Posts Tagged ‘Fair Debt Collection Practices Act’

Two Federal Class-Action Suits Accuse N.J. Collection Firms of Overreaching

September 6, 2010 1 comment

Two Federal Class-Action Suits Accuse N.J. Collection Firms of Overreaching

In Mary Pat Gallagher’s recent New Jersey Law Journal article on September 2, 2010, she cites the two recently filed putative class-action suits accusing New Jersey collection firms of systematic abuses in trying to squeeze money from debtors.

Pressler & Pressler in Parsippany, the state’s preeminent collection powerhouse, has been sued over its alleged practice of going after joint bank accounts that contain non-debtor money.

The other suit accuses Lenox Socey Formidoni Brown Giordano Cooley & Casey in Trenton of regularly overstating the interest component of debts.

Robert and Diana Kieffer of Atlantic County, who share two joint bank accounts at Ocean First Bank, filed suit Aug. 3 in federal court, alleging that the Pressler firm — in an effort to collect credit card debt incurred by Diana before marriage — had the Ocean County sheriff levy on one of the joint accounts in August 2009, without checking first to see if she was the sole owner. The firm was acting on behalf of frequent client New Century Financial, which had acquired the debt and is a defendant in the case, Kieffer v. Pressler & Pressler , 10-cv-3938.

The Kieffers’ lawyer, Wesley Hanna, of Friedman Doherty in West Berlin, says he persuaded Superior Court Judge Craig Wellerson in Ocean County that everything in the account actually belonged to Robert and none to Diana, so Wellerson lifted the levy on Oct. 23, 2009, and Pressler never got any of the money in the account.

But for more than two months, the account was frozen, causing automatic payments to bounce and leading Robert to incur penalties by drawing against his retirement savings to pay bills, Hanna says. And during that time, Pressler & Pressler tried to use the frozen account to pressure Diana into agreeing to a payment plan. The situation created discord between Diana and Robert, who “doesn’t even owe the debt and suddenly he doesn’t even have access to his money any more,” Hanna says.

In the federal suit, the Kieffers claim Pressler and New Century have an “established business practice to levy upon joint bank accounts” and “as a matter of regular business practice, do not instruct levying authorities to limit levy attempts only to accounts where a debtor is the sole authorized signatory.”

In consequence, joint accounts are levied, resulting in unnecessary and undue expense, harassment and abuse of the non-debtors and also the debtors themselves due to increased tension, acrimony and hostility between them and the other account owners, they say.

The practices allegedly violate the federal Fair Debt Collection Practices Act’s ban on misrepresentation and deceit and unfair or unconscionable means in attempting to collect a debt. The Act, 15 U.S.C. §1692 et seq., allows for actual damages or statutory damages up to $1,000, plus legal fees. For class actions, it allows recovery of statutory damages, plus additional damages not exceeding $500,000 or one per cent of the debt collector’s net worth.

The Kieffers assert claims on behalf of a class of individuals from whom the Pressler firm and New Century sought to collect a debt by levying on a joint account within the last 12 months. Hanna estimates there are several hundred class members based on the defendants’ extensive collections activity.

Hanna says New Jersey’s Multiple-party Deposit Account Act bolsters his position that joint accounts should be off-limits to debt collectors. N.J.S.A. 17:16I-4 states that a joint account “belongs, during the lifetime of all parties, to the parties in proportion to the net contributions by each to the sums on deposit.” Absent proof of who put in what, equal ownership is presumed.

Hanna says lawyers should not be able to gain leverage to extract payment by disregarding the joint nature of an account or foregoing asset depositions. “The potential to make people’s lives miserable to collect debt means you have to follow very specific rules.”

Pressler & Pressler has not answered the complaint and could not be reached for comment.

Another class-action suit asserting Fair Debt Collection Practices Act, Baratta v. Lenox Socey Formidoni Brown Giordano Cooley & Casey , 10-cv-4324, filed in Middlesex County in July, was removed to federal court on Aug. 23.

Lenox Socey sued Robert Baratta in state court in May 2009 seeking to recover nearly $6,700 for medical services provided to him by Bayshore Community Hospital in Holmdel between February 2006 and May 2008. Baratta alleges the amount included interest calculated from March 2006 on the entire amount of the debt, even portions that were not incurred until 2007 or 2008.

The class allegations are predicated on the assumption that the firm has done the same thing in other cases. The complaint alleges 100 or more.

Baratta’s lawyer, Andrew Wolf of Galex Wolf in North Brunswick says Baratta went to Northeast Legal Services which referred the case to him.”

The answer is not due until Sept. 13 and the firm’s lawyer, Claudia Costa, of Kaufman Dolowich Voluck & Gonzo in Hackensack, declines comment.

Kieffer is assigned to District Judge Stanley Chesler and Magistrate Judge Michael Shipp in Newark, while Baratta is being handled by Chief District Judge Garrett Brown Jr. and Magistrate Judge Douglas Arpert in Trenton