Debt Collection: Fake Courts the Latest Tactic
As if debt collectors preying on desperate consumers’ fears and financial troubles were not enough, debt collection companies have begun to actually take the law into their own hands.
Unicredit, a debt collection company in Erie, Pennsylvania, used fake court proceedings to deceive, mislead or frighten consumers into making payments or surrendering valuables without following the lawful procedures for debt collection. Although there have been cases in which debt collectors threatened arrests if debtors fail to pay their debt, this might be the first time a debt collection company has been accused of setting up a phony court.
First, Unicredit filed legal judgments against debtors in improper venues. Although Pennsylvania rules require judgments to be filed in the debtor’s district court or where the debt was incurred, Unicredit filed many of its cases at District Judge DiPaolo’s Office, located in the same office complex as Unicredit.
Next, according to Pennsylvania’s Attorney General, consumers received letters that were often hand-delivered by individuals dressed like sheriff deputies, implying that consumers would be taken into custody if they failed to appear at the fake court. Specifically, these subpoenas summoned consumers to an office in Erie, which included a room referred by Unicredit employees as “the courtroom.”
The “court room” was located at the Unicredit “Debt Resolution Center.” This space was equipped with furniture and decorations similar to those used in actual court offices, including “a raised bench area where a judge would be seated; two tables and chairs in front of the ‘bench’ for attorneys and defendants; a simulated witness stand; seating for spectators; and legal books on bookshelves.” It is reported that during some proceedings, an individual dressed in black was seated where one would expect to see a judge. These bogus court proceedings were used to intimidate consumers into providing their bank account information and giving up vehicle titles and other assets.
The Pennsylvania Attorney General’s Office spokesman said that 370 affected consumers have been identified in Erie County Court records thus far. Two lawyers are believed to have been involved in these fraudulent, misleading practices. Erie County Chief Deputy Sheriff Jon Habursky told AOL News that Unicredit seems to have targeted the elderly and the sickly.
In October, the Attorney General’s Bureau of Consumer Protection filed a lawsuit against Unicredit America, Inc., and a petition for special and preliminary injunction, asking the court to prohibit the company from engaging in any debt collection and immediately stop all fake hearings or depositions.
At the first hearing, Unicredit agreed to put an end the tactics at the center of the government’s complaint and to stop sending letters threatening consumers with arrest. Judge Michael E. Dunlavey also ordered the mock courtroom to be torn down within 30 days. At the second hearing the judge ordered the entire Unicredit operation closed in order to reinforce the actions of the Attorney General’s office.
As discussed in a previous blog, Illinois recently passed the Debt Settlement Consumer Protection Act (Public Act 96-1420). The new law requires a written contract that clearly indicates the terms of the debt settlement agreement and that must be signed by both the service provider and the customer. The Illinois Department of Financial and Professional Regulation has accepted public comments on proposed rules implementing the law and is expected to announce the final rule within the next few months. This law will help protect Illinois residents as they consider whether or not to utilize a debt settlement company and does not include any new protections for consumers regarding debt collection practices. Given, however, the new debt collectors’ new schemes, it may be time to consider more regulation in this area as well.
This article was coauthored by Ji Won Kim.
