (FDCPA) relating to “[t]he use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court…of the United States…, or which creates a false impression as to its source, authorization, or approval,” or which constitutes “[t]he false representation or implication that documents are legal process. ” The Court’s opinion stated, “The ‘least sophisticated consumer’ might well conclude that Defendant had initiated a lawsuit to collect the debt, given the form of the Summons and Complaint, the reference to the court and parties…and the fact that an attorney from Portfolio’s “Litigation Department” had signed the cover letter.
Lemberg said, “The law unequivocally prohibits debt collection agencies from sending official-looking documents that lead consumers to believe that they are being sued; it is quite surprising that the practice persists.” Noting that it would be cumbersome for the 990 consumers affected by Portfolio Recovery Associates’ “Pre-Suit Package” to individually pursue actions against the debt collector, Lemberg applauded the Court’s decision to grant class certification. “We look forward to obtaining money for all of the consumers who were impacted by PRA’s actions.”
This release references Zimmerman v. Portfolio Recovery Associates, LLC (U.S. District Court, Southern District of New York, 1:09-cv-04602-PGG).
Collecto Class Action Moves Forward
The U.S. District Court, Eastern District of New York has denied the defendant’s motion to compel arbitration in our class action suit, Butto and Houser v. Collecto (10-cv-2906 (ADS)(AKT)).
The suit alleges that Collecto (collecting a Verizon Wireless debt in the case of Ms. Butto, and collecting an AT&T Mobility debt in the case of Ms. Houser) violated the Fair Debt Collection Practices Act and New York’s consumer protection statute. The suit alleges that Collectco sent both women debt collection letters that added 18% in collection fees to the amounts owed. The suit alleges that Collecto had made arrangements with Verizon and AT&T that they would receive their payments when Collecto had successfully collected on the debts. Because no monies had been recovered at the time Collecto sent the letters, it was not entitled to its collection fees. The suit alleges that Collecto therefore misled Ms. Butto and Ms. Houser by creating a false impression that they incurred collection fees and owed that money.
If you had a contract with AT&T Mobility or Verizon Wireless, and received a debt collection letter from Collecto, please call our office toll-free at 855-301-2100.
To learn more about the case, or to download the pleadings and decisions, please visit our class action page.
Advice for Employers via BBB Newsletter
We were happy to contribute an article for the recent edition of the Connecticut Better Business Bureau’s newsletter. We’ve also pasted the text below:
Workplace Disruptions: What to Do When Debt Collectors Call Employees on the Job
by Contributor Sergei LembergWhen your employees walk through the door, you rightfully expect to have their undivided attention. These days, the ubiquity of Facebook, Twitter, smartphones and apps can create a bevy of unwanted distractions.
Although workplace policies vary, the norm is to ask employees to refrain from engaging in personal tweeting, texting, and emailing during business hours. Many businesses also prohibit employees from receiving personal phone calls at work. Yet, some debt collection agencies are persistent in their attempts to contact consumers at their places of employment.
If this situation crops up in your business, it’s helpful to understand three things: your employee’s situation, the law regarding debt collection and workplace contact, and the course of action you can take to prevent further calls and distractions.
Your Employee’s Situation
When it comes to your employee, it’s important not to jump to conclusions. Your employee may not be willfully handling personal matters at work. Many times, debt collectors don’t heed requests to refrain from calling consumers at work. In other words, the debt collector, rather than the employee, may be at fault.Alternately, the debt collector may be attempting to collect on a debt that isn’t the employee’s to pay. Some debt collectors contact relatives of a deceased person in an attempt to collect the decedent’s debt. Debt buyers sometimes have the sketchiest of information on a debtor, and confuse a consumer with a similar name to the debtor.
Debt Collection Law
Even if the employee does owe the debt in question, the federal Fair Debt Collection Practices Act (FDCPA) specifically outlines prohibited practices regarding workplace contact. The law says that a debt collector can’t communicate with a consumer “at the consumer’s place of employment if the debt collector knows or has reason to know that the consumer’s employer prohibits the consumer from receiving such communication.” In practice, this means that if your employee tells the debt collection agency – verbally or in writing – that he or she isn’t allowed to take personal calls at work, the debt collector isn’t allowed to call.Your Course of Action
If an employee is receiving calls on the job from debt collectors, there are a number of steps you can take:1. Speak to the employee – Reiterate the company policy against handling personal business at work, and ask if he or she has informed the debt collection agency about this policy.
2. Speak to other employees – In a manner that doesn’t further embarrass the employee being contacted, instruct other employees not to engage in conversations with the debt collector and to refrain from providing the collector with the debtor’s personal or identifying information.
3. Send a cease and desist letter – Encourage the employee to write a cease and desist letter to the collection agency. The FDCPA says that once such a letter is received, the debt collector may no longer contact the consumer. In addition, determine the name of the collection agency and send a letter from your company demanding that the calls stop.
4. Contact the police – If the calls continue after sending a cease and desist letter, the debt collector calling your employee is likely a scam artist. The FBI and other government agencies have issued alerts about current scams involving contact information gathered through hacking payday loan and other sites.
In closing, be aware that a debt collection agency may contact you for the purpose of verifying or correcting information about an employee or former employee. According to the FDCPA, a debt collector may contact a third party for the purpose of obtaining location information – but cannot reveal that the consumer owes a debt. However, you are under no obligation to provide the debt collector with information, and the debt collector can only contact you once.
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Stamford, CT 06905
Tel: 855-301-2100
Local: 203.653.2250
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“ Thank you so much for your quick and thorough service. It was a pleasure working with you and I'll be sure to pass your name on to anyone in a similar situation. ”
-Elizabeth D.
