Attorney General Reaches Deal With Debt Collection Companies Over Deceptive Practices

New York Attorney General Andrew M. Cuomo today announced that his office has reached an agreement with three New York debt collection companies that failed to adequately supervise employees who engaged in deceptive and fraudulent methods to collect debts.

The three companies, Creditors Interchange Receivable Management, LLC, Capital Management Services, LP and Tri-Financial, LLC, have agreed to substantially reform their business practices in order to be in full compliance with the Federal Fair Debt Collection Practices Act and New York’s Debt Collection Procedures Act. The companies, which are based in Western New York but do business across the country, are also paying $245,000 to the state in penalties and costs.

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“We will continue to investigate the myriad deceptive practices that debt collection companies, debt settlement companies and others employ as a means to exploit consumers who are already down on their luck,” said Attorney General Cuomo. “These three companies have agreed to immediately stop these practices and reform their policies to ensure their collectors comply with both state and federal law. I call on other companies engaged in the business of debt to do the same.”

According to complaints received by the Attorney General’s Office, collectors at the three companies employed fraudulent tactics in an attempt to collect debts, including:

  • Contacting alleged debtors without a lawful justification for doing so and even after being asked in writing to cease all communication
  • Contacting consumers at their places of employment even though the collectors were aware that such contact was prohibited by the consumers’ employers
  • Discussing consumers’ debts with third parties (i.e. employers, neighbors, etc.), and doing so even after the third party told the company to cease such communications
  • Falsely claiming that the company was acting on behalf of an attorney and that the company or a creditor was about to commence legal action against the consumer
  • Failing to respond to consumers requests for debt verification

Under separate settlements with Attorney General Cuomo’s Office, the three companies have agreed to enhance their compliance protocols and make it easier for consumers to file complaints against individual collectors. All three companies must create a direct link on their respective Web sites to consumer complaint forms. The companies must also maintain an employee disciplinary history database, as well as a comprehensive database of all complaints made by consumers or third parties who were wrongly contacted by collectors.

For the violations, each company must pay penalties and costs to the state.

Tactics prohibited by both the federal Fair Debt Collection Practices Act, the New York State debt collection and consumer protection laws include: posing as an attorney, threatening lawsuits or other legal action which cannot be taken, saying a consumer committed a crime or will be arrested and talking with third parties except to get location information. The law further requires collection agencies to send a written notice within five days of initial communication with the consumer explaining how he or she can dispute the debt. If properly disputed, the collection agency must stop all collection attempts and send verification.

The settlements announced today are part of a larger investigation by Attorney General Cuomo into unlawful debt collection practices. Last week, Attorney General Cuomo subpoenaed nearly twenty companies and law firms operating as debt collectors throughout the state. His office also shut down two collectors for threatening and intimidating consumers into paying debts that they did not owe. In early May, Attorney General Cuomo announced a lawsuit against two debt settlement companies for fraudulent business practices and false advertising by selling misleading debt settlement plans that very rarely deliver the promised benefits to consumers dealing with debt.

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