Debt Collection Agency Tries To Pull New York Consumers Into Arbitration And Gets Shot Down

Debt Collection Agency Tries To Pull New York Consumers Into Arbitration And Gets Shot Down

By |August 30th, 2011|

new york debt collection agency arbitrationWhen a debt collection agency tries to send you to arbitration, make them prove they’re entitled to do so.

It doesn’t seem all that long ago that the Minnesota Attorney General effectively shut down the Mann Bracken/NAF arbitration scheme. For a while after that, the horror stories of debt collectors forcing arbitration seemed to dry up.

At least one debt collection agency recently tried to get the band back together by forcing two New York consumers into arbitration.

Victoria Butto and Lakesha Houser didn’t pay their cell phone bills. Their cell phone carriers, Verizon Wireless (“Verizon”) and AT&T Mobility (“AT&T”), placed the delinquent accounts with Collecto for collection.

The collection agency contacted Butto and Houser demanding not only payment for the past due cellular bills, but for collection costs as well. Butto and Houser filed suit against Collecto, claiming the collection agency was collecting improper costs. In return, the collection agency tried to compel Butto and Houser to arbitrate their claims rather than litigate them in court of law.

Something Funny Happened On The Way To The Arbitration

The judge didn’t buy into the debt collector’s argument.

The service agreements that both Butto and Houser signed contained clauses that required arbitration of all disputes arising between the parties. Though the collection agency was not named in those agreements, Collecto didn’t let that stop it.

Collecto claimed to be an agent of both Verizon and AT&T because it was attempting to collect overdue debts on behalf of those entities. Because of its agency status, the collection agency argued that it was allowed to enforce the arbitration provision.

Creditor To Collection Agency: Don’t Stand So Close To Me

Let me tell you a secret. Creditors don’t want debt collection agencies acting as their agents because it leaves them open to liability in the event that the collection agency does something wrong.

Collecto’s contracts with Verizon and AT&T bear this out. Collecto’s agreement with Verizon states: “In providing any services under this Agreement

[Collecto] is acting solely as an independent contractor and not as an agent of any other party.” Similarly, Collecto’s agreement with AT&T provides: “[Collecto] is engaged in an independent business and will perform all obligations under this Agreement as an independent contractor and not as the agent or employee of AT&T.”

Had the consumers not forced the collection agency to turn over copies of its agreements with Verizon and AT&T, we never would have seen this. And as with most things in life, the proof was in the writing.

The Court made clear that it could not find the collection agency to be an agent of either AT&T or Verizon. Collecto’s motion to compel arbitration was denied.

Don’t let them have their cake and eat it too.

If you’ve had the unpleasant experience of dealing with a debt collector, it should come as no surprise that they will sometimes claim to have rights they don’t have. Don’t let them get away with it. Make them prove it by showing copy of the collection agreement.

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About the Author:

I've been a consumer protection lawyer since 1995, working to help people end their bill problems. I'm a faculty member at the Student Loan Law Workshop, a nationally recognized speaker, and a long-time member of both the National Association of Consumer Bankruptcy Attorneys and National Association of Consumer Advocates.