Arrow Financial Services: Loss Over Language In Letter

2011-10-05T10:10:00.000-07:00

Sacramento, CA (September 25, 2011) Arrow Financial Services LLC violated the federal Fair Debt Collection Practices Act when it sent a mail blast to some 40,000 California residents trying to get them to pay old health club debts, the 9th U.S. Circuit Court of Appeals said in a recent ruling. It upholds a decision of a U.S. District Court in Los Angeles.

Arrow Financial buys previously uncollectible debt at deep discounts and then goes after the debtors seeking the full amount or at least a negotiated settlement.

This case stems from Arrow’s purchase in 2002 of a portfolio of debts owed to health clubs. All the debts were more than seven years old.

Because they were so old, under the federal Fair Credit Reporting Act, none of the debts could be reported to a credit reporting agency.

From the court’s description of the case’s background:

“In 2004, Arrow attempted to collect on this portfolio of debts by sending substantially identical letters to nearly 40,000 California residents. One of those residents was Johnny Gonzales.… The letter informed Mr. Gonzales that he owed a ‘past due balance’ to ‘Holiday Spa of Calif.’”

The letter also said that if he agreed to Arrow’s settlement terms, then, “if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.”

The letter referred to credit bureaus three times, twice saying that if Arrow were reporting the debt, it would notify credit bureaus once the settlement funds clear, and also says that if “a consumer fails to fulfill his credit obligations, negative information may be submitted to a credit reporting agency.”

The key word here is “if.”

Mr. Gonzales looked into the law and found that the debt was too old to be reported to credit agencies and so he sued, contending that the letter would induce people to pay in fear of getting a ding on their credit.

He won at the district court level, with a jury setting total damages to Mr. Gonzales and the nearly 40,000 other members of the class action at $225,500.

Arrow Financial Services LLC, which is part of the Sallie Mae (NYSE: SLM) family of companies, appealed. (SLM Corporation, commonly known as Sallie Mae, was originally the Student Loan Marketing Association but now is a publicly traded non-governmental corporation.)

The appeals court says the federal Fair Debt Collection Practices Act “broadly prohibits the use of ‘any false, deceptive, or misleading representation or means in connection with the collection of any debt.’”

The 2-1 decision adds that Arrow’s letters were “misleading and impliedly threaten to take action that cannot be legally taken.”

Key to Arrow’s arguments were that the letters used conditional language such as “if we are reporting the account.”

But the court says, “[W]e emphasize that a literally true statement can still be misleading.”

“We are not … to read the language from the perspective of a savvy consumer, and consumers are under no obligation to seek explanation of confusing or misleading language in debt collection letters,” the appeals court said.

Kelly Macbeth

2009-04-19T06:58:00.000-07:00

Kelly Macbeth is an attorney who does a lot of collection work for Arrow Financial Services. Be careful if she contacts you!

Arrow Financial Services Harasses the Dead!

2009-04-11T15:00:00.000-07:00

My mother-in-law received letter from Arrow Financial Services LLC addressed to her late husband. I instantly recognized it as a scam. Too strangly worded, not to mention he had never done business with a company called Premier Bankcard Inc., the entity Arrow was attempting to collect for.

I called Arrow Financial to tell them my father-in-law has been deceased for almost four years. They had sent him a "delinquint" bill of $1, 090.83 My exact words to the phone rep were; "consider this account closed and uncollectable". His reply: "okay".

Arrow Financial Services Watch

Arrow Financial Services: Loss Over Language In Letter

Kelly Macbeth

Arrow Financial Services Harasses the Dead!