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Determined1

When Debt Collectors Engage In Racketeering and Fraud

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I have been researching issues surrounding debt collection activity and fraud. Apparently, some debt collectors may be violating racketeering laws (RICO), as well. In a New York Federal Court case, the debt collection company Mel Harris and Associates, and its affiliates, have been accused of violations of the Fair Debt Collections Practices Act, the Racketeer Influence and Corruption Organization Act, and Fraud. The lawsuits stems from a scheme by the Defendants in which process servers fraudulently told the court they properly served debt collections lawsuits. Instead, they were routinely engaging in "sewer service" and never served the legal papers. Further, the Defendants are accused of falsifying Affidavits en masse in a wholesale fraud on the court.

 

The lawsuit was approved as a class action on behalf of up to 100,000 consumers that were subject to default judgments, wage garnishments, and frozen bank accounts at the hands of Mel Harris and Associates, and its affiliates. The Consumer Financial Protection Bureau in conjunction with the Federal Trade Commission has presented an Amicus Brief in support of the Plaintiffs.

 

The tide is turning against debt collectors. I don't believe this case is an anomaly, but points out what is occurring across the country as debt collectors' daily business practices. I've long believed the debt collection industry and their business practices were a massive fraud scheme. Here's one example where the accusation is not just fraud, but racketeering.

 

Some great articles on the story:

 

http://www.forbes.com/sites/danielfisher/2011/01/04/judge-allows-rico-suit-over-debt-collection-tactics-to-proceed/

 

http://blog.credit.com/2011/01/suit-debt-collectors-sewer-service-was-racketeering/

 

http://www.law360.com/articles/508148/2nd-circ-weighs-100-000-member-debt-collection-class

 

CFPB & FTC Amicus Brief:  http://www.ftc.gov/sites/default/files/documents/amicus_briefs/sykes-v.mel-s.harris-associates-llc/131113sykesharrisbrief.pdf

 

18 U.S. Code § 1962 - Prohibited activities:

http://www.law.cornell.edu/uscode/text/18/1962

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New York AG tried bringing similar case against debt collectors in NY and lost.  He attempted to get 100k default judgments vacated, but wasn't able to prove what he alleged in the complaint and the settlement ended up being less than 1% of those 100k judgments were vacated.

 

In these types of cases, I always worry about proof.  Unless plainitffs have some insider or whistleblower it is ridiculously hard to prove.

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Hi USC,

 

I agree that these types of cases are hard to prove. Fraud and racketeering are extremely serious charges. The reason fraudsters get away with their behavior so long is they learn how to cover their tracks, use ill gotten gains to hire large and well connected law firms to protect them, and manipulate authorities who might otherwise catch them.

 

In this case I don't think there is a whistleblower. However, the Defendants' employees appear to have admitted to most aspects of the scheme. There's a significant paper trail here, too.  I think the jig is up. I hope the case does not settle and goes the distance. It would be an important landmark in battling fraud in the debt collection industry.

 

Check out the Judge's Order certifying Class Action status.  I think they've got the proof:  http://www.ballardspahr.com/~/media/Files/Alerts/2012-09-18-Sykes-v-Harris-opinion.pdf

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