Legal and Debt Recovery, an Orange, Calif.-based collection agency, and the agency's legal counsel, D. Scott Carruthers, have been issued a cease-and-desist order by the Idaho Department of Finance.
The order follows a report that an Idaho company was wrongly billed for toner cartridges - a bill that started at $339 but soared to $18,500. Idaho officials did not disclose the name of the company.
The company reported it had been disputing with the collection agency unordered toner supply bills for more than two years and was threatened with a lawsuit if it did not pay the $18,500.
The Department of Finance in August issued guidance to help licensed collection agencies, debt buyers and attorneys comply with the Idaho Collection Agency Act. The Act requires licenses for third-party collection agencies doing business in the state.
Gavin Gee, director of the state's finance department, cautioned that legitimate collection agencies will not require a company to pay for unordered merchandise.
"This was a fraudulent scheme from the get-go and the victimized business did the right thing by filing a complaint," he said.
The state's collection agency act was developed in response to an Idaho Supreme Court decision that impacts the way collection agencies must operate. The high court in May unanimously ruled that collection agency Medical Recovery Services could not ask for attorney's fee that are higher than what patients paid for their care.
Medical Recovery Services v. Strawn involved three patients treated between December 2010 and April 2011 at an urgent and primary care clinic. Medical Recovery argued it was owed $350 in attorneys fees per patient, which in each case was more than the cost of the care provided.