Sylvia Hsieh of Dolan Media Newswire reports that NAF's exit, coming after settlement of a lawsuit from the Minnesota attorney general, sent shock waves through the debt-collection industry. And consumer lawyers are reacting with appropriate urgency, reports Hsieh:
The ink was barely dry on the settlement when the American Arbitration Association announced on July 22 that it too would be getting out of debt collection arbitration until it can develop standards of practice.
Consumer lawyers reacted swiftly.
“Tons of consumer lawyers are investigating lawsuits right now,” said Paul Bland, staff attorney with Public Justice in Washington, D.C., and co-author of Consumer Arbitration Agreements.
The first NAF-related class action already has been filed. And more appear to be on the way:
Dan Edelman, a consumer rights attorney with Edelman, Combs, Latturner & Goodwin in Chicago, has already filed the first class action against credit giant MBNA/FIA and the debt collection law firm Mann Bracken, alleged to have financial ties to NAF, seeking to set aside thousands of arbitration awards and judgments entered against Illinois consumers since 2007. Bland expects more to be filed soon.
Lawyers handling individual consumer debt cases are also planning to use the recent revelations to get judgments overturned and sue for damages.
The Minnesota lawsuit essentially pulled the mask off the arbitration side of the debt-collection industry:
The complaint mapped out a “complex web” that boiled down to a cozy financial relationship: The arbitration services of NAF and sister organizations, as well as the debt collection services of the law firm Mann Bracken and other companies, have all been owned by the same New York hedge fund since 2007.
The complaint alleged that the NAF violated state consumer fraud, deceptive trade practices and false advertising statutes through “complex and opaque corporate structuring” that concealed its financial ties and represented itself as a neutral party.
“Consumers also do not know that--despite representing to the public that it has ‘no relationship with any party’ and does not ‘counsel our users’--(NAF) works closely with creditors behind the scenes,” the complaint said.
It further alleged that the NAF encouraged creditors to file arbitration claims, helped creditors draft arbitration clauses and sometimes collection claims against consumers, and referred creditors to debt collection law firms, including Mann Bracken, which then filed arbitration claims before the NAF.
We've had personal experience with the bottom feeders of the debt-collection industry, and the NAF case is just the tip of an ugly, smelly iceberg. An outfit called NCO, based in Horsham, Pennsylvania, is widely believed to be among the lowest of the low, a serial violator of the Fair Debt Collections Practices Act (FDCPA), which is supposed to govern the industry.
In truth, the FDCPA is a pathetically weak law, and debt-collection outfits know they have little to fear from it. Essentially, abusive practices pay off for debt collectors, and many consumers have no idea they are being taken for a ride.
We have some intriguing, tape-recorded evidence that shows exactly how NCO--and its affiliated law firms, such Ingram & Associates of Birmingham--operate. Angie Ingram is the lawyer who heads Ingram & Associates LLC, and she is a member of something called the NCO Attorney Network.
In a series of upcoming posts, we will give you a behind-the-scenes look at how the NCOs and Angie Ingrams of the world operate, violating federal law with impunity. You won't want to miss it.