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AG gets $2.25 million settlement in debt collection case

Massachusetts Attorney General Maura Healey.
Massachusetts Attorney General Maura Healey.Craig F. Walker/Globe Staff

For the second time in a month, a national debt collection company has agreed to pay the state a large sum of money to settle allegations that it used abusive debt collection practices.

The latest settlement, filed in court Tuesday, requires Transworld Systems Inc., one of the country’s largest collectors of defaulted student debt, to pay $2.25 million.

Last month, Avant, a Chicago-based company that services online loans to consumers, agreed to pay the state $1.6 million to settle similar allegations.

The two settlements, totaling almost $4 million, will fund local consumer programs throughout the state. Both were negotiated by Attorney General Maura Healey’s office, which enforces consumer protection laws, including debt collection regulations.


The state’s debt collection regulations are among the strictest in the nation, and the two settlements are among the largest of their kind.

In the most recent case, Transworld, based outside Philadelphia, was accused of making excessive telephone calls to debtors at their homes and places of employment and failing to disclose to debtors in some instances that the debts they were attempting to collect were too old to be legally collectible.

The attorney general’s office also alleged that Transworld filed false and misleading affidavits in lawsuits against debtors. In some instances, those who signed the affidavits claimed to have personal knowledge about the facts of certain debts, when they actually lacked personal knowledge, according to the 17-page settlement document filed in Suffolk Superior Court.

In addition, Transworld, in some instances, claimed in affidavits that certain debts were owed when the company actually did not “possess sufficient documentation to establish the chain of title” for that debt, the settlement filing says.

“This company routinely violated state laws and regulations by harassing and misleading vulnerable, low-income consumers and student borrowers,” Healey said in a statement. “One of my office’s top priorities is to protect the economic security of Massachusetts residents, and we will take action against companies that engage in illegal debt collection practices.”


In a press release, Transworld on Tuesday noted the company did not admit to the attorney general’s “findings or conclusions” and said the conduct in question occurred from 2014 to 2016.

“There will be no impact to daily operations, as the alleged conduct occurred over four years ago and is not a reflection of current practices,” Transworld said.

Transworld described the matter as a “distraction” and said its resolution will allow the company to focus on providing its services.

Transworld is one of the nation’s largest debt collectors and serves as the primary debt collector for private student loan debt held by NCT, which owns hundreds of thousands of student loans with a face value of about $12 billion, according to the court filing.

The attorney general’s office accused Transworld of violating the state debt collection regulations that prohibit more than two calls a week to a consumer’s home and more than two calls a month to a consumer at work.

Transworld “frequently” attempted to collect debts from consumers that were so old that the debt was “time-barred,” meaning that these debts were no longer legally enforceable through a lawsuit, the attorney general’s office said. State debt collection regulations prohibit the collection of a time-barred debt unless the consumer is provided notice that the debt is time-barred and that a consumer cannot be required to pay the debt through a lawsuit.


The terms of the settlement include assurances from Transworld that it will abide by state regulations.

The attorney general’s office made a similar settlement in 2016 with Ditech Financial, a national mortgage servicer which previously operated as GreenTree, according to an attorney general’s press release dated in 2016.

Ditech agreed to pay the state $1.4 million for its alleged abusive debt collection practices, including excessive telephone calls to borrowers and failure to advise them of their right to documentation of their debt, according to the press release.

Got a problem? Send your consumer issue to sean.murphy@globe.com. Follow him on Twitter @spmurphyboston.