On appeal from the Southern District of California, the United States Court of Appeals for the 9^th Circuit ruled on September 23, 2011 that almost 40,000 letters sent to California consumers by Arrow Financial Services LLC violated the Fair Debt Collection Practices Act (FDCPA).

In 2002, Arrow Financial purchased a portfolio containing almost 40,000 debts owed by California residents to various health clubs.  By 2009, all of the debts had grown “obsolete” in industry parlance, as they were no longer legally reportable to credit agencies.  The Fair Credit Reporting Act prohibits reporting debts over seven years old to a credit reporting agency such as Equifax, Experion, or TransUnion.

Nevertheless, Arrow Financial decided to send misleading collection letters to the 40,000 Californians which impliedly threatened that Arrow would report the debt to collection agencies if the consumers did not pay the alleged debts.  Among its many provisions, the FDCPA prohibits “[t]the use of any false representation or deceptive means to collect…any debt.”  In their decision, the 9^th Circuit Court of Appeals affirmed the decision of the lower court, both of them clearly stating that Arrow Financial’s letters violated the FDCPA and mislead the class of nearly 40,000 California consumers. 

Click here to read the 9th Circuit’s decision.

James Healy went to college in the 1980s.  So when he started getting calls in 2010 seeking payment for almost $27,000 in allegedly unpaid tuition to Columbia University, he was shocked to say the least.  Diligently, he called his alma mater, Columbia, and the registrar confirmed to him that he did not owe any money to the University.  But Enterprise wouldn’t take “no” for an answer, even after Mr. Healy told Enterprise that Columbia had confirmed that he owed no debt.  He even pointed out that Columbia wouldn’t have given him a diploma if he’d still owed them tuition, but logic seems to get consumers nowhere in the face of a determined and illogical debt collector. 

So it was for Mr. Healy, and Enterprise kept calling.  Not only that, they started calling James’ neighbors and relatives.  People who had minimal contact with James, even though the debt collector already had up-to-date contact information for James.  The harrassment had to stop.  James came to Schlanger & Schlanger, and we filed suit on his behalf in the Southern District of New York alleging violations of the Fair Debt Collection Practices Act (FDCPA). 

Enterprise ceased its collection attempts after we sent notification that our firm represented Mr. Healy, but never filed an answer  to the complaint, despite having in been in touch with us prior to filing, and despite knowledge of the default hearing.  We took a default judgment for over seven thousand dollars, including attorney’s fees and costs and are now in the process of enforcing the judgment.

Schlanger & Schlanger, LLP settles case in favor of a New Yorker whose common name happened to land her in trouble with Forster & Garbus.

There must be hundreds of people named Andrea Vasquez in the New York City metropolitan area, let alone New York State, but not all of them owe money to American Express.  A simple enough lesson that the debt collection law firm of Forster & Garbus was forced to learn the hard way after they were hired to collect an over-due debt, and sued the wrong person.  In a surprisingly common scenario, the innocent Andrea Vasquez suddenly found herself facing a lawsuit in state court for a debt she simply did not owe, and so, she turned to Schlanger & Schlanger who quickly negotiated a settlement in her favor with everyone involved.

As part of the pre-litigation settlement, American Express admitted that they had sued the wrong person and that our client, the innocent Andrea Vasquez, did not owe them any money.  Moreover, Forster & Garbus paid the consumer $4,500 and voluntarily discontinued the state collection case against her with prejudice.

For more information about consumer rights against debt collection abuse and unfair collection practices, click here.

After seeing an advertisement on cars.com for a 2007 Mercedes-Benz CLS 550, James San Pedro headed to Queens to make the car his own.  After a healthy back and forth, he agreed to pay $31,000 for the car, and left almost $10,000 as a first down payment, with another payment of nearly $12,000 to follow shortly.  That’s when the problems started for James.

Soon after leaving the first down payment, the auto dealer called James to inform him that he needed a co-signer to secure financing for the remainder of the purchase price.  When he came back with the second payment, and a co-signer, James and his co-signer were hurriedly presented with a series of documents to sign. 

Through a variety of tricks and misrepresentations, including misleading disclosures, a fictitious warranty, not providing copies of the signed contract, presenting the documents only in English even though James doesn’t read English, and blank spaces left in the contract, Mr. San Pedro was roped into spending far more than the initially agreed upon $31,000.  Moreover, his co-signer was now on the hook too. 

