State AG Smacks Down Two ARM Companies...Oh, Wait

We’ve grown fairly accustomed to seeing announcements from state attorneys general about how sore their hands are from slapping around debt collection agencies and debt buyers.

Well, here’s another one to add to the list: “Attorney General McGraw Reaches Settlement with Out-of-State Debt Collectors…” That announcement came from West Virginia AG Darrell McGraw. He put the press release up on his site Friday afternoon. Yes, the Friday before a long holiday weekend.

Why, I wondered, is a state AG burying such a juicy announcement? After all, every time a state AG sues or settles with a debt collector, an angel gets its wings. It should be bigger news, right?

Reading the press release reveals why everyone at the West Virginia AG’s office decided it would be a good idea to just give this one a cursory release. There is no story here.

Apparently, a consumer in the Mountain State had complained to McGraw’s office that his “credit card account had been sold so many times he could no longer identify who the creditor was.” So McGraw’s office launched an investigation. They learned that a debt buyer from Texas had bought some accounts belonging to WV residents and then had assigned those accounts to be collected by a debt collection company in Kansas.

The two companies’ biggest crime? Not being licensed to collect debt in West Virginia. So McGraw’s office “settled” with the companies for $1,000 each and the letter was signed with a promise to become licensed should the ARM firms need to call on delinquent West Virginia consumers.

And that’s it. Literally. There were no other accusations at all in the three paragraph press release. No claims of harassment or FDCPA violations; just the licensing issue. But this was still such a big deal that the AG’s office felt it warranted a press announcement. And you’ll see that press announcement in the news today on many other sites, I’m sure.

But there is a little more to the story. We could rail on McGraw for hyping up a non-story just to stay in front of his constituency. But he’s a politician, and that’s what they do. The more disturbing part of the story comes from the last paragraph of the announcement. According to the AG’s office, the debt buyer “agreed to cancel the outstanding balances of West Virginia consumers whose debts it had previously assigned for collection.”

That’s crazy. McGraw is using a licensing issue to help consumers in his state avoid paying their obligations. This is where I insert the earnest caveat that all ARM companies need to go the extra mile to ensure they are fully licensed and bonded, where required, to collect in any state in which they do business. This is actually very, very important. But for the highest law enforcement officer in a state to compel a company to simply throw away one of its capital assets is beyond the pale.

Remember: state attorneys general are not infallible. They generally have the law on their side, and most genuinely have the interests of their citizens at the tops of their minds. But they overstep their bounds, as well.

The attorney general in Missouri recently learned that he couldn’t just sue an ARM firm for anything and everything, “Judge Throws Out State AG Case Against Debt Buyer,” June 30). But their announcements carry a lot of weight. When the media sees a headline of “so-and-so AG settles with evil debt collector,” a Pavlovian response kicks in, and the old tired narratives are trotted out once more.

We as an industry must get better at nuance. We have to do a better job of explaining when there’s a “there” there in legal action announcements, and when there isn’t.