Debt collection

Credit Bureau Collection Services, a Columbus, Ohio collection agency, will pay a civil fine of $1.1 million to settle Federal Trade Commission charges that it violated federal law by inaccurately reporting credit information and pushing consumers to pay debts they often did not owe, FTC officials said today.

A Washington, D.C. lawyer, accused late last year of collecting more than $1.2 million from homeowners with false promises to arrange loan modifications, has been charged with bank fraud after depositing $2.4 million in counterfeit checks at several banks.

TransUnion reports that customers at least 60 days past due on their mortgage payments rose to a new record in the fourth quarter.

Legal collection giant Mann Bracken LLP, at the firm's request, will be placed into receivership and liquidated rather than filing for bankruptcy protection, according to Montgomery County (Md.) Circuit Court officials.

With more borrowers making hard choices about the bills that are most important to pay, more collection shops are adopting a kid-gloves approach to recoveries.

Alabama Attorney General Troy King's office and the Alabama Securities Commission announced this week the permanent shutdown of what they call one of the largest debt settlement schemes in the nation.

In less than two years, the financial world witnessed the collapse of some of the most trusted industry icons, mergers and acquisitions of many of the largest banks and government bailouts - namely TARP.

An estimated 293 different collection agencies and creditors are named in 436 consumer statute lawsuits filed nationwide in the first half of February, according to data from U.S. District Court complaint dockets. The 15-day total trails the pace established in January. In that month, 712 collection agencies and creditors were named in 851 lawsuits.

Editor's Note: This is an updated version of a column published by Collections & Credit Risk last month.

Minnesota Attorney General Lori Swanson filed lawsuits Thursday against six debt settlement companies, alleging they violated a state law passed last August that requires them to be licensed in Minnesota and cap the fees they can charge. The law generally caps the origination fee paid by the consumer at between $200 and $500. Monthly fees are capped at between $50 and $75.

A Georgia man believed responsible for a debt relief scheme that defrauded consumers out of more than $25 million was arrested yesterday by federal agents.

West Virginia Attorney General Darrell McGraw's office announced today it has reached settlements with two collection agencies, Allied Interstate of Minneapolis and Jefferson Capital Systems of St. Cloud, Minn., and one debt buyer, Wilhelm, West, Kacey & Associates (WWKA), of Canton, Ga. - all of which were being investigated for wrongful collection practices. The companies agreed to pay restitution and cancel debts totaling $404,091 to 446 West Virginia residents.

The average credit score for U.S. consumers dropped two points to 669 at the end of January from 671 at the start of the year, according to a report released today by Credit Karma Inc., a San Francisco-based company that tracks national credit scores. The average score is down eight points from just two months ago. Credit Karma pulled its new data from 100,500 users.

With chargeoffs historically high, debt volumes up and liquidation rates down, choosing whether to invest in technology or stand pat has taken on grave importance.

Asset Acquisition Group LLC, a debt buyer in Denver, purchased a $240 million loan portfolio from a large national bank. It is one of the largest purchases for the company since it opened in 1992, according to Donna J. Meier, president and chief executive, who added that the deal is part of an "amplified acquisition plan for 2010."

Portfolio Recovery Associates Inc., a Norfolk, Va. debt buyer, today reported cash collections rose 20% to a record $95.3 million in the fourth quarter ended Dec. 31, up from $79.2 million in the year-ago period.

The credit crisis is creating new opportunities for collection shops to play a larger role in the success of a company. It also creates an imperative for management to foster excellence.

For the third consecutive month, the Credit Manager's Index is signaling that the recession is over and the economy is expanding, according to a report by the National Association of Credit Management (NACM).

Illinois Attorney General Lisa Madigan today filed four lawsuits against seven debt settlement firms, alleging they are misrepresenting the services they provide to consumers and the impact those services will have on credit ratings. Six executives with the companies also are named as defendants.

Legislation set to be introduced in Minnesota later this month would ban the practice known as "re-aging" delinquent accounts, making it more difficult for debt buyers to collect debts - particularly in cases where the amounts owed cannot be verified.