Within days of signing the papers, James’ co-signer began receiving bills from the finance company that made no mention of James.  Concerned, she immediately called the finance company and got copies of the contract, which to her shock made no mention of James and listed the car’s purchase price as $43,000.  When James and his co-signer protested to the dealer and the finance company, their complaints fell upon deaf ears, so they turned to Schlanger & Schlanger. 

Schlanger & Schlanger, LLP filed a lawsuit on Mr. San Pedro’s behalf to make the auto dealership and the finance company liable for violations of the Truth In Lending Act, the Magnusson Moss Consumer Warranty Act, and New York General Business Law Sec. 349, as well as for fraud, breach of contract, and unjust enrichment.  Defendants quickly agreed to settle the claims, pay Mr. San Pedro and his co-signer $38,000.00, and cancel the allegedly unlawful auto loan.

Today, Judge Andrew J. Guilford of the United States District Court, Central District of California, awarded over $28,000 in attorney’s fees to Schlanger & Schlanger LLP and Law Office of Robert Stempler in a decision that highlighted the social value of consumer protection litigation, and quite frankly, made all of us smile. 

The case is Hernandez v. Erin Capital Management and  Eltman, Eltman & Cooper, No. 10-cv-1695.  The Complaint alleged that Mr. Hernandez was sued upon a Citibank debt that he simply did not owe.  The situation came to Mr. Hernandez’ attention when he began receiving calls from Erin Capital seeking to collect on a New York state default judgment obtained against him in Queens Civil Court, all of this despite the fact that Mr. Hernandez lives in California and has never resided in Queens.   After improperly obtaining the default judgment against Mr. Hernandez in New York, the Complaint alleged that Erin Capital and Eltman, Eltman & Cooper falsely told Mr. Hernandez that the judgment had been domesticated in California, and then threatened to contact his employer and garnish his wages if he did not pay the fraudulent debt.

After contacting our office, Mr. Hernandez retained our services, and we — along with California based co-counsel, Law Offices of Robert Stempler — filed suit on his behalf against Erin Capital and Eltman, Eltman & Cooper in Federal Court for violations of the Fair Debt Collection Practices Act (FDCPA). 

Partway through discovery, the parties eventually agreed to settle the case for $6,500 plus reasonable attorney fees and costs.  The parties were unable to agree as to reasonable attorney’s fees and the issue was submitted to the Court.  Defendants argued that Plaintiff’s time (over 70 hours) was grossly excessive.   Judge Guilford roundly rejected Defendants’ position, holding that due to the nature of Mr. Hernandez’ claims, “this case would justify a larger award [of attorney’s fees] even if it were outside the general range awarded by other courts.” 

The Court went on to note that the award of fees was particularly appropriate in this case in light of the purpose of the Fair Debt Collection Practices Act and the specific allegations in the Case:

“Congress specifically included a fee-shifting provision in the FDCPA to encourage attorneys to bring these cases….Congress wanted attorneys to litigate FDCPA cases because, although the individual damages might be small, FDCPA plaintiffs ‘seek to vindicate important rights that cannot be valued solely in monetary terms….This case involved Defendants who allegedly had a practice, spanning at least two states, of using this country’s court systems to defraud consumers.  By succeeding on the merits, Plaintiffs benefitted other members of the public who might have otherwise fallen victim to this scheme if left unchecked.  The public has a strong interest in ensuring that attorneys invest the necessary time to stop such practices.  The success in this case, both in terms of damages and public impact, supports a full award of [attorney’s fees].”

Click here to read Judge Guilford’s decision

On July 27th, Judge Katherine A. Levine dismissed a suit against a consumer-debtor over an allegedly unpaid Chase credit card debt because the debt buyer had been unable to prove valid assignment of the debt, and because the notice of such assignments were never sent to the consumer. 

Under New York law, creditors may sell a debt to another person who then has full legal rights to collect the amount owed on said debt.  However, when such sale–called an assignment–is made, and the new owner then uses the courts to collect on the alleged debt, the new owner–called an assignor– must provide proof to the court that he or she has legally obtained the rights to collect on the debt.  Moreover, the sellor of the debt must notify the debtor that he or she now owes the debt to another party, the logic being that if notice is sent by the buyer, unscrupulous people would interject themselves into these cases claiming to by have been lawfully assigned the rights to collect on debts when they are in no such position. 

The New York state laws which govern these issues are straightforward and have been on the books for decades, yet complaince with them by debt buyers is notoriously lax.  So decisions like South Shore Adjustment Co. v. Pierre, No. 96717-09, Kings County Civil Court, while seemingly straightforward and expected, represent huge vindications for the rights of New York consumers.

