Unlicensed, 2 debt firms close doors
Goldstone brothers move in face of Mass. deadline
After years of hunting down thousands of Massachusetts consumers for old credit card debts, the brothers who own two of the state's busiest and most notorious debt-collection firms have closed their local offices, rather than seek licenses to operate legally here.
Last Friday was the deadline for Daniel W. Goldstone, owner of Norfolk Financial Corp., and Chad E. Goldstone, owner of Commonwealth Receivables Inc., to apply for licenses from the state Division of Banks. Rather than comply, Norfolk has moved out of its West Roxbury office and set up shop in Rhode Island, a state that does not require licenses for collection firms.
Commonwealth Receivables vacated its Watertown office late last month, leaving some debtors uncertain about where to send payments. Chad Goldstone continues to do business from an office he maintains in Georgia.
The Goldstones, whose business practices were featured in a recent Globe Spotlight series on abuses in the debt collection industry, have sued more than 47,000 Bay State residents over the past four years, most of them for debts under $2,000. They were among the most aggressive collectors in the state, known for their practice of towing debtors' cars to extract payments. Both brothers are under investigation by the state attorney general.
The Goldstones had argued that they didn't have to be licensed, because they own the debt they collect, purchasing delinquent accounts for pennies on the dollar and chasing consumers for all or part of what is owed. In fact, Massachusetts law changed in 2004 to require such firms to be licensed. But the Division of Banks, believing it had not communicated the change clearly enough, elected to give Norfolk, Commonwealth and other debt buyers until Sept. 30 to comply.
On Monday, the division sent letters to 575 firms warning them to cease operations unless they are licensed. By that time, Norfolk and Commonwealth had already moved on.
The Goldstones' Boston lawyer, John J. O'Connor, declined to explain why his clients shut their local operations. In an e-mail response to the Globe he said, ``my clients say simply that they have always worked hard to comply with all applicable requirements of the law and common decency and will continue to do so."
Norfolk listed the Providence office of O'Connor's law firm, Peabody & Arnold, as its Rhode Island corporate address.
The move to Rhode Island may reflect that state's reputation for placing few restrictions on debt-collection firms.
``We do not have any laws or regulations that require the licensing of a traditional debt collector," said Richard Bernstein, executive council of Rhode Island's Division of Business Regulation.
Christopher M. Lefebvre, a consumer lawyer in Pawtucket, said, ``We're . . . behind other states, like Massachusetts, that at least try to have a system in place that protects consumers." He added that ``in Rhode Island, anything goes."
The departure of Commonwealth Receivables from its Watertown office was abrupt. The owner of the building said the firm vacated the premises last month without giving a required 30-day notice, although the rent had been paid in full. The disappearance befuddled some who have been making regular debt payments to the company; some called the Globe to say that they had not received monthly bills since June and that checks mailed in the last few weeks have not been cashed.
``I've been making $20 payments for two years; now I don't know what to do," said Linda Burnham, a single mother from Northborough who got into debt trouble when she lost her job, but has since found a new position with a Marlborough real estate firm.
Burnham said she tried to reach Commonwealth by telephone in early September and left a voice mail message that was never returned. Last week, she called again and found there was no longer a recorded message.
``Now I'm getting really nervous," she said, adding that she fears the company will have her car towed. ``I'm trying to do everything right here, and I'm so worried."
On Sept. 7, Norfolk Financial hired an Uxbridge debt-collection lawyer, Richard R. Hubbard, to handle about 1,000 cases in which Norfolk had already filed suit against Massachusetts consumers, according to court filings and an interview with Hubbard.
But that arrangement is under review by the Division of Banks. ``We are looking to avoid the situation where an attorney is hired to avoid coverage under the law," said David J. Cotney, chief operating officer at the division. The division will issue an opinion on the matter within a few days, he said.
Hubbard said he did not know whether Norfolk would pursue Massachusetts debtors in the future. But, he added, ``I would be happy to accept any new cases that they send to me."
In addition to ordering unlicensed collectors to cease operating, the Division of Banks issued a separate letter yesterday to 378 licensed collection firms nationwide, urging them to comply with all Massachusetts collection laws. The division said it would investigate any firm with evidence of activities that it deems ``false, misleading, deceptive, unfair, unconscionable, or constitute harrassment" under state debt collection law.
Specifically, the letter said it is illegal to pursue consumers who can show they do not owe the debt in question.
In addition, the division said it is false and misleading for a collector to imply that a consumer does not need to appear for a scheduled court date or for a collector to threaten legal action for debts that are too old to be collected through court action.
The division has also posted new information on the rights of debtors on its website: www.state.ma.us/dob.
Beth Healy can be reached at bhealy@globe.com. Michael Rezendes can be reached at rezendes@globe.com. 