Lemberg & Associates Blog

Lemberg & Associates Wins $350,000 Class Action Award Against Debt Collectors Portfolio Recovery Associates

On behalf of Jason Zimmerman and other consumers, Lemberg & Associates (www.stopcollector.com) has won a $350,000 class action award against debt collection agency Portfolio Recovery Associates for violations of the Fair Debt Collection Practices Act (FDCPA). This is the largest reported judgment in a Fair Debt Collection class action case. According to Sergei Lemberg, who was labeled the “most active consumer attorney” of 2012 by debt collection industry insider WebRecon LLC, “We are gratified that the judge saw it fit to impose a significant, meaningful penalty for PRA’s intentional violations of the FDCPA.”

The court ruled that Portfolio Recovery Associates violated the FDCPA by sending 990 consumers debt collection correspondence that simulated legal process. The package consisted of a letter plus a set of legal-looking documents, such as a draft Summons and Complaints. According to Lemberg, “The FDCPA prohibits dissemination of fake legal papers on its face. The court rightfully labeled Portfolio Recovery Associates’ behavior ‘unscrupulous.’”

Portfolio Recovery’s unscrupulous behavior was just one of the factors the court used in determining the $350,000 award. According to Lemberg, “We were pleased that the judge noted that Portfolio Recovery’s FDCPA violations were ‘intentional’ and ‘egregious,’ and that a sizeable award was appropriate.” Indeed, the judge wrote, “The sanction imposed must be sufficient to deter PRA from engaging in abusive practices in the future.”

The court determined that each class member who returned the appropriate claim form would receive $500, that the lead plaintiff, Mr. Zimmerman, would receive $1,500, and that any remaining monies would be awarded “to a non-profit organization working to curb abusive debt collection practices or to increase consumer awareness of such practices.”

Lemberg concluded, “It’s fitting that a portion of the award will go to consumer advocacy organizations. The court’s decision should a clear message to debt collectors that they will be held accountable when they engage in shady practices.”

This release references Zimmerman v. Portfolio Recovery Associates, LLC (U.S. District Court, Southern District of New York, 09 Civ. 4602 (PGG)).

Massachusetts High Court Rules Against Data Mining

As reported in the Patriot-Ledger, the Massachusetts Supreme Judicial Court has ruled that cashiers can’t ask consumers for their ZIP codes when customers make credit card purchases. The class action lawsuit against Michaels craft store chain charged that Michaels violated the Commonwealth’s consumer protection laws, and that asking for personal information led to the retailer sending unsolicited phone calls and mailings. While Michaels argued that the law was designed to prevent identity theft, the court ruled that the legislative intent was to prevent sellers from sending consumers unwanted solicitations. Although the law doesn’t specifically mention ZIP codes, the court ruled that ZIP codes are personal information.

Another Step Closer to Class Action Certification

A report and recommendation from a magistrate judge means that Butto and Houser v. Collecto, Inc. (U.S. District Court, Eastern District of New York, Case No. 2:10-cv-02906(ADS)(AKT)) is one step closer to receiving class certification. Lemberg & Associates is representing Victoria Butto, who are suing Collecto, Inc. (doing business as EOS/CCA) for unlawful and predatory debt collection practices. The suit alleges that Verizon Wireless turned over Ms. Butto’s debt to Collecto for collection. Collecto sent her a debt collection letter that added collection fees to the amount owed. Collecto had made arrangements with Verizon that they would receive their payments when Collecto had successfully collected on the debts. If Collecto didn’t collect on the debt, they weren’t entitled to any fees. Because no monies had been recovered at the time Collecto sent the letter, it was not entitled to its collection fees. The suit alleges that Collecto therefore misled Ms. Butto by creating a false impression that they incurred collection fees and owed that money, in violation of the Fair Debt Collection Practices Act.

The Report and Recommendation filed by the court recommended that the presiding judge grand class certification to the following: New York consumers who were sent a collection letter by Collecto, Inc. DBA EOS/CCA for a Verizon Wireless account, which included a collection fee for Verizon Wireless service that hadn’t yet been incurred when the letter was sent.

TCPA Class Action Complaint Against Westlake Financial Network

On behalf of a client and others similarly situated, Lemberg & Associates filed a class action lawsuit in Scott v. Westlake Financial Network. The suit alleges that Westlake Financial Network negligently, knowingly, and/or willfully placed automated calls (“robocalls”) to our client’s cell phone in violation of the Telephone Consumer Protection Act (TCPA).

