Dept. of Financial Services announces charges against debt collector

The Department of Financial Services announced on Wednesday that it had filed a statement of charges against debt collector Forster & Garbus LLP.

DFS alleges that Forster & Garbus, over the course of years, failed to treat consumers as required by the law.

Overall, Forster & Garbus did not honor requests by consumers for substantiation of debt, that is, requests for information proving the validity of the debt and Forster & Garbus’s right to collect the debt. New York law requires that substantiation be provided within 60 days of any such request, and describes the particular kinds of documentation a collector must show to substantiate the debt.

“Consumer protection is the center of everything we do at DFS,” said Superintendent of Financial Services Linda A. Lacewell. “It is especially important for New Yorkers to have access to appropriate and accurate financial information during this stressful time – so they can protect their rights and make financial decisions in their own best interest.”

These charges are the first to allege violations of New York State’s Debt Collection Regulation, Part 1 of Title 23 of the New York Codes, Rules, and Regulations, promulgated in 2015.

Forster & Garbus collects, among other types of debt, student loan debt for some of the largest student loan lenders and servicers in the United States.  These student loan lenders and services, including Sallie Mae and Navient, have assigned to Forster & Garbus several thousand student loan debt accounts since the promulgation of Debt Collection Regulation.

In the statement of charges announced today, the Department alleges that Forster & Garbus failed to comply with substantiation requirements in several ways, including:

  • failing to provide any substantiation;
  • failing to provide substantiation within required timeframes; and
  • providing insufficient substantiation by omitting, for example, underlying transaction documents.

In failing to comply with the law, Forster & Garbus acted in an unacceptable manner to consumers.  In one instance, a consumer questioned whether she actually owed the student loan debts in question, and requested proof of her liabilities. Forster & Garbus responded by suing the consumer. In another instance, Forster & Garbus delayed responding to a consumer’s queries for months beyond the law’s 60-day response requirement. Another consumer in severe financial distress and on the brink of homelessness questioned whether a debt actually belonged to her.  In response, Respondent merely provided a single document — a judgment — which clearly amounts to insufficient substantiation under the law.

According to the statement of charges, the company’s conduct violates Section 1.4 of the Debt Collection Regulation. Under Section 408 of the Financial Services Law any such violation carries penalties of up to $1,000 per violation. DFS alleges that each failure of the company to substantiate a consumer’s debt constitutes a separate violation carrying up to $1,000 in penalties per violation.

A full copy of the statement of charges and Notice of Hearing can be found on the DFS website.

The hearing will be held at the office of the New York State Department of Financial Services, One State Street, New York, New York, beginning on January 12, 2021.

The Debt Collection Regulation became effective in 2014 and as amended became effective in 2015. The Debt Collection Regulation was drafted with substantial industry input.