Legalized extortion

It's five in the morning. You're alarm has another half an hour before it goes off to wake you. Unfortunately, the ringing of your doorbell does it instead. You go to the door, and find someone there, insisting that you were summoned to small claims court for a debt that was over five years old (and erased through bankruptcy). They say you either pay the debt and the court costs in cash right now (which amounts to a couple of thousand dollars), or you hand them the keys to your car. Or maybe your house.

Yes, it happens all the time.

Dimanche is one of thousands of Massachusetts residents who have had their cars seized and lives upended by a pair of debt collection companies, Commonwealth Receivables Inc. of Watertown and Norfolk Financial Corp. of West Roxbury. Run by two brothers [41-year-old Chad Goldstone and 44-year-old Daniel Goldstone, respectively], one of whom was disbarred this year for his business practices, Norfolk and Commonwealth have become two of the state's most litigious and aggressive collectors, a Globe Spotlight Team investigation of the debt industry has found.

In America's debt-saturated culture, Chad E. and Daniel W. Goldstone are among the clear winners. They are perhaps the most active local players in a nationwide debt collection industry that has exploded in size and profits, inundating court systems in Massachusetts and across the country with collection lawsuits seeking tens of billions of dollars in debts that are often purchased for collection by the Goldstones and hundreds of other firms for just pennies on the dollar.

Part of the costs of the Goldstones' extortion operation is the fees generated by the deputy sheriffs, constables, and tow lot operators who show up at people's doors to take their possessions or their money, provide information about them to the extorters Goldsones, and do other types of work for them.

The Goldstones and their fellow thugs debt collectors are able to do this by filing suit in small claims court. They use an old address for someone, so they don't actually get the documents, don't know they are being sued, and therefore don't show up. The thugs debt collectors then get the go-ahead to take their property. Oddly enough, they are able to scrounge up a correct address for that part of the project, thanks to the constables, tow lot operators, and deputy sheriffs working for them.

The people the Goldstones target are working- and lower-middle-class, or are among the ranks of the working poor. They are the elderly, the disabled, and the economically disenfranchised. Some of these people cannot get to work with no car. Some of these people paid off their debts years ago, but collection agencies are not often questioned about the veracity of their information. It's all about gouging poor people.

Before the Goldstone brothers formed their own separate companies, they ran Goldstone & Sudalter, a collection law firm. Daniel, who owned the firm, was disbarred for bilking his customers for over $800K. The brothers went their separate business ways. Chad is the car man, and Daniel is the house man. In other words, if Daniel purchases records of your debt, and doesn't bother to check if you've actually paid it off, he'll go through the scummy motions of not having your correct contact info, file suit with the wrong address, get the courts permission to seize your assets, and then put a lien on your home (which he magically finds once court is over).

The damage these bullies inflict is great.

And then there was the case of Marie Dimanche, the Mattapan mother who awoke to a 6 a.m. visit from constables working for Commonwealth Receivables.

Dimanche thought the debt Commonwealth was trying to collect had been paid by Travelers Aid Family Services, an agency for the homeless that had once helped Dimanche find a place to live. An official with the agency said it often provides financial assistance to clients, paying off old debts and restoring credit.

When Commonwealth rejected her explanation, Dimanche's effort to keep her car off the auction block became a race against time. Scrambling to understand the legal actions that had been taken against her, she filed a motion in November 2002 in Boston Municipal Court, asking to have the court's judgment against her lifted.

Dimanche, in her motion, said she never received notice of Commonwealth's lawsuit because of the outdated address the firm provided to the court. She emphasized the urgency of her case: her car was to be auctioned on Nov. 22.

The court responded by scheduling a hearing for Dec. 5 - more than a week after the scheduled auction. And on Nov. 22, her car was sold for $2,197 - about a third of the vehicle's market value, according to the National Auto Dealer's Association Used Car Guide.

Days later, on Dec. 5, a judge lifted the judgment against Dimanche. But by then it was too late. Dimanche resigned herself to bumming rides and using the MBTA to get to work and take her daughters to school. It was two years before she could afford to buy another car.

But a reliable means of transportation wasn't the only thing Dimanche and her children lost: Without her car, Dimanche was unable to make use of a City of Boston scholarship for computer training courses in Quincy - training that Dimanche said would have qualified her for a better-paying job at Sears, her employer.

''They don't understand that they're altering people's lives,'' Dimanche said of Commonwealth. ''It's not like you can just catch a ride and go on like normal.''

But this isn't an aberration. Credit card companies and banks will sell their debt records in bulk. And bottom feeding bullies buy it up, and try to collect--even if the debt has been paid off, or has been forgiven or nullified. They are able to do it because too many people love to think they are not like the poor, and that people get what's coming to them; the poor are guilty as charged, and should be punished. The Goldstones and their ilk are able to collect on debts that have been paid because of a corrupt small-claims court system that rubber-stamps these frivolous lawsuits, and act as a branch of the debt collection agencies.

