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Commerce takes action against eight collection agencies

October 06, 2011


For Immediate Release

ST. PAUL, MN – “The meat is on the grill.” Those were the code words used by one debt collector at Plymouth-based Allied Interstate, LLC to tell a co-worker he had just stolen a debtor’s personal credit card information. It is one troubling example of what can happen when a collection agency fails to respect or comply with industry regulations.

Minnesota Department of Commerce Commissioner Mike Rothman today issued enforcement actions against eight separate collection agencies accused of violating Minnesota law. Consent orders made public Thursday allege those agencies unlawfully hired convicted felons, harassed consumers, forged signatures, failed to properly report instances of criminal identity theft, and doctored financial documents.

“Our investigation discovered a handful of companies that disobeyed the law, and effectively let the wolves loose in the henhouse,” said Commissioner Rothman. “In numerous instances, credit card numbers, bank accounts, and personal financial information of vulnerable, financially stressed people were handed over to criminals. It should come as no surprise what happened next.”

An investigation of Allied Interstate, LLC uncovered a serious breakdown of vital consumer protections in the company’s operations. Through a broken system of inadequate background checks, deceit, and negligence, Allied Interstate hired numerous convicted felons as registered debt collectors. The company fired employees for harassing debtors over the phone, using profanity, forging documents, and other serious misconduct – but failed to inform the Commerce Department of these violations, as required by law.

Consent orders released today by the Department of Commerce reveal a pattern of similar misconduct at that business, and seven additional collection agencies doing business in Minnesota.

“Let me be clear: this pattern of disregard for important regulations will not be tolerated on my watch,” said Commissioner Rothman. “We will continue to vigilantly monitor the marketplace to protect Minnesota consumers, and work with healthy businesses to promote a strong and competitive Minnesota economy.”

Commissioner Rothman stressed that this problem is not unique to Minnesota, citing similar instances in Georgia, Texas, West Virginia, Maryland, Washington, DC, and New York. Rothman encouraged regulators in other states to join Minnesota in keeping an eye on the problem.

A summary of charges made public by the Commerce Department this week is attached, along with a list of consumer tips to help Minnesotans avoid falling victim to identity theft or debt collection misconduct.
 

Summary of Charges

The following summaries briefly describe the charges against eight collection agencies recently investigated by the Minnesota Department of Commerce. More detailed consent orders are attached and can be viewed online at www.commerce.state.mn.us.

Allied Interstate, LLC
Plymouth-based Allied Interstate, LLC has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing debt collectors with prior felony convictions; and 4) failing to report when its registered debt collectors were fired for failing background checks, swearing at debtors, theft of debtor’s financial information, or falsifying debtor records.

In one instance, a debt collector applicant disclosed her criminal background to Allied Interstate, LLC during the application process. She had been previously convicted of financial card fraud and of being a lookout in a burglary. Allied Interstate, LLC hired her nonetheless and told the Commerce Department she had no criminal history.

The Minnesota Department of Commerce has instructed Allied Interstate, LLC to comply with industry regulations and pay a $300,000 civil penalty.

Bureau of Collection Recovery, LLC
Eden Prairie-based Bureau of Collection Recovery, LLC has been charged with: 1) directing employees to change the dates of scheduled payments; 2) changing the dates of deposit for postdated payments; 3) failing to establish adequate screening procedures when hiring collector applicants;  4) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 5) employing collectors with felony criminal backgrounds; and 6).failing to notify the Commissioner of employee terminations for using profanity, third party disclosure violations, and harassing debtors.

In response to these charges, Bureau of Collection Recovery, LLC has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; 4) auditing employee records of terminated employees for the last five years; and 5) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

Bureau of Collection Recovery, LLC has also been ordered to pay a civil penalty of $150,000.

AllianceOne Receivables Management, Inc.
Eagan-based AllianceOne Receivables Management, Inc. has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; and 2) employing debt collectors with prior felony convictions.

In response to these charges, AllianceOne has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; and 4) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

AllianceOne has also been ordered to pay a civil penalty of $40,000.

Van Ru Credit Corporation
Illinois-based Van Ru Credit Corporation has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing three collectors with felony criminal backgrounds; and 4) failing to notify the Commissioner of at least 15 employee terminations for verbally abusing debtors, using profanity, and third party disclosure violations.

In response to these charges, Van Ru Credit Corporation has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; and 4) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

Van Ru Credit Corporation has also been ordered to pay a civil penalty of $65,000.

IC System, Inc.
Saint Paul-based IC System, Inc. has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing collectors with felony criminal backgrounds; 4) failing to notify the Commissioner of at least 10 employee terminations for using profanity, third party disclosure violations, and repeatedly calling debtors at their places of employment; and 5) allowing at least 23 debt collectors to work at locations that were not licensed.