The class representative was subjected to repeated cell phone calls from Westlake Financial Network, in which Westlake Financial Network used an automatic telephone dialing system (ATDS). The TCPA prohibits ATDS calls and calls using an artificial or prerecorded voice to a cell phone without prior express consent by the person being called.

Even though our client asked Westlake Financial Network to stop making robocalls to her cell phone, the company continued to do so. Moreover, she never gave her prior express consent to receive such calls.

According to the complaint filed in U.S. District Court, Northern District of Illinois, the proposed class consists of all people within the U.S. who received one or more cell phone calls from Westlake Financial Network and who didn’t provide prior express consent for such calls.

The suit seeks statutory damages of $500 per call, triple damages of $1,500 per call, and injunctive relief prohibiting future calls from Westlake Financial Network.

If you received a cell phone call from Westlake Financial Network without your consent, call Lemberg & Associates at 855-301-2100.

Lemberg and Associates Commends Federal Trade Commission on Debt Buyers Study, But Says it Falls Short

Lemberg & Associates released the following statement on February 1 in response to the Federal Trade Commission’s study on debt buyers:

Fair debt attorney Sergei Lemberg commended the recently released Federal Trade Commission’s (FTC) study on debt buyers, “The Structure and Practices of the Debt Buying Industry,” but noted that it doesn’t go far enough. “Debt buyers are the underbelly of the debt collection industry, so it’s crucial that the FTC pulled back the curtain to reveal how they do business,” said Lemberg. “Nevertheless, the FTC report only peripherally addressed the heart of the problem – the inadequacies in the way debt buyers handle consumer disputes, the abuse of the court system in seeking summary judgments against consumers, and the disproportionate role that smaller debt buyers play in violations of the Fair Debt Collection Practices Act.”

Debt buyers purchase debt deemed “uncollectible” and charged off by original creditors or purchase debt portfolios from other debt buyers. The FTC study examined data from 90 million consumer accounts purchased by nine of the country’s largest debt buyers, which together accounted for three-quarters of the debt sold in 2008. The FTC found that debt buyers literally paid pennies on the dollar for old debt – four cents per dollar, on average. When debt portfolios are sold, the accuracy of the information is not guaranteed, which led the regulatory agency to estimate that consumers dispute one million debts each year.

Lemberg, who was targeted as the “most active consumer attorney” of 2012 by debt collection industry insider WebRecon LLC, said the findings of the FTC study mirror the experience of many of his clients who attempt to dispute debts. “Often, the debt does not belong to the client or the amount is incorrect,” said Lemberg. “Sometimes, the client has previously disputed the debt, but as the FTC points out, the dispute history of a debt isn’t included when a debt portfolio is sold. And, as the study correctly notes, collectors who work on behalf of debt buyers often ‘validate’ the debt simply by looking at the information on their spreadsheet rather than providing the proper underlying documentation.”

The FTC study noted that, as time passes and debt portfolios are resold, the process of debt collection becomes even more problematic. Further inaccuracies creep into the records and aging debts become time-barred. Each state has a statute of limitations, usually between three and six years, after which time debt collectors aren’t allowed to sue a consumer to recover the money. Lemberg says that this doesn’t stop collectors from trying. “Debt collection agencies – and debt buyers in particular – file tens of thousands of lawsuits against consumers each year yet generally don’t have to prove that the debt is valid or within the statute of limitations,” he said. “To add insult to injury, it is up to the consumer – who often isn’t even aware that he or she is being sued – to prove that the debt is time-barred.” Lemberg noted that this practice often results in summary judgments, whereby debt buyers are given the ability to pursue wage garnishment and recover money from consumer bank accounts. “The current situation is a recipe for disaster. If a debt buyer says John Doe owes money, and John Doe isn’t present to defend himself, the debt buyer can obtain a judgment and freeze John Doe’s bank account,” he said.

