State Targets Eight Collection Agencies Over Hiring, Accounting Practices

The Minnesota Department of Commerce made public Thursday documents detailing enforcement actions against eight debt collection agencies doing business in the state. The actions primarily focused on hiring and accounting practices and carried nearly $1 million in civil penalties.

The Minnesota Department of Commerce (DoC) said that that the companies failed to properly screen potential employees, hired felons, engaged in shoddy accounting practices, and failed to report to the DoC employee dismissals for consumer harassment, all required by law in Minnesota. None of the ARM firms were accused of engaging in illegal debt collection practices.

In total, the DoC levied $930,000 in civil penalties against the firms, of which $250,000 was stayed and $10,000 is in dispute. Seven of the eight agreed to the penalties and to amend certain business practices, while one is fighting the charges.

According to DoC spokesman Matt Swenson, the investigation that led to the actions coincided with a December article in Minneapolis paper The Star Tribune that investigated how felons were landing jobs as debt collectors, a violation of the state’s business regulations restricting access to consumer financial information. The article took the DoC to task for failing to properly oversee collector hiring.

“[Incoming Commerce Commissioner Mike Rothman] put a cease-and-desist order on some of these folks and immediately instructed our investigators to start looking into the [debt collection] industry,” Swenson told insideARM.com. Since the investigations all started at the beginning of this year, they all wrapped up at the same time, leading to Thursday’s announcement, according to Swenson.

Nearly all of the agencies named were charged with “failing to establish adequate screening procedures when hiring individual collector applicants.” Most were also charged with hiring applicants with criminal backgrounds.

But the charges also include failing to report dismissals for violations of debt collection regulations. Even if the companies properly fired employees for engaging in illegal debt collection practices, they were obligated to report the actions to the Department of Commerce, according to the agency.

In one case highlighted in the DoC press release, a collection agency caught an employee after she had stolen a consumer’s financial information, in effect, engaging in identity theft. The company reclaimed the stolen data before it could be used and fired the person. But since they did not report it to the DoC, they were charged with a violation.

Other charges included sloppy accounting practices that saw collection trust accounts – the money to be remitted to clients – comingled with company operations accounts. One company was also accused of improperly postdating consumer payments.

All of the collection agencies that signed consent orders agreed to amend their business practices and pay penalties ranging from $40,000 to $300,000. One agency that was fined $10,000 is disputing the charges.

The seven ARM companies that signed content orders are: