Collection agency pursues old magazine-subscription debts
Posted
Mar 31 2008, 07:42 PM
by
Karen Datko
This post comes from Joseph S. Enoch at partner blog ConsumerAffairs.com.
Five years after the Federal Trade Commission barred a magazine-subscription company from fraudulently signing up consumers for pricey magazine bundles, a collection agency is trying to collect on those debts and those from other magazine peddlers.
In 2003, the FTC essentially closed the door on Consolidated Media Services and the network of companies under the Cross Media Marketing name after they settled for $350,000 and agreed to end the myriad of alleged deceptive sales tactics they were accused of.
Although CMS appears to have dissolved, consumers write that a collection agency -- Luebke Baker and Associates of Peoria, Ill. -- has been trying to collect on CMS debts, some as old as 11 years.
"Back in November 1997 I received a phone call from Consolidated Media Services asking to purchase magazines," wrote Darla of Catasauqua, Pa. "I cannot remember the deal they had offered, but agreed to one year. One to two years later I received a phone call from Consolidated Media stating the balance was past due. I apologized and paid my account in full with a check by phone.
"Now 11 years later I receive a call from Luebke Baker and Associates stating that I owe $140 and that they would be more than happy to take money over the phone."
Status in doubt
Many consumers, like Darla, say they paid the balance of these debts years ago, while others say they have never heard of the companies that generate these charges.
"I received a phone call stating I owed money on a subscription to receive five magazines monthly," wrote Julian of Westland, Mich. "The mailing address they gave me is one I have never even lived at. I was told it was ordered in 1998 and I owe $640 but they would settle for $122."
Don Cummings, Luebke Baker's senior legal administrator, said the debts are real.
"I don't think it's a matter of people saying 'I never heard of it.' I think it's a matter of whether they forgot," Cummings said. "Three years ago, five years ago they ordered these magazines."
ConsumerAffairs.com has received 51 specific complaints regarding Luebke Baker and close to 400 CMS complaints, many of which include Luebke Baker. The Better Business Bureau has received 84 complaints in the past 36 months, of which most have been resolved, according to the BBB's Web site. The Illinois Attorney General's Office has received 48 complaints since 2000, of which most have been resolved through the company dropping the charges, said spokeswoman Natalie Bauer.
Luebke Baker appears to be calling and mailing as many consumers as possible hoping a percentage of them will unwittingly not fight the charges and pay all or part of the supposed debt, said Emil Hartleb, executive director of the Commercial Collection Agency Association, which strives for ethical debt-collection practices.
Luebke Baker is not a member of the association.
"These guys probably have very little documentation on which to base these debts," Hartleb said. "It's a call-and-letter campaign to annoy these people until they decide to pay the debts to get them to leave them alone."
Cummings said 85% to 90% of Luebke Baker's clients are companies attempting to settle magazine-sales debts.
Third-party buyers
Some of Luebke Baker's clients are third-party buyers of debt who purchased the names and accounts of the consumers from defunct companies like CMS and other sources, Cummings said. That explains why a company now out of business still seems to be trying to gather funds and why consumers say Luebke Baker representatives won't give out company phone numbers or addresses.
Hartleb said the whole debt-buying collection industry has been riddled with corruption for years, but that Luebke Baker seems particularly suspicious since it is pursuing debt more than five years old.
"I hope the state of Illinois gets involved here," he said.
Cummings said Luebke Baker helps consumers and their clients by following all applicable laws and offering settlements, never forcing the consumer to pay the full amount of the debt.
"Our client has given us settlement authority," Cummings said. "The reason that we offer that is a courtesy because you have to remember, in most of these cases the consumer has received these magazines."
ConsumerAffairs.com asked why the agency would settle a legitimate debt for less than the full amount.
"Settlements are so great because the consumer finally has the chance to fulfill an obligation three years ago they forgot to do but choose to do and that's a win-win for the client and the consumer," Cummings said.
If a consumer challenges the debt and refuses to pay, the debt goes back to the client. Luebke Baker then asks the client to provide a recording or documented proof of the debt, Cummings said.
Luebke Baker does not report any magazine-related debts to credit bureaus, Cummings said.
Why pay?
When ConsumerAffairs.com asked why any consumer would pay a debt if it won't affect their credit either way, Cummings replied, "Because they owe the debt. They got the value, they got the benefit and it's like any collection agency. You have to remember why the account would even be sent to us. The answer is the consumer did not fulfill their obligation so it had to be sent to a third party."
The bundled packages of magazines consumers supposedly purchased from CMS and similar companies cost anywhere from $30 to more than $1,000, according to consumer complaints.
"When I first started working in this business, my first thought was, 'Why in the world would someone pay $800 for some magazines?'" said Jim Kubicek, Luebke Baker's director of client and legal services. "My first thought was, this is a scam ... but it's really not."
These magazine vendors call consumers and offer a bundle of three to eight magazines for a period of three to five years. Since they are buying in bulk and agreeing to the extended length of time, the vendors calculate a savings for the consumer, Kubicek said.
Conservatively assuming that no general-interest magazine would cost more than $20 directly from the publisher, ConsumerAffairs.com calculated that $800 would be the most expensive bundle possible.
Fight back
One consumer fought back against Luebke Baker and actually made money from Luebke Baker's alleged false charges.
"We got a call from Luebke Baker and Associates about a scam/bogus magazine subscription," wrote Chris Jarrel of Washington, D.C. "They said I owed $800 from 2001. I asked them to send me something on paper. I mailed it to my lawyer, my lawyer sent them a letter, and they settled out of court for $4,500. This is the second time that this happened for about the same thing. Both times, they settled out of court, and I got money."
Jarrel's lawyer, Dale Pittman of Petersburg, Va., argued that Luebke Baker was in violation of the Fair Debt Collection Practices Act.
"It was pretty much because of their harassment," Jarrel wrote. "Everything was done through fax, phone calls and letters, and it took less than a month and a half to settle."
While Jarrel's battle against Luebke Baker was not only effective but also profitable, there are other ways to fight back, and consumers should never pay a debt they don't owe, said FTC spokeswoman Claudia Bourne Farrell.
Both Farrell and Hartleb suggested filing complaints with the FTC.
Bauer said consumers nationwide should file complaints with the Illinois attorney general online or by phone at: (312) 814-3000. She said the office has been successful in mediating past complaints regarding Luebke Baker.
Other articles of interest at ConsumerAffairs.com:
"Junk mail relief"
"States raise questions about XM-Sirius merger"
"Feds' roof crush rule inadequate, critics charge"
