New York Judges Resist Claims by Debt Collectors

[Cees Binkhorst]

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May 7, 2010
New York Judges Resist Claims by Debt Collectors
http://www.nytimes.com/2010/05/08/nyregion/08debt.html
By WILLIAM GLABERSON

As New Yorkers have tumbled into credit-card debt during the Great
Recession, bill collectors have turned to the courts to get what they
say is due, and the courts have in turn issued hundreds of thousands of
orders against residents. Some consumer groups argue that by doing so,
the courts have become little more than an arm of the debt-collection
industry.

Now, a few New York judges are suggesting that they agree, at least in
part, with the consumer groups. They have fumed at debt collectors and
their lawyers, scolding them for excessive interest like 30 percent a
year and berating for them for false statements and abusive practices.

Some of the rulings have even been sarcastic or incredulous. In
December, a Staten Island judge said debt collectors seemed to think
their lawsuits were taking place in a legal Land of Oz, where everyone
was supposed to follow anticonsumer rules invented by some unseen
debt-collection Wizard.

Last month, a Manhattan appeals court threw out a credit-card case,
saying a debt collection company had sued the wrong person but pursued
the case anyway.

“I think these judges are outraged at the status quo, and they’re trying
to change it,” said Janet Ray Kalson, a Manhattan lawyer who chairs a
City Bar Association committee that has studied the deluge of
credit-card cases.

Debt-buyer businesses purchase lists of names and amounts supposedly due
— for pennies on the dollar — from credit-card companies and sometimes
have no real evidence about who they are suing or why.

They then file tens of thousands of suits, often with little to back up
their claims. A Nassau County judge said this winter, for example, that
one of New York City’s high-volume debt-collection law firms, which has
close ties to a debt-buying company, did not provide “a scintilla of
evidence” that there was a debt at all in a case against a Long Island
woman.

The suit received an unusual amount of attention. The judge, Michael A.
Ciaffa of District Court in Hempstead, said that it “regrettably,
involves a veritable ‘perfect storm’ of mistakes, errors, misdeeds and
improper litigation practices.” The judge said the law firm, Eltman,
Eltman & Cooper, ignored court orders, made a “demonstrably false”
assertion and harassed the woman for payment even after the judge
dismissed its suit.

The case before Judge Ciaffa ended with an order that is far from
typical in a credit-card suit. The woman who had been sued, Patricia
Bohnet, a bookkeeper and single mother, did not have to pay anything.
But Eltman, Eltman & Cooper had to pay $14,800 in sanctions for
violating ethical rules at least 18 times.

“They don’t care if you’re sick; they don’t care if you’re poor,” Ms.
Bohnet said in an interview at her job in Woodmere. “Their only job is
to collect money, and they’ll do it in any way possible.”

In response to questions, the law firm said in a written statement that
said Judge Ciaffa did not have all the facts but that the firm would not
appeal. “As with any firm or business that handles this type of volume,”
it added, “there exists a potential for errors or omissions in the
normal course of business.” Under the judge’s order, $4,800 is to go to
Ms. Bohnet, the remainder to a state fund that works to reimburse
consumers for dishonest conduct by lawyers.

Eltman, Eltman & Cooper was one of 35 law firms sued by the state in
July with claims that they had improperly obtained 100,000 judgments in
consumer-debt cases. Separate files in Brooklyn federal court show that
without admitting fault, the Eltman law firm settled a class-action suit
in 2006 that claimed it used “false, misleading and deceptive means” to
collect debts.

Privately, some judges say they are embarrassed that in many New York
courts, debt-collection lawyers have grown so comfortable that they give
the impression they are in charge of the proceedings and need not prove
their claims with strong evidence.

In the handful of recent rulings, skepticism of the debt collectors’
claims has been obvious. A Brooklyn judge, Noach Dear, has written
decisions that come close to saying that the collection cases are
sometimes based on falsehoods.

In a case in August, Judge Dear observed that there was nothing to
substantiate a lawyer’s claim that she somehow remembered mailing a
document to the credit-card holder that was the foundation of the
collection suit. The document, Judge Dear noted archly, had been mailed
three and a half years earlier.

Behind the legalese of the credit-card suits, some judges have
suggested, there is often a disorganized jumble of documentation. A
Mount Vernon City Court judge noted that one case was based on little
more than “a self-serving computer printout.” A Manhattan judge said one
company that buys debt claims from credit-card companies had filed suit
against a card holder when it did not even own that particular debt.

In the Staten Island case, the judge, Philip S. Straniere, said a
credit-card company was claiming interest of 28 percent on the balance
due, which would be illegal as usury under New York law.

The company argued that the New York credit card that seemed to be from
a national company had actually been issued by a one-branch bank in
Utah, which had no usury law.

“Like the Land of Oz, run by a Wizard who no one has ever seen,” Judge
Straniere wrote, “the Land of Credit Cards permits consumers to be bound
by agreements they never sign, agreements they may never have received,
subject to change without notice and the laws of a state other than
those existing where they reside.”

The judge ruled that the supposed agreement allowing unlimited interest
charges was not enforceable in New York.

Industry spokesmen say tales of abusive collection cases are misleading.
“There are certainly colorful stories,” said Joann Needleman, an officer
of the National Association of Retail Collection Attorneys. “People
think that handful is the rule, not the exception, but it’s not.”

But Patricia Bohnet, the Long Island woman who was sued by the New York
law firm, said just one case can be harrowing. When she received a call
last year at the charity where she does the books for $39,000 a year,
the voice on the other end told her the debt collectors had a
five-year-old court order against her for $4,861. She had to pay, or
they would start taking money out of her salary.

The address of the debt-collection firm and its lawyers at Eltman,
Eltman & Cooper seemed to be the same, she noticed.

She did not know she had ever been sued. She started to cry, she said,
worried that with a chunk of money missing every month, she might lose
the modest apartment she needed to share custody of her teenage daughter.

“I was in all-out fear,” she said. “After I got off the phone,” she
added, “I realized I didn’t even know what the debt was for.” She might
have had an old credit card, but she had had some years of troubles with
alcohol and drugs and tangled financial problems. In recovery, she said,
she had worked to clean up her financial affairs.

The next time they called, she said, she was willing to pay if she owed
any money. But she needed to see some proof that they had the right
person. Then, without a lawyer, she went to the court in Hempstead to
check into the court order the debt collectors said they had against her.

After some digging, she found the case. The debt-buyer’s lawyers had
filed a statement that they said was proof that she had been given
notice of the suit. A process server for Eltman, Eltman & Cooper claimed
she had been given a copy of the suit personally on July 30, 2004.

Judge Ciaffa doubted that. Ms. Bohnet, he wrote, “hadn’t lived at that
address since 1998.”

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