In response to these charges, IC System, Inc. has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; 4) auditing employee records of terminated employees for the last five years; and 5) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

IC System, Inc. has also been ordered to pay a civil penalty of $65,000.

General Revenue Corporation
Ohio-based General Revenue Corporation has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing a collector with a felony criminal background; and 4) failing to notify the Commissioner of at least 40 employee terminations for using profanity, third party disclosure violations, and threatening an alleged debtor on MySpace.

In response to these charges, General Revenue Corporation has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; 4) auditing employee records of terminated employees for the last five years; and 5) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

General Revenue Corporation has also been ordered to pay a civil penalty of $50,000. 
           
Nationwide Recovery Systems, LTD LP
Texas-based Nationwide Recovery Systems, LTD LP has been charged with commingling trust account funds collected for creditors with the agency’s operating fund, thereby engaging in an act or practice that demonstrated the firm was untrustworthy, financially irresponsible, or otherwise incompetent.

The Minnesota Department of Commerce ordered Nationwide Recovery Systems, LTD LP to: 1) hire an independent auditor to conduct a review of all aspects of its financial and accounting operations; and 2) provide the auditor full access to its financial information and other necessary documentation.

Nationwide has complied with the Commissioner’s request. After the audit was completed, the company applied to renew their license. The Commissioner approved a temporary collection agency license in order to allow new owners to take over the business. Nationwide provided the Commissioner with its business plan to ensure its financial solvency, which incorporated changes to that business plan as required by the Commissioner, including termination and replacement of the agency’s management.

Nationwide was ordered to pay a civil penalty of $250,000, which was stayed pending their continued two-year compliance with the Commissioner’s order.

Commercial Recovery Corporation (CRC)
Blaine-based Commercial Recovery Corporation (CRC) has been charged with: 1) failing to pay vendors, including CP Office Products (Circle Pines, MN); 2) failing to collect thousands of dollars from alleged debtors and failing to remit those payments to clients, including Brown & Bigelow (St. Paul, MN) and ADvantage Tape (Edina, MN); 3) holding a negative balance on one or more of its trust accounts; 4) providing false information to the Commissioner; 5) failing to pay rent in the amount of $99,700; 6) failing to retrieve sensitive records from the company’s landlord following eviction; and 7) defaulting on a Promissory Note due to CRC’s bank in the amount of $278,809.

The Department of Commerce is pursuing disciplinary action and sanctions against CRC, including retroactive revocation of the company’s collection agency license, and civil penalties of up to $10,000 per violation.
 

TIPS FOR MINNESOTA CONSUMERS

In light of these developments, Commissioner Rothman encourages Minnesota consumers to know their rights and protect themselves from identity theft. “If you think you are a victim of one of these scams, hang up the phone and call the Minnesota Department of Commerce. We are here to help and we can answer your questions,” Rothman said.

The Department of Commerce offers these helpful tips to help Minnesotans avoid becoming victims of debt collection scams:

Call us first. Do not send money to a “debt collector” you think may be perpetrating a fraud – call the Department of Commerce to see if the person is, in fact, a licensed debt collector.

Protect your identity. Do not give away or verify any of your personal financial information.

Protect your money. Ask your bank to put an “alert” on your account (often these scammers have a consumer’s bank account information before they begin harassing them).

Avoid phony calls. Be wary if the debt cannot be verified or if no documentation is received. At that point, ask the callers to stop contacting you and register with the National Do Not Call Registry at www.DoNotCall.gov or 888-382-1222.

Contest errors. If no debt is confirmed, contact any involved parties to clear up inaccuracies on your credit report, such as: the debt collector; the creditor or company claiming unresolved accounts; and the major credit bureaus. Write a detailed letter and include supporting documents to prove your case. The Federal Trade Commission provides additional resources for reporting errors.

Know your rights. Review the federal Fair Debt Collection Practices Act (FDCPA), which sets standards for collection agencies and prohibits abusive tactics. The FDCPA is enforced by the FTC and violations should be reported. Debt collectors:

May not make false or deceptive claims.

Are not allowed to make idle threats, express or implied, or use abusive or profane language.

Should not discuss consumers' accounts with unauthorized third parties.

May not inaccurately report credit information or pressure consumers to pay debts they do not owe.

Must investigate the validity of a dispute over a debt.

The Minnesota Department of Commerce Consumer Help Line can be reached by phone at (651) 296-2488 or (800) 657-3602. Complaints can also be sent by email to consumer.protection@state.mn.us or by mail to Minnesota Department of Commerce, 85 7th Place East, Suite 500, Saint Paul, MN 55101.