Victims of Debt Collection Scheme in New York Win $59 Million in Settlement

Tens of thousands of New Yorkers who had their wages garnished or bank accounts frozen in a surreptitious debt-collection scheme will receive $59 million in a class-action settlement that also bars a major network of collectors from continuing the practice.

News Story (New York)

Benjamin Mueller
New York Times (NYT)
November 13, 2015

Tags: Consumer Protection

Organizations mentioned/involved: Mobilization for Justice (New York City)


The settlement, which was filed late on Thursday in Federal District Court in Manhattan, deals a significant blow to an industry that in recent years fed off a recessionary rise in consumer debt actions as companies bought up charged-off debt at low rates and then sought to recover the full debt for themselves.

It also gives hope to a larger group of mainly low-income, minority New Yorkers who are under a cloud of about $800 million in default judgments that the collectors won using fraudulent documents in court, according to legal filings. The plaintiffs will probably have those judgments vacated, and a major network of firms will be forced to stop buying and collecting debt, according to the settlement terms.

“I’m happy that it’s finished — that these companies pay for what they did, and they will not be able to do that again,” said Rea Veerabadren, 63, a plaintiff who had her bank account restrained after a default judgment in 2006. “Maybe one day I will be able to forget, but this was the worst time of my life.”