It was announced early in October that the Minnesota Department of Commerce took action to shut down two collection agencies that it said was collecting debts without the proper licensing and operating out of trust. The trust account balances were near zero or below.
The Commerce Department revealed that it began an investigation this past summer into Wentworth Assets, LLC based out of West St. Paul and Receivables Management Solutions, Inc. based out of South St. Paul and their owner. During the investigation, the state found 40 dates in a 19 month period where the RMS trust account had a negative balance or it was zero. Minnesota law states that collection agencies are required to have a trust account that is separate from their regular accounts and that that account is to hold the money that they collect on behalf of their clients. The purpose of the trust is to make sure the money that is collected isn’t mixed in with money for their operating expenses.
It was found that the money collected was comingling with money for operating expenses and that the owner had use money for personal expenses.
The Commerce Department has been accused of not presenting information correctly, as the owner states that the assets of RMS and its client base were sold earlier in 2013. Personal items are said to have been purchased after the sale.
The state alleges that there was a refusal or failure to account to the 4,966 clients of RMS for the money that was collected on behalf of the clients within 30 days from the last day in which money was collected. The state also alleges that checks were fabricated from consumer bank accounts to help cover payroll. Another allegation is that employees were ordered to deposit post-dated checks from debtors prior to the date on the check, which resulted in bounced checks and other issues for affected debtors.
The issues that depositing checks early caused consumers potentially resulted in hundreds of dollars in bank fees for a single consumer that was not their fault. This creates a consumer protection issue due to the breach in agreement between the consumer and the debt collector.
During the investigation, it was stated that the license lapsed because the business had a net worth that was more than a million dollars in the negative and could not afford the surety bond that is required to apply for a license. However, Minnesota regulators state that the company continued to operate without a license and still secured over 1,200 debt collection contracts during that period.
The Commerce Department has placed Wentworth and RMS into receivership. Debt collection companies are placed into receivership in order for the receiver appointed by the court to manage the business, figure out how much money is owed to clients, obtain a full accounting of the money that was collected for clients, and find out how much money was collected from debtors to resolve their debt.