Debt Collection Firm's Collection Tactics Under Scrutiny

03/19/09

Complaints against the firm started last fall. Consumer Affairs is investigating the firm's consumer disputes, collection practices, and has inquired as to the procedures in place for the validation of outstanding debts. Frederick J. Hanna & Associates has refused to co-operate to its fullest potential stating that the business practices of the debt collection firm is not the state agency’s business citing reasons that 'because it’s a law firm, the debt collector contends it is outside the consumer office’s jurisdiction.' The firm’s refusal to answer the agency's questions have left the agency and the firm at a stalemate.
 
The consumer agency advocates that it is within its rights to investigate the complaints and the firm's collection practices to determine if the debt collection firm is practicing within the perimeters of the state law.

According to Frederick Hanna of Frederick J. Hanna & Associates, his firm receives 50,000 new debt files monthly and the methods used to collect the money is legitimate. They insist that the consumer agency is not entitled to know their business methods.

Bill Cloud, spokesman for Georgia Governor’s Office of Consumer Affairs argues that the agency has the right to investigate the debt collection firm, and “if we perceive an infraction of the law, we don’t believe your status as a law firm will protect you.''

The matter will be heard in Cobb County Superior Court on March 30th and the outcome will be of major significance to many Georgia consumers who were besieged by the collection firm. The hearing’s outcome will also have a big impact especially for those consumers who did not owe money.

According to the Federal Trade Commission Consumer's Sentinel Network, in 2008, complaints from consumers nationwide regarding debt collection firms were higher than any other industry. The network tracks complaints to the FTC, and is used by law enforcement agencies as well as other groups including FBI, National Consumer League, Better Business Bureau, U.S. Postal Service and the Social Security Administration.

According to a report last month from the FTC, ''the debt collection legal system needs reform and the 1977 Fair Debt Collection Practices Act needs to be modernized to reflect changes in technology, debt and the collection industry.'' The FTC stresses that timely repayment is vital but changes are needed “to better ensure that collectors are going after the right people for the right amounts of money.'' The report also recommends that the collectors need to be mandated by law to provide information and advise consumers of their legal rights.

Cloud acknowledges that complaints are rising concerning the practices of debt collection firms and some of the tactics are illegal. Cloud adds, ''A lot of them are buying up ‘zombie debt.’ It’s old debt you cannot collect anymore by normal means. It’s essentially debt renewal. To get you back on the hook they try to intimidate and try to berate you.''

Zombie debt is defined as a debt, whether it is legitimate or not, that refuses to go away and may be the end result of identity theft. However, it is possible that the original debt was written off years prior. Likewise, the debt could be legitimate from years ago and was already paid off or was legally dealt with in bankruptcy. Unfortunately, if the debt was sold to a collection agency, the collection agency will resurrect it and try to collect on it for their own profit.

In the case of Frederick J. Hanna & Associates, the consumer office served the firm with an investigative demand notice in November asking for documentation regarding the firm's collection methods including any zombie debt cases. The consumer office has been tight-lipped regarding any of the complaints’ particulars against Frederick J. Hanna & Associates due to the ongoing investigation. According to the Better Business Bureau records, the debt collection firm has an ''F'' rating due to the number of complaints and the firm's failure to address and respond to the complaints.

According to the notice, state officials are investigating any potential violations of the state’s fair business practice act including ''allegations the firm engaged in abusive or oppressive tactics prohibited under state and federal laws and allegations the firm used misleading and deceptive methods.'' The notice did not cite any particulars or examples of the allegations.

In 2007, changes were made to the Georgia Fair Business Practice Act by the Georgia Court of Appeals, recognizing that debt collection is a consumer transaction act and covered by law.

According to Hanna, he would be willing to allow the consumer office to review only some specific files because the firm has hundreds of thousands of files. According to documents filed in Cobb County Superior Court, Hanna feels the amount of information the consumer office is requesting is unreasonable and the firm maintains that the consumer office ''has no jurisdiction over the practice of law and therefore no jurisdiction over its activities.'' The consumer agency has asked the court to order the firm to comply with their investigation requests for the related documents and information.

Hanna maintains that the ''spotlight should not be focusing on debt collection firms. The problem is the debtors and the amount they owe. Hanna adds that consumers should try to work with people like him.

In a similar case, according to records from the Fulton County Court, the firm of Mann Bracken, a national debt collection law firm with an office in Atlanta, has refused to co-operate fully citing reasons that the consumer office is not within their jurisdiction, because lawyer conduct ''is regulated only by the State Bar and the Supreme Court of Georgia.''

Cloud advises ''that consumers should be careful about anything they say to a debt collector. Insist the firm send you written proof you owe the money.''

Cloud offers this final piece of advice, ''If this is an old debt and you do not believe you owe this money, do not in any way, shape or form reaffirm this debt. They are probably recording you.''