While the FTC study found that the largest debt buyers purchased a majority of portfolios from original creditors, a fifth of the debt purchased was between three and six years old and 11 percent was between six and fifteen years old. The FTC issued a caveat, saying, “[M]any purchasers of older debts and debts with larger numbers of past placements with third-party collectors are smaller firms.” This echoes Lemberg’s experience. He said, “Smaller debt buyers get the hard-to-collect leftovers, which often tempts them to cross the line into questionable behavior or even practices that violate the Fair Debt Collection Practices Act.” One such behavior, Lemberg said, is to try and convince unsuspecting consumers to make a small payment on a time-barred account. “People don’t realize that making any payment – whether a penny or a hundred dollars – resets the clock and destroys protections afforded by the statute of limitations,” he said.

Lemberg applauded the Federal Trade Commission study, but said it needs to be expanded. “Smaller debt buyers need to be studied in order to get a true picture of the debt buying industry,” he said. “Debt buyers don’t share information about the debts they are trying collect, and then use the courts to obtain judgments against consumers who may not know they’re being sued. The current process leaves people’s lives in tatters, is an enormous burden on the taxpayer-funded court system, and is simply immoral.”

Sergei Lemberg Named “Most Active Consumer Attorney” for 2012

Debt collection industry insider WebRecon has listed Sergei Lemberg as the “most active consumer attorney” of 2012, saying that he represented 365 consumers during the year. Although seemingly intended as a warning to debt collectors, Lemberg embraces WebRecon’s label. He says, “I’m passionate about empowering our clients to stand up against debt collection agencies that use illegal tactics and break the law. If that makes me a target of the debt collection industry, so be it.”

Taking a moment to reflect on 2012, Lemberg says that he’s gratified that Lemberg & Associates accomplished so much. “I’m not only proud of the clients we’ve helped, but also that we expanded our practice areas and launched three new websites to help consumers learn more about their rights under the Telephone Consumer Protection Act.” The websites, www.do-not-call-complaints.com, suejunkfaxers.com, and suespamtexters.com, explain the TCPA and that consumers rogue telemarketers, junk faxers, and spam texters can be made to pay $500 for each violation – or triple that if they knowingly and willfully violated the law.

Macy’s Pays Penalty for Allegedly Falsely Labeling Textiles

According to the Federal Trade Commission, Macy’s Inc., along with Amazon, Leon Max, Sears, and Kmart, have settled FTC charges that the companies violated the Textile Products Identification Act and the agency’s Textile Rules. Macy’s will pay $250,000 to settle charges that the department store advertised and marketed products “as being made of bamboo, when, in fact, they were actually made of rayon.” Together, the companies will pay $1.26 million in penalties.

Lemberg & Associates has alleged that Macy’s engaged in another kind of mislabeling. A class action lawsuit filed by Lemberg & Associates in federal court in Boston alleges that Macy’s routinely violates the FTC Rule, passing off gold-plated sterling silver as “Fine Gold” without providing the adequate qualification. The complaint, Barsukova v. Macy’s, Inc. (U.S. District Court, District of Massachusetts, 1:12-cv-11892), alleges that Barsukova purchased earrings from Macy’s that were labeled and marketed as “Fine Gold,” but that really only had a fine layer of gold covering a sterling silver item.

Specifically, the complaint alleges that “Macy’s breached the terms of the contract by selling much less valuable gold-plated silver that it misrepresented as ‘fine gold’ jewelry”; “Macy’s was unjustly enriched by selling gold-plated jewelry while representing it as fine gold”; “Macy’s breached that duty [of good faith and fair dealing] by failing to deliver goods as promised and advertised.”

Sergei Lemberg “Most Active” Consumer Attorney Year-to-Date

Reporting on research from WebRecon, Collections & Credit Risk noted that, as of November 30, Sergei Lemberg was the “most active” consumer attorney in the country. The research is based on the number of lawsuits filed in U.S. district courts, and specifically looks at lawsuits filed for violations of the Fair Debt Collection Practices Act, the Telephone Consumer Protection Act, and the Fair Credit Reporting Act.

Court Builds on Foti Ruling in Cerrato v. Solomon & Solomon

In Cerrato v. Solomon & Solomon (3:11-cv-623 (JCH)), the U.S. District Court, District of Connecticut, built on the landmark Foti decision in ruling that autodialed calls not answered by the consumer constitute “communication” under the Fair Debt Collection Practices Act. Ms. Cerrato is represented by Lemberg & Associates.