Clerks routinely give plaintiffs the benefit of the doubt. And basic questions of fact are rarely asked or answered: Might the plaintiff's claim be false or overstated? Might they be after the wrong person?

Yes, they might. George Rodrigues of New Bedford twice had to go to court over a $1,665 NStar bill that was not his. Both times, the DHL driver had to take time off work, costing him $200 a day, to convince the court it had the wrong guy.

The NStar debt belonged to a different George Rodriguez - ending with a z. The fellow NStar was after was 21; Rodrigues is twice his age. But in court, it was Rodrigues who faced the burden of proving he was innocent. ''How many times can I show them my information?'' Rodrigues asked.

The clerk would not accept Rodrigues's proof of his identity; he insisted on a hearing, at which NStar's lawyer finally dropped the case.

Innocent until proven guilty is for other people, not for poor people who are accused of owning debt.

Comments

[Sheelzebub]

Ann, thanks for the links. The last installment of the Globe's Spotlight series (which I'll post about later) includes comments from Professor Warren.

Reddest and FBM--I had something similar, but nearly as scary, happen to me. It was with Sprint in my last year of college (about 15 years ago), and it only lasted a few months (I paid every month in full and on time, but still got collection calls.) I made such a stink they finally stopped. (And yeah, I cancelled Sprint's service.)

[Ann Bartow]

The FTC has a website that gives information about "Fair Debt Collection Practices" here: http://www.ftc.gov/bcp/conline/pubs/credit/fdc.htm
It isn't a great site but it does have a link to the FTC's Comsumer Complaint Form: https://rn.ftc.gov/pls/dod/wsolcq$.startup?Z_ORG_CODE=PU01
and it directs folks with debt collection concerns to their state Attorney General's offices (some of which can be very helpful, though unfortunately this varies a great deal).

Anyone with a more academic interest in these issues might want to check out the writings of Elizabeth Warren, a Harvard Law Prof quoted the article linked above, such as: Warren, Elizabeth. "Congress and the Credit Industry: More Bad News for Families" in American's Second Gilded Age: Perspectives on Law and Class Difference (New York University Press, 2006).
Warren writes very accessibly and is incredibly knowledgeable about these issues.

[reddest]

in the early nineties, i had a small student loan that i paid off in full when my college fund matured. i had proof of payment in the form of a letter, a statement from the data corp. that collected the funds, and even a small check from the little bit i accidentally overpaid. yet, for seven years i was harassed almost daily by collection agency after collection agency for "defaulting." each time the same thing would happen. i'd be threatened, i'd fax in proof of payment, and they'd sell the debt off to another agency and it would start all over again. it destroyed my credit. this went on for years. i lost track of how many agencies the debt was sold to before they finally quit.

my husband, during this time, had a similar situation. he went to a programming tech school and took out a small student loan for it. the school went bankrupt. he was given notice that, because of the bankruptcy, his debt was forgiven. next thing you know, well, read what i wrote about my situation. same thing. agency after agency.

we were lucky we didn't own a car or a home. they kept threatening to have our wages garnished.

[Five Before Midnight]

Yeah, debt collectors even buy debts from collection agencies, who either have collected on the debts or were unsuccessful. I think the latter is common because I get harassed at least twice a year on debts that are being collected under other people's names(that are similar to mine but not mine). I've researched some of these companies(which seem to change phone numbers a lot)and they do the same things that are listed in this article.

One asshole called me up saying that I owed money(giving someone else's name) and I'd better call if "you know what is good for you". I played that message on my answering machine to his supervisor and said that if it and he wasn't taken care of, I was going to get a police report filled out in his jurisdiction, because that is an extortion threat.

[Sheelzebub]

Yep. In today's Boston Globe Spotlight installment, they interview constables and sheriffs who wouldn't have anything to do with this--they think it's bullying and gouging. And a lot of lawyers are repelled by it as well. Heck, even a creditor was horrified at the treatment a debtor got at the hands of a small-claims judge.

Apparently it's easier to get away with this crap in certain counties.

[varro]

I'm surprised that the judges would even allow the cases to go through without the plaintiffs proving they effected service on the debtors.

But then again, this crook gamed the system in that it only required a first-class letter to the defendant, not a certified letter or personal service of process.

I sincerely hope someone puts him behind bars for perjury and theft, from both the defendants in these cases and from Sears. I am a bankruptcy lawyer, and I would lower the boom on someone like this if he tried to go after one of my clients in the same manner....

[kris]

Ahh, guys...The people who SPECALIZE in this is everybody's friend SallieMae. State sponsored ripoff merchants. See the blog, "Sallie Mae are Chiselling Crooks"...or "Student Loan Justice". It's not just poor old grandma who happend to be unlucky.

[Roxanne -]

Just wow. I'm speechless.