Andrew Cuomo

Earlier this week, New York State Attorney General Andrew Cuomo’s office announced that it had sued a process server, American Legal Process, that specialized in debt collection lawsuits (“NY Attorney General Going After Debt Collection Case Process Servers,” April 14). In addition, the owner of the company was arrested on criminal charges.

More pertinent to the accounts receivable management industry is the inclusion of law firm Forster & Garbus in the suit. Forster & Garbus is one of the most prolific collection law firms in New York. They were one of American Legal Process’s largest clients.

The central issue in the suit is the alleged practice of “sewer service” in lawsuit notification. Cuomo’s office said that American Legal deliberately failed to notify debtors that a collection case was pending against them, most often resulting in a summary judgment for the creditor or collection law firm. The office claims that Forster & Garbus failed to supervise American Legal and “relied on legal papers from ALP that it knew or should have known were false.”

Cuomo said in a statement, “If proven to be true, the schemes detailed in the cases filed today undermined the legal rights of thousands of citizens by corrupting our legal system and abusing individuals who happened to have consumer debts.”

He also took the opportunity to fire a warning at collection law firms. "I am putting all law firms on notice that they are responsible for the conduct of the companies they use to serve complaints and other legal documents. Law firms cannot turn a blind-eye to abuses perpetrated on their behalf,” he said in a statement.

Since many ARM firms have business models that rely on legal collections, the case and subsequent action in New York are definitely worth the collection industry’s attention.