New York AG Shuts Down One Collection Agency, Fines Another $175,000

New York Attorney General Eric Schneiderman Thursday announced actions against two Western New York debt collectors: an agreement permanently banning one from the debt collection business and a settlement requiring the other one to pay $175,000 in penalties.

A common theme in both actions was the allegation that the businesses tried to appear as attorneys to confuse consumers.

“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. Predatory scams that prey on Western New Yorkers will not be tolerated,” said Schneiderman. “These settlements put dishonest businesses that engage into deceptive practices on notice. Our office will prosecute unscrupulous debt collectors to the fullest extent of the law.”

One settlement was reached with John Chebat, who operates several debt collection businesses in the Buffalo 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.

The AG’s office entered into an agreement with Chebat requiring him to pay $175,000 in penalties and change his debt collection practices. Schneiderman alleged that Chebat’s collectors: sent letters to consumers on the letterhead of a local attorney, falsely represented 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 – and other violations focused on misrepresenting legal consequences of non-payment.

Chebat told insideARM in a statement that he welcomes the changes that will be made within his companies.

“Debt collection is fundamental to the extension of credit for working Americans,” said Chebat. “The industry is ever changing and more changes are on the horizon. This investigation revealed opportunities for improving our systems and procedures. We believe our improvements will make us stronger and even more compliant with state and federal law.”

In addition to paying $175,000, Chebat must, 1) install a system that permits him to monitor the calls of his collectors without their knowledge, 2) monitor his collectors on a regular basis to ensure that they are complying the law, 3) bar his employees from engaging in spoofing and representing that they are process servers, and 4) appoint a compliance officer responsible for ensuring that Chebat’s collectors comply with the law.

“We look forward to implementing these changes, which we believe will allow us to continue our growth as a leading company in the Western New York area,” added Chebat.

Schneiderman said that his Buffalo Regional office received hundreds of complaints from consumers about Chebat’s companies, prompting the investigation. (Read more about debt collection complaints in insideARM’s Complaints Issue)

Chebat said his companies did not have access to the specifics behind the majority of the consumer complaints, so they could not determine whether many of them had merit. Because of the technical nature of the alleged violations, the option of settlement became a business decision, he said.

The second investigation involved a debt 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’ website 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 Schneiderman’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 Attorney General’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 AG 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 most recent agreement with Davis will shut down his debt collection agency and permanently bar 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.

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