The circumstances of the case are that, over a period of 21 months, Citibank turned three of Ms. Cerrato’s debts over to Solomon & Solomon for collection. After receiving debt collection calls for the first account, Ms. Cerrato sent Solomon & Solomon a cease and desist letter. After receiving the letter, Solomon & Solomon made six more calls to Ms. Cerrato. Ten months later, the debt collection agency began calling her in reference to the third debt, and called her 117 times over the course of six months. Ms. Cerrato faxed the debt collector a cease and desist letter, together with a copy of her previous cease and desist letter.

The Solomon & Solomon clerk who processed the letter noted that communication should stop for the third account, but not the other two. Still, using an autodialer, the debt collection agency called Ms. Cerrato eight more times after Solomon & Solomon received the letter. Ms. Cerrato says that she chose not to answer the calls after her caller ID indicated that they were from the debt collector. The debt collection agency argues that the eight unanswered telephone calls aren’t “communications” under the Fair Debt Collection Practices Act, and thus can’t be held liable for communicating with Ms. Cerrato after receiving a cease and desist letter. Solomon & Solomon argues that “an unanswered telephone call does not constitute a communication because no information was conveyed; Cerrato never spoke to a Solomon representative.”

In an order denying summary judgment, the court rejected Solomon & Solomon’s citation of Wilfong v. Persolve, LLC, and instead looked at Foti v. NCO Financial Systems, Inc. In that case, “the court held that a prerecorded voice message that did not specifically reference a debt still constituted a communication under the FDCPA.” In this opinion, the court looked to the rationale behind the Foti decision, namely that the statute should be construed broadly. Further, in the Foti case, that court noted that simply stating that the call was from NCO Financial Systems was enough to communicate that it concerned a debt. In this case, the court noted that Foti received one telephone message after one letter from NCO, while Ms. Cerrato had received 117 calls prior to the eight unanswered calls. In other words, Ms. Cerrato knew that it was a debt collector calling. The court also drew parallels to the Foti calls that attempted to entice a return phone call: “In Foti, the court found that the debt collector provided enough information to ‘entice’ a return call by providing its name and return phone number and be referencing a matter that required immediate attention. Solomon provided similar information to Cerrato. Its name and telephone number appeared on Cerrato’s caller ID display, and by calling eight times within one month, it is hard to imagine how Cerrato could not realize that Solomon wanted her immediate attention.” The court went on to write that Solomon & Solomon’s argument would mean that “debt collectors could call consumers however often they wish as long as the consumer does not pick up or the debt collector hangs up before reaching the consumer.”

The judge goes on to cite the Merriam-Webster definition of “communication,” noting that it does not require a two-way exchange or any response from the recipient of the communication.

Solomon & Solomon offered contingency arguments, which were also rejected by the court. One argument said that the eight unanswered calls could fall under the FDCPA approved exceptions, namely to notify Ms. Cerrato that Solomon & Solomon would no longer try and collect the debt, or to tell her that they were going to invoke a specific remedy (such as a lawsuit). The court wrote that, because the calls stopped once the debt collection agency noted Ms. Cerrato’s cease and desist letter on all of her accounts, that argument doesn’t hold water.

Solomon & Solomon’s other contingency argument was that even if the calls constituted communications under the FDCPA, it was a bona fide error and the firm doesn’t have any liability.

Apparently, Solomon & Solomon’s computer system has a field that can be used for a code indicating that a consumer has sent a cease and desist letter. The debt collection agency says employees are trained to enter that code into the account. However, they are not trained to put the code on all of the consumer’s accounts. The debt collection agency says that the cease and desist letter listed only one account, while Ms. Cerrato says that her letter referenced all accounts.

The court found that, since Solomon & Solomon had called Ms. Cerrato six times after she had sent a previous cease and desist letter, “there are issues of material fact as to whether Solomon committed a bona fide error,” as well as whether the debt collection agency had developed reasonable procedures to prevent such a mistake to happen.

Solomon & Solomon says that it has procedures in place to train employees on provisions of the Fair Debt Collection Practices Act, and says that it specifically trains and tests employees about the meaning and importance of a cease and desist letter. Ms. Cerrato disputes this, saying that the debt collection agency’s “testing and literature merely states that employees are allowed to contact a debtor one more time after receiving a cease and desist letter.”

Because the motions for summary judgment were denied, the case will proceed.

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