May 24, 2013
Debt Collector Sued Over Tactics
A Lawsuit Alleges That a New Jersey Agency Sued Thousands Over Unpaid Accounts
Fausto Brito, a Bronx truck driver, said he was stunned to learn last summer that his credit was too damaged to obtain a home mortgage.
He was told he had been sued in 2006 by Palisades Collection over unpaid debt in an AT&T Wireless account. Mr. Brito said he never had such an account. Nor had he ever heard of the suit.
"They were trying to blame me for something I'd never done," said the 34-year-old driver, who moved to the U.S. from the Dominican Republic in 1995 and spoke through a translator.
After multiple court appearances, the case was dismissed. Mr. Brito now is one of three named plaintiffs in a suit seeking class-action status filed earlier this month in Manhattan federal court. The lawsuit alleges that Palisades Collection of New Jersey and its law firm Pressler & Pressler sued thousands of New Yorkers over unpaid accounts with AT&T T +0.33% Wireless—debts the people say they never incurred. Many were never notified of the lawsuits, and the debt collector obtained default judgments totaling millions of dollars, the suit says.
Victims learned of the judgments years later, once their bank accounts were frozen, their wages were garnished or they discovered problems with their credit, the lawsuit says.
Seth Berman, general counsel for Palisades Collection and its parent Asta Funding, ASFI -0.44% declined to comment. Sheldon Pressler, head of Pressler & Pressler, also based in New Jersey, called the allegations "absolutely false." In the case of Fausto Brito, Mr. Pressler said his law firm had properly served another man with the same name, and the case shouldn't have been dismissed.
AT&T declined to comment on whether the three plaintiffs, Mr. Brito, Betty Bernhart and Charles Roberts, ever had accounts with AT&T Wireless. AT&T also wouldn't comment on whether it sold debt to Palisades Collection or Asta Funding in 2004, as the suit alleges.
"It became increasingly clear that here was a top-down strategy to seize assets from the most vulnerable New Yorkers without regard to whether a debt was owed or whether they even had the right person," said attorney Diane Lifton, who is serving as the plaintiffs' co-counsel from the private firm Hughes, Hubbard & Reed along with lawyers from the New York Legal Assistance Group.
Palisades Collection is under review by New York City's Department of Consumer Affairs, which said it had received 96 complaints against the debt collector since 2004. Since 2005, Palisades has been the subject of 591 federal lawsuits, mostly for alleged violations of the Fair Debt Collection Practices Act, including attempts to collect debt from people who say they don't owe it. Many of theses suits were eventually dismissed; some were settled out of court.
Pressler & Pressler was one of 35 firms sued by the state attorney general's office in 2009 for allegedly using a process server that failed to notify people of complaints, and then filed false affidavits claiming the documents were served. The law firm didn't admit wrongdoing in settling the case, and agreed to contact any people who might have been improperly served.
"There's a reason why people don't contest cases," Mr. Pressler said. "They owe the money."
This case was developed by the legal assistance group, which works with low-income New Yorkers. About two years ago, the same kinds of cases kept popping up, lawyers in the unit said. People were showing up in court bewildered to discover they had been sued in 2005 and 2006 by Pressler & Pressler, over AT&T Wireless debt they say they didn't owe.
"It stood out as a pattern," said senior staff attorney Danielle Tarantolo. A records search found that Pressler & Pressler filed more than 15,000 cases in New York City Civil Courts on behalf of Palisades Collection in 2005 and 2006, the lawsuit says.
With those numbers, "even for a very large, well-resourced law firm it would be extraordinarily difficult to give each case the level of review and attention that it requires to make a determination about whether a lawsuit is appropriate or not," she said.
Not so, said Mr. Pressler: "I had enough information pursuant to ethics and the law to sustain the lawsuits."
Ms. Tarantolo pointed to Ms. Bernhart, another plaintiff in the federal court suit. In 2011, Ms. Bernhart of Brooklyn said the boss at her medical records company summoned her into his office and told her that he would have to garnish her wages to comply with a court order.
"I was like, 'Oh my God.' I'm thinking about the rent, I'm thinking about a lot of stuff," she said.
Then Ms. Bernhart read the affidavit attesting that she had been served notice of the lawsuit: The server swore that he had given the papers to a black woman. Ms. Bernhart is white.
Ms. Bernhart had four separate court appearances, missing work each time, she said. After the first suit was dismissed, she learned that Palisades had filed a second lawsuit against her, for debt from a different AT&T account she also said she never had.
That suit was eventually dismissed, too, but she said she remains "on the edge."
Mr. Pressler said his firm eventually determined that Ms. Bernhart was the victim of identify theft and dropped the case.