A prominent debt-collection attorney has been forced to give up his license and close his practice after an investigation sparked by complaints from more than 100 consumers.
Derrick McGavic, of Eugene, Oregon, also had to pay $70,000 to cover the investigative costs for the state attorney general's office. McGavic and Finney was one of the most high volume debt-collection law firms in Oregon and was known for representing national third-party debt collectors, who buy large amounts of defaulted consumer debt for pennies on the dollar and then try to collect.
The debt-collection industry is notorious for shady outfits, but press reports tend to focus on the individuals who sit in cubicles and place one call after another. The McGavic case is significant because it unmasks a big fish, a lawyer who routinely violated the Fair Debt Collections Practices Act (FDCPA).
This story hits close to home here at Legal Schnauzer because my wife and I have encountered a law firm that sounds an awful lot like the McGavic outfit. Ingram and Associates, of Birmingham, was hired by NCO, a large national debt collector based in Pennsylvania, to sue me over a debt I allegedly owed to American Express. The Ingram firm, headed by attorney Angie Ingram, committed numerous FDCPA violations--not to mention fraud and other state-law claims--and we filed a lawsuit that is pending in U.S. district court.
We see at least one major difference between our experience and what happened in Oregon. The Birmingham legal community, including federal judges, has gone to extraordinary and unlawful lengths to protect Angie Ingram. Oregon Attorney General John Kroger, on the other hand, was not afraid to go after a corrupt lawyer, on behalf of consumers. A major hat tip to Mr. Kroger, and may we someday find more public officials like him.
How did the McGavic firm step in deep doo-doo? The Eugene Register-Guard reports:
The state found a pattern of falsifying fee affidavits in motions for default by claiming services McGavic did not perform.
McGavic also is alleged to have arbitrarily increased fees based on the amount of money claimed or where the claim was filed.
Another allegation is that McGavic purposely misidentified or confused the identity of creditors to delay payment and thereby increase the fees and interest he could charge. He was accused of repeatedly calling debtors who had exercised a right not to be contacted further and did not provide specific information about the debts when it was requested.
Boy, that sounds familiar, especially the last paragraph. Let's consider just a few of the unlawful actions Mrs. Schnauzer and I have witnessed from Ingram and NCO:
* Failure to provide written notification regarding a debt--Under the FDCPA, debt collectors are required to give written notice of an alleged debtor's rights under the law. This is called a "mini Miranda" notice in the debt-collection world. The McGavic firm apparently made it a practice to ignore this requirement. Based on our experience, the Ingram firm does the same thing. We never received a "mini Miranda" notice and were completely caught off guard when Ingram representatives started calling us on the phone. Collectors, of course, like it when their targets are caught off guard, and that probably explains why written notification often is not sent. Angie Ingram stated under oath in our lawsuit that her firm sent the notice two days before calling us. But Mrs. Schnauzer testified under oath that one of Ingram's representatives admitted in a phone conversation that the firm had not prepared or sent written notice. In my conversations with two Ingram reps, which I tape recorded, neither ever mentioned a written notification or their obligation to send one.
* Confusing the identity of creditors--This apparently was a favorite of the McGavic firm, and we experienced a similar tactic from Ingram. Ingram did not try to confuse us regarding creditors, but it did lie to us about who the firm represented. Ingram reps repeatedly told us that they had been hired by American Express, that Angie Ingram was American Express' lawyer. Discovery in our lawsuit has shown that was a blatant lie and clearly meets the legal definition of fraud. In fact, Ingram was hired by NCO, and the firm admitted it had no documents from American Express to prove I even had an AMEX card, much less that I owed a debt on one. Obviously, it's an effective tactic for a debt-collection law firm to say it has been hired by a well-known national credit-card company--as opposed to being hired by NCO, which an alleged debtor probably has never heard of. This violates federal and state laws, but debt collectors want money--whether they can prove it's actually owed or not--and they'll do most anything to get it.
* Threatening to sell our house--Ingram reps told us on multiple occasions that they could sell our house "on the courthouse steps." Never mind that the alleged debt was in my name only, and my wife and I jointly own our house. In fact, an Ingram rep told my wife they were going to sell her house, not long after admitting Mrs. S. had nothing to do with the alleged debt. I've yet to see a statute that says a jointly owned house can be sold in its entirety--on the courthouse steps, or anywhere else--to satisfy an alleged credit-card debt.
McGavic's law practice did not collapse overnight; his fall was years in the making. Williamette Week, in the Portland area, reported three years ago about numerous federal lawsuits the firm had settled. McGavic apparently treated the settlements as the cost of doing business and went about his unlawful way. The misconduct finally became so blatant that the state attorney general and state bar stepped in, shutting down the firm.
God only knows how many debt-collection law firms around the country need to meet a similar fate. Williamette Week provided insight on the ugly incentives that lead so many debt collectors to violate the law:
To understand why a lawyer might cross the line in his efforts to collect, it helps to know a bit about how America’s billion-dollar debt-collection industry works.
Credit-card companies sell their uncollected debts to debt-purchasing companies, who buy them by the thousands for up to 20 cents on the dollar.
Many of those debts are past time to collect. Others have been discharged under bankruptcy. But if the companies play hardball, they can collect enough to turn a profit. So they hire collection agencies and lawyers like McGavic, who can win a court order to raid bank accounts and garnish wages to pay off the debt. But there’s risk for the lawyers as well. They get paid only 25 to 30 percent of what they collect—if they turn up nothing, there’s no paycheck.
The lawyers file dozens of boilerplate lawsuits at a time, hoping a few pan out. Some debtors won’t respond at all. Then the lawyer wins a default judgment and the right to collect—though the deadbeats, if they can be located, often have nothing left to take.
Even some lawyers are turned off by the ugliness in the debt-collection racket:
Portland debt lawyer David Schumacher says the work is typically a lawyer’s last resort. “It’s the necessary evil,” he says. “If you do it right, you’ll be successful at it. I’m just amazed at the rules that are broken out there. It just blows me away.”