AJC Article “Complaints pile up against debt collectors” Frederick J. Hanna & Associates
Complaints pile up against debt collectors
By Alison Young
The Atlanta Journal-Constitution
Sunday, March 15, 2009
[ Note: This article has been shortened to keep it very topic specific. Please view the entire article here. ]
Consumers complain that a Marietta debt collection firm uses deceit and abusive tactics to collect money, even when it isn’t owed, records show.
Enough complained that the Georgia Governor’s Office of Consumer Affairs began investigating last fall. It ordered Frederick J. Hanna & Associates to answer questions about collection practices, consumer disputes and what it does to ensure the validity of debts.
But for three months the state’s top consumer watchdog agency and the debt collector have been in a standoff.
Frederick J. Hanna & Associates says its tactics are none of the state agency’s business. Because it’s a law firm, the debt collector contends it is outside the consumer office’s jurisdiction. It refuses to answer the agency’s questions.
“We don’t feel like they’re entitled to anything. Period,” Frederick Hanna said. He said his firm gets 50,000 new debt files each month and its collection methods are legitimate.
The consumer office says it has a right to investigate whether the firm’s tactics are breaking state law. “If we perceive an infraction of the law, we don’t believe your status as a law firm will protect you,” said Bill Cloud, a spokesman for the consumer office.
A hearing is scheduled March 30 in Cobb County Superior Court and the outcome could have a significant impact on thousands of Georgia consumers targeted by debt collectors — especially those who don’t owe money.
In November, the state consumer office served an investigative demand notice, similar to a subpoena, on Frederick J. Hanna & Associates. It asked for documents about the firm’s collection practices, including those involving zombie debts. Officials with the consumer office declined to give details about the complaints they have received about the firm, citing the ongoing investigation.
The firm has an “F” rating with the BBB because of its complaint history, including failing to respond to consumer concerns, according to BBB records.
State officials are investigating potential violations of Georgia’s Fair Business Practices Act, according to the notice, 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 does not provide details or examples.
Hanna said Friday that if the consumer office wants to review a few specific files, he’d allow it. But he said he has hundreds of thousands of files and it is unreasonable to provide them all, as has been requested.
Until recently, it was unclear whether the state Fair Business Practices Act could be applied to debt collectors. In 2007, the Georgia Court of Appeals held that collection of a debt is a consumer transaction covered by the law.
Frederick J. Hanna & Associates, in documents filed in Cobb County Superior Court, says the consumer office is asking for an unreasonable amount of information. But beyond that, the debt collection law firm contends that the consumer office has no jurisdiction over the practice of law and therefore no jurisdiction over its activities. The consumer office is seeking an order from the court to force the firm to comply with its demand for documents and information.
State consumer officials have opened a similar investigation of Mann Bracken, a national debt collection law firm with an office in Atlanta. Mann Bracken also contends the consumer office doesn’t have jurisdiction, according to Fulton County court records. Lawyer conduct is regulated only by the State Bar and the Supreme Court of Georgia, the firm said in documents filed in court.
Hanna said Spotlight should not be focusing on debt collection firms. The problem is the debtors and the amount they owe, he said, adding that consumers should try to work with people like him.
Cloud warned that consumers should be careful about anything they say to a debt collector. Insist the firm send you written proof you owe the money, he said.
Complaints about debt collectors are on the rise and some of the tactics firms use are already illegal, Cloud said.
“A lot of them are buying up ‘zombie debt.’ It’s old debt you cannot collect anymore by normal means,” Cloud said. “It’s essentially debt renewal. To get you back on the hook they try to intimidate and try to berate you.”
Zombie debt, like the name implies, is debt — legitimate or not — that refuses to die. It may be debt that resulted from identity theft years ago that the original creditor wrote off. It may be a legitimate debt that is several years old, was already paid off or has been legally erased by bankruptcy. The debt gains new life when sold to a collection agency for pennies on the dollar.
“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,” Cloud said. “They are probably recording you.”
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