During the congressional battle over Wall Street reform, Sen. Chris Dodd (D-CT) advanced a bill to create the Consumer Financial Protection Agency and grant it the power to write and enforce rules governing payday lenders, debt collectors, and other financial companies that are not part of banks. This was not popular with key Republicans. In March, Sen. Bob Corker (R-TN), who played a crucial role on behalf of Republicans in negotiating the bill, “pressed Mr. Dodd to scale back substantially the power that the consumer protection agency would have over such companies.” The Republican counter-proposal set forth in May by Senate Minority Leader Mitch McConnell (R-KY) also attempted to exempt these industries, prompting President Obama to rip the plan as “worse than the status quo” with “dangerous carve outs for payday lenders, debt collectors, and other financial services operations.”
These Republican efforts to insulate debt collectors from further regulation were ultimately unsuccessful, leading the industry’s trade group, the Association of Credit and Collection Professionals (ACA), to blast the new law as “overreaching.” “Lawmakers and regulators need to understand, we are not the enemy… .[T]hird-party debt collectors are the last ray of hope for consumers who might otherwise have to file bankruptcy,” said ACA’s CEO.
Yesterday, however, a shocking lawsuit brought by the state of Pennsylvania against a debt collector in Erie, PA illustrates why federal oversight is necessary for the industry, which deals with vulnerable people often on the brink of financial collapse. Unicredit America Inc. is accused of using phony Sheriff’s deputies and a corporate office decorated as a courtroom to confuse debtors into thinking they were in legal trouble in order to coerce them into making immediate payments. According to the Pennsylvania Attorney General’s office:
Consumers also allegedly received dubious ‘hearing notices’ and letters – often hand-delivered by individuals who appear to be Sheriff Deputies – which implied they would be taken into custody by the Sheriff if they failed to appear at the phony court for ‘hearings’ or ‘depositions’….Fictitious court proceedings were used to intimidate consumers into providing access to bank accounts, making immediate payments or surrendering vehicle titles and other assets – sometimes dispatching Unicredit employees to consumers’ homes in order to retrieve documents or have consumers sign payment agreements.
[Attorney General Tom] Corbett said Unicredit allegedly used civil subpoenas to summon consumers to an office in Erie, which included an area referred to by Unicredit employees as “the courtroom.”
The fake courtroom allegedly contained 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. During some proceedings, an individual dressed in black was seated where observers would expect to see a judge.
Watch a local news report:
According to the website of the ACA — the debt collection trade group that claimed they were “not the enemy” — Unicredit has been a member since 2009.