Federal legislators passed the Fair Credit Reporting Act (FCRA) back in the 1970s with the intention of protecting consumers against a variety of financial industry abuses. Within that legislation were many provisions governing how collection agencies can do business. The original rules have since been strengthened by additional legislation and FTC rules.
It is with that in mind that consumers should know one important fact about debt collection agencies: they are not above the law. That much was apparent in a recent ruling against an Indiana debt collection agency. New Britain Financial LLC was slapped with a $1.3 million judgment after violating Indiana laws on several fronts.
According to Inside Indiana Business, state Attorney General Curtis Hill sued New Britain Financial in 2020 after numerous complaints about the collection agency’s business practices. The company was accused of harassing consumers with threats of liens, wage garnishments, arrests, and lawsuits.
No Judgments on Record
Collection agencies are not allowed to harass under any circumstances. But what makes New Britain’s actions more egregious is the fact that they had no judgments on record. For example, collection agencies cannot randomly garnish wages in order to collect on bad debt. Wage garnishment can only occur after a legal judgment has been entered. For the Indiana company to threaten wage garnishment without a judgment steps way over the line.
Judgment Collectors, a Salt Lake City judgment collection agency, explains that wage garnishment is a pretty straightforward process. It can be implemented with no need for threats. A collection agency or attorney simply contacts the consumer’s employer and furnishes a copy of the judgment. The employer is then compelled by law to garnish the consumers wages.
Collection agencies of all types are restricted in terms of what they can do to encourage people to pay. They certainly cannot threaten people with arrest. They also cannot claim to have attorneys on staff if it is not so. Collection agencies must be upfront and transparent at all times.
Operating Without a License
New Britain also ran into trouble when it was discovered that they had no license to operate in Indiana. They had a license previously, but it was not renewed in 2019. In addition, the company’s owner had been banned from collecting debts in Illinois after being found guilty of abusive collection practices. This could explain why his Indiana license was not renewed.
The company was served with a civil complaint by the state of Indiana in September 2020. After failing to appear in court, a default judgment was entered. The court awarded some $300,000 to be paid to consumers affected by New Britain’s practices as well as an additional $1 million in civil penalties.
In addition, New Britain Financial can no longer provide debt collection services in Indiana. Nor can the company’s owner. Barring him from the state prevents him from opening a new debt collection agency under a different name.
Collecting on the Collectors
It will be interesting to note how forthcoming New Britain is in paying the $1.3 million judgment. How ironic would it be if the company could not pay and had to be pursued by a collection agency? That probably won’t happen, but it’s always a possibility.
The moral of the story is pretty clear: debt collection agencies are not above the law. If you feel you are being harassed by debt collectors above and beyond what the law allows, contact your state attorney general’s office. They can clear things up for you. If it turns out you are being harassed and abused, there are legal remedies available to you.