In November 2015, New Economy Project filed a federal lawsuit, with co-counsel, against the debt collection law firm Gutman, Mintz, Baker, and Sonnenfeldt (GMBS), on behalf of Franklin Arias, a New Yorker in his 70s whose only income is Social Security benefits. The lawsuit alleged that GMBS violated federal debt collection and state consumer protection laws, and explicitly subverted New York’s Exempt Income Protection Act. Mr. Arias sought monetary and injunctive relief.
(Read our blog post here.)
In late 2014, GMBS restrained Mr. Arias’s bank account, which contained only his Social Security benefits. To get his money released, Mr. Arias followed rules spelled out in the Exempt Income Protection Act, a law New York passed in 2008 to stop debt collectors from leaving people without enough money to live. Mr. Arias presented clear proof that GMBS had frozen his Social Security funds, which are legally exempt from debt collection.
Despite the clear evidence he presented, GMBS refused to release Mr. Arias’s funds, falsely claiming that his proof wasn’t good enough. Three weeks later, still without access to his Social Security funds, Mr. Arias again showed the same proof to a GMBS lawyer in court. This time, the lawyer agreed to release his account immediately.
Mr. Arias’s lawsuit alleged that GMBS violated the Fair Debt Collection Practices Act by refusing to release his legally-exempt funds in order to squeeze him financially and pressure him into settling the alleged debt. In its decision, the district court acknowledged that GMBS had made “false and deceptive” statements to Mr. Arias, but ruled that GMBS did not violate the law. The court dismissed the 21 days Arias had to survive without access to his money, saying it had “minimal impact.”
The court’s decision, if left to stand, would have allowed debt collectors to unlawfully hold the last few dollars in people’s bank accounts, forcing low-income New Yorkers to choose between meeting their basic needs and paying off an alleged debt. Fortunately, New Economy Project and co-counsel mounted a successful appeal to the Second Circuit Court of Appeals, which vacated the district court’s decision dismissing Mr. Arias’s lawsuit and sent the case back to the district court.
The lawsuit, which New Economy Project brought with co-counsel, The Law Office of Ahmad Keshavarz , and National Center for Law and Economic Justice, was filed in the U.S. District Court for the Southern District of New York, and settled in October 2018.