New York Attorney General Eric T. Schneiderman announced agreements this week with two Western New York debt collectors, permanently barring one from the collection business and requiring the other one to pay $175,000 in penalties.
Both companies engaged in deceptive practices to trick consumers into thinking they were in trouble with the law when they were not, according to the attorney general's office.
The first investigation ended with a settlement with John Chebat, who operates several collection businesses in the Buffalo, N.Y. area - including Western New York Capital Inc.; International Asset Group LLC; Unified Asset Solutions LLC; Outsourced Legal Prep LLC; Argos Alliance Group LLC; and Check Systems Recovery LLC. Chebat also is required to pay the $175,000 in penalties. The investigation concluded that Chebat collectors:
• Illegally contacted the employers of consumers.
• Illegally sent verification of employment forms to employers demanding information to which they were not entitled to. For example, they demanded social security numbers of consumers.
• Illegally sending letters to consumers on the letterhead of a local attorney.
• Falsely representing to consumers that, if they did not settle a debt, their case would be referred to a "nationwide network of attorneys" or in-house counsel.
• Engaged in Caller ID spoofing, the practice of causing a fictitious local number to be displayed consumer's Caller ID display, including local court phone numbers.
• Falsely represented to consumers that they were process servers and were about to serve consumers with legal process.
• Falsely represented to consumers that if they did not settle the debt, Chebat would pursue them "according to [the consumer's] Bad Check Laws"
• Falsely implied to consumers that they had taken civil judgments when they had not.
In addition to paying $175,000, Chebat must install a system that permits him to monitor the calls of his collectors without their knowledge, monitor his collectors on a regular basis to ensure that they are complying the law, bar his employees from engaging in spoofing and representing that they are process servers and appoint a compliance officer responsible for ensuring that Chebat's collectors comply with the law.
"More and more debt collectors are giving their businesses names that mimic law firms as a way to deceive individuals into thinking they are in legal trouble," said Schneiderman. "Our Buffalo Regional office received hundreds of complaints from consumers about this company. We have also seen a trend where debt collectors engage in shameful practices like spoofing to trick people into thinking that they are in trouble with the law when they are not. Debt collectors, like all other businesses in New York, must play by the rules or we will hold them accountable.”
The second investigation involved a collection business called "The Lombardo Davis Goldman Firm, LLC" owned by Frank Davis.
The name of the company was misleading because it mimicked a law firm's name. Davis' Web site compounded that deception by including the photo of a gavel and law books and making reference to litigation experts.
In an agreement made last year with the attorney general's office, Davis was ordered to stop using a name that mimicked an unrelated law firm's name and install a monitoring system of his employees to discourage them from engaging in improper and illegal conduct. Davis was further required to pay $20,000 in penalties.
In early 2012, the Schneiderman's office investigated Davis again and learned that he violated the original settlement. Davis again was using a name that mimicked a law firm name. He failed to disclose to the Attorney General that he changed the name and location of his business. Davis failed to monitor his employees to assure that they were complying with the law.
The agreement with Davis shut down his collection agency and permanently bars him from participating in any consumer debt collection business in the state of New York. Davis was also required to pay an additional $5,000 penalty.