Sitting in the Eastern District of New York, Judge Dora Irizarry ruled in early June that debt collection letters, so-called dunning letters, must clearly communicate according to the “least sophisticated consumer” standard.  Under the standard, dunning letters must clearly state the amount of the debt allegedly owed, and what, if any, additional charges would apply to the alleged debt.  Any language to the effect that “interest, late charges, or other charges may or may not be applicable,” is unlawful under 15 U.S.C. §§ 1692e(2) and 1692g(a) because such language makes unclear to a consumer what amount is allegedly due and what additional charges apply to the debt. 

This decision represents a victory for New York consumers, and ensures that debt collectors clearly communicate with alleged debtors regarding their accounts.  If you are a New Yorker who has received ambiguous correspondence from a debt collector, feel free to contact us, as your rights may have been violated.

In March, Magistrate Judge Leslie Foschio of the Western District of New York ruled that statements detailing the personal experiences of a plaintiff following harassing phone calls from a debt collector are admissible in actions brought under the Fair Debt Collection Practices Act (FDCPA). 

Following brain surgery to remove a tumor, plaintiff became unable to work, went on Social Security Disability Income (SSDI), and consequently defaulted on two loans.  The debt collection firm hired to collect on the debt began a series of harassing phone calls and told plaintiff that her bank account would bank account would be frozen and her SSDI benefits seized unless she paid her debts.  Plaintiff subsequently suffered seizures, which she and her doctor believed to have been induced by the emotional stress of the debt collector’s harassing phone calls.  Plaintiff laid out these facts in an affidavit which the debt collection firm challenged, and Judge Foschio ruled in plaintiff’s favor that the statements were not based on heresay from her doctor, that they reflected her state of mind as to the potential cause of her seizures, and that her statements were based entirely on her own personal experience. 

This decision represents a victory for New York consumers facing harassing debt collection phone calls, and holds accountable those who would go to any length to collect a debt, no matter how low.

Sitting in the Southern District of New York, Judge Denise L. Cote ruled on September 1st that an original creditor attempting to collect its own debt is not a debt collector under the meaning of the Fair Debt Collection Practices Act (FDCPA).  Under the FDCPA, debt collectors are forbidden from employing a variety of deceptive and unethical practices in order to collect debts.  The law does not, however, apply to original creditors. 

In the case of Almonte v. Public Storage, Inc., 11-cv-1404, Public Storage placed a lein on the contents of a self-storage unit when monthly rents fell into arrears.  Public Storage then reported false information to a third-party debt collection firm called Allied Interstate, and conspired with Allied to report false information about Almonte to credit bureaus.  Even still, Judge Cote found Public Storage to be an original creditor under the FDCPA, and ruled that, as an original creditor, the FDCPA did not apply to any of Public Stroage’s debt collection activities in the case. 

While the case represents a minor setback for consumers, it has long been settled that the FDCPA does not apply to original creditors.  So the decision, while unfortunate, was not unexpected.  Moreover, the decision has no bearing on other consumer protection statutes which could have potentially been brought to bear in this case, namely the Fair Credit Billing Act (FCBA) and the Fair Credit Reporting Act (FCRA).

In an effort to help protect New Yorkers from the predatory practices of so-called debt settlement companies, New York City’s Department of Consumer Affairs announced in early August that it was issuing subpoenas to 15 debt settlement companies that have been the subject of repeated consumer complaints.  According to DCA, “the subpoenas are targeted to reveal the extent to which these companies have fraudulently lured New York City consumers with illegal advertising claims and charged them additional upfront fees, and to examine to what extent anyone has actually been helped, rather than harmed, by their ‘settlement’ services.”

The announcement comes on the heels of a similar announcement from DCA in March that the debt settlement industry represented the single greatest consumer fraud of the year for residents of New York City, no small feat.

The 15 debt settlement companies subpoenaed by DCA are:

• America Debt Free
• CF Capital Financial Group
• Cooperative Credit Union Management
• Credit 911
• Debt Remedy Advice
• Debt Rx USA, LLC
• Diamond Financial Group
• Global Debt Management
• iCorpFunding
• Life Coach, Inc.
• New Path Financial
• Right Start Financial
• Square One Debt Settlement
• United Debt Resolution Group
• The Resolution Group

If you have gotten involved with these or any other debt  settlement company, and are concerned that you have been a victim of fraud, please give us a call. 

Click here to read the DCA’s press release