Submit your Case
for Evaluation

Return to All News

Waco attorney John Fugate helps break up group of shady debt collectors

July 19, 2009

By Cindy V. Culp Waco Tribune-Herald staff writer, cculp@wacotrib.com, 254-757-5744

The persistence of a Waco attorney who has dedicated his practice to protecting consumers from shady debt collectors recently helped dismantle a group of such companies that officials deemed the worst they have ever seen.

Employees of the New York-based companies used a variety of abusive tactics to get people to give them money, officials allege. The most egregious one was to pose as law enforcement officials and threaten consumers with jail time, they have said.

One Waco woman, for example, received phone calls from one of the companies’ collectors who said he was a detective. He told her he was about to issue warrants for her arrest that had the approval of McLennan County District Attorney John Segrest and would be served by McLennan County sheriff’s deputies.

In another call, that same local woman was told that police were going to come to her job at Hillcrest Medical Baptist Center and arrest her there. The message left for her, which officials have on tape, said in part: "Make sure you have somewhere for your kids to go, lock up your house, get some clean clothes because you’re not coming home anytime soon."

At least several dozen Central Texans were victimized by the companies over the past three years, said Waco attorney John Fugate, who helped gather evidence against the ring. All told, hundreds of people across the country have filed complaints with law enforcement agencies, New York Attorney General Andrew Cuomo said in a release issued last month.

Cuomo’s office, which headed up the investigation, secured a court order to close down the ring, which included at least nine debt collection companies across western New York.

"Plain and simple, this company was run by people who lied, bullied and preyed on vulnerable Americans struggling to resolve their financial situation," Cuomo said in the release. "Pretending to be a police officer, threatening to throw consumers in jail — these practices are as despicable as they are illegal."

Fugate, who has developed a national reputation for helping consumers treated unfairly by debt collectors, became involved in what would eventually become Cuomo’s investigation about three years ago. A Waco-area man contacted him after being harassed by a debt collection company, even though he didn’t owe any money.

During one call, the man was told that people like him "slither across the border like snakes" and was threatened with deportation despite the fact that he is a legal U.S. resident, Fugate said.

Know your rights:

• You cannot be jailed for failing to pay a debt, except in the case of child support payments.
• In Texas, the statute of limitations for most debts is four years from when you go into default. For cell phone-related debts, it’s two years. After that, you do not legally owe the money.
• Even if you owe money, you should not give out personal or financial information over the phone. Shady collectors can use that information to take more money than you’ve agreed to, or even more money than you owe.
• Never make an agreement to pay if you are not sure whom you are dealing with.
• Debt collectors cannot repeatedly call you in a harassing manner. Also, if you tell a collector you cannot receive calls at work, they can no longer call you there.
• Contact an attorney if you feel you are being treated unfairly.

Fugate tried to track down the company but ran into multiple roadblocks. The area code for the calls showed they were coming from Baltimore.

It was only later he learned the firm used an Internet call technology to mask its true location.

Similarly, the debt collectors did business under multiple names and had 62 bank accounts, Fugate said. Eventually, though, as Fugate received cases from people around the state experiencing the same sort of tactics, he began to realize they were related, he said.

What made the companies’ tactics especially egregious, Fugate said, is that most of the victims did not owe any collectable debts. Some had owed money in the past.

In their cases, they had already paid it off or it had passed the statute of limitations, meaning they no longer were obligated to pay it, he said.

Scared by threats

In other cases, victims had never been delinquent at all, Fugate said. Yet, people paid the ring — a typical amount was $1,000 to $1,500 — because they were scared by the threats, he said.

Even in cases where people legitimately owed money, those accounts were the property of other debt collection companies, Fugate said. The ring stole the information needed to collect on them, he said.

"There were different levels of thievery going on,” Fugate said. “The attorney general told me they stole $1 million a month."

A break in tracking down the ring came when one of the debt collectors gave a client of Fugate’s a particular address to send money to.

It turned out to be his home, and Fugate was able to start unraveling the mystery based on that person’s identity.

While Fugate is glad the New York ring has been shut down, he said consumers still need to be vigilant. There are other groups as bad, or worse, he said.

Plus, even legitimate debt collection companies sometimes go over the line, Fugate said. He said he thinks some have decided it is more profitable to settle the occasional lawsuit than to abandon abusive tactics that spur people into paying.

"This is a bigger problem than the occasional criminal enterprise," he said.