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)).
The New York Post published an article about a class action lawsuit Lemberg & Associates filed on behalf of a client in a spam texting case. Alex Shiyan received several text messages from the Lucille Roberts health club – a women-only club. The suit alleges the Lucille Roberts violated the Telephone Consumer Protection Act by using an automated telephone dialing system to text him without his consent.
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.”
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.
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.
On behalf of a client and others who experienced the same issue, Lemberg & Associates filed a class action complaint in U.S. District Court, District of Connecticut against Cardtronics, Inc. and Dunkin’ Brands, Inc. The lawsuit alleges that the defendants repeatedly violated the Electronic Funds Transfer Act (EFTA) and related regulations. The EFTA requires that those who charge consumers a fee for using what are called “host transfer services” provide consumers with a notice informing them of the fee and the amount being charged. According to the law, the notice must “be posted in a prominent and conspicuous location on or at the automated teller machine at which the electronic fund transfer is initiated by the consumer.” Lemberg & Associates’ client used an ATM inside a Dunkin’ Donuts, but the fee notice was placed below knee level – which the suit argues is neither a prominent nor conspicuous location, and is thus a violation of the law. Because many other consumers have used the same ATM inside the same Dunkin’ Donuts, it is logical to assume that other consumers have also been charged an ATM fee without proper notice; hence taking the route of a class action.
In related news, the Washington Times reports that Congress is moving to amend the Electronic Funds Transfer Act to remove the requirement that a physical sign or placard be posted on ATMs charging fees; instead, only that a digital message displayed on the ATM screen would be required. The House of Representatives unanimously approved the legislation, and the Senate is expected to take action shortly.
Among those opposing the legislation are Consumer Action, Consumers Union, and U.S. PIRG. Sergei Lemberg added his voice to the opposition, saying, “Transparency in financial transactions is critical in protecting consumers from the insidious hidden fees propagated by those in the financial services industry. Relaxing disclosure requirements could easily have a cascading effect, causing unsuspecting consumers to incur fees that could push them over the financial brink.” Urging U.S. Senators to vote against the measure, Lemberg continued, “Ever wonder why banks are putting the notice on the side of the machines or at ankle height? It’s because people would be less likely to insert the card into the machine if they knew what it cost.”
InsideARM reports that, according to WebRecon LLC, as of April 30 Sergei Lemberg is the “most active consumer attorney” of 2012. We welcome this designation, and hope to continue to help consumers throughout the rest of the year, and for years to come.
Lemberg & Associates Of-Counsel Tammy Hussin was quoted in the Sacramento Bee over the weekend. The article, written by Marjie Lundstromand, discussed the uptick in lawsuits against debt collection agencies by California consumers. Hussin noted that the poor economy means people have less money with which to pay their debts, which results in more aggressive debt collection tactics.
The article reported the increase in debt collection-related complaints to the Federal Trade Commission, as well as enforcement actions taken against rogue California-based debt collection agencies. Unsurprisingly, representatives of the debt collection industry portrayed themselves as victims of consumer attorneys, unclear laws, and consumers who file multiple lawsuits. But the article also sheds light on California’s debt collection statute, the Rosenthal Act, as well as the downright nasty practices engaged in by some debt collectors.
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.