Lynda Siggers of Glen Burnie had fallen behind on her credit-card bill when the Mann Bracken law firm threatened to garnish roughly one-sixth of her monthly wages as a day-care worker. She panicked and said she called the firm to plead her case, agreeing to scrape together $100 as a good-faith payment after a firm representative indicated that might be enough to have the garnishment lifted. But soon after that December call, Mann Bracken had $154 docked from her paycheck anyway. She was forced to turn to her church for help paying rent.
"I just feel victimized," said Siggers, adding that she used credit to pay for necessities like food and does want to make good on her debts.
Today, Rockville-based Mann Bracken finds itself as the target. The abrupt collapse of the firm and an affiliate left behind millions of dollars in debt and upended tens of thousands of Maryland cases that now must be dismissed. Last month, the Montgomery County Circuit Court appointed a receiver over Mann Bracken at the firm's request, an alternative to bankruptcy.
But the spectacular fall did more than just shutter Mann Bracken, once one of the nation's largest debt-collection law firms. It also lifted the veil off a business - and an industry - whose aggressive practices were not only persistent but are alleged to have been ruthless and perhaps even illegal.
Some consumer advocates hope the firm's collapse and the extra regulatory and court scrutiny brought to bear in the aftermath will prompt debt-collection reforms nationwide. Mann Bracken's reach was unusual, consumer attorneys say, but the way it did business was not.
"There's the potential here for the entire model to change," said consumer lawyer Peter Holland, a visiting professor at the University of Maryland School of Law. "It's shining a light on a very oppressive industry."
Managing partner Connell A. Loftus did not respond to numerous attempts to reach him at his home and through the firm's attorneys. In a short statement in January, Mann Bracken said the firm had nothing to pay creditors after the bankruptcy of Axiant, its collections-agency spinoff, and was left with "no alternative but to wind down its business operations."
Axiant listed 2,400 creditors and estimated liabilities of up to $50 million in court filings. The largest claim - for more than $8 million - came from Mann Bracken. Mann Bracken's receivership request lists more than 500 creditors and at least $5.9 million in expected claims.
Scores of lawsuits and complaints to state regulators describe Mann Bracken as a hard-nosed legal operation that employed unfair tactics. They accuse the firm of taking debtors to court even after they made upfront payments in an attempt to avoid legal problems, harassing debtors' relatives in violation of consumer-protection laws and garnishing wages for debts that had already been paid.
Moreover, the debt-collection process used by Mann Bracken appeared to be rigged against consumers from the start.
The firm routinely took unpaid-debt cases to the National Arbitration Forum, which billed itself as neutral ground for disputes, even though - a state attorney general alleged - it was connected to Mann Bracken through a common ownership structure. Consumers typically consent to that kind of arbitration in the fine print of credit-card and other applications.
Arbitrators almost always ruled in favor of creditors, and from there Mann Bracken would go to court to get those decisions confirmed by a judge and turned into wage garnishments or liens on homes. The setup reduced the time lawyers had to spend in court. And cash-strapped debtors rarely defended themselves.
Minnesota Attorney General Lori Swanson sued the National Arbitration Forum in July, contending that it aggressively marketed services to creditors as a slam-dunk way to get debts repaid and would sometimes refer creditors to Mann Bracken for debt-collection help. The attorney general also alleged a carefully concealed common ownership between the forum and Axiant, the Mann Bracken spinoff. The detailed lawsuit "was a bombshell," said Deepak Gupta, a staff attorney at watchdog group Public Citizen, which had long criticized the forum as unfair.
Five days after the suit was filed, the forum agreed to stop hearing consumer cases as part of a settlement. Axiant, which had been struggling with cash-flow troubles even beforehand, filed for bankruptcy protection at the end of last year and folded, laying off more than 300 in Rockville and Frederick locations.
And Mann Bracken, which had 25 offices across the country and was dependent on Axiant for its case files, its office leases, even its computer systems, could no longer function. In Maryland, officials estimate that at least 40,000 court cases filed by Mann Bracken will be dismissed in the wake of the firm's shutdown.
It was "a huge empire," said Mark Steinbach, president of the Maryland Consumer Rights Coalition.
And it disappeared virtually overnight.
According to the Minnesota attorney general's complaint, the debt-collection behemoth came into being through a complex and closely guarded deal engineered in 2006 and 2007 by Accretive, a New York private equity firm. Accretive effectively took a $42 million stake in the forum - doing so through affiliates on both sides to obscure the connection, the attorney general said.
At the same time, Accretive was negotiating with the Atlanta-based Mann Bracken, the Wolpoff & Abramson law firm in Maryland and a California firm, according to the complaint. All three firms were large, and two - Mann Bracken and Wolpoff & Abramson - were handling the majority of debt-collection cases filed with the arbitration forum.
The law firms merged into one and sold Accretive their assets and nonlegal collections operations - the guts of the firm. That's how Axiant was born. Those at the head of Mann Bracken and Wolpoff & Abramson at the time had minority stakes in that spinoff, according to the attorney general's lawsuit.
These ownership ties knitted the arbitrators, the collections agents and the collections attorneys together in a way that put the lie to any claims that the forum was impartial, the attorney general alleged.
"When your best friend is running the show, it makes it real easy for you to win," said Sonya A. Smith-Valentine, a Greenbelt attorney who represented consumers with cases at the forum.
Officials with the forum declined to comment. Accretive, the equity firm, said in a statement that it was not a defendant in the complaint and "never had an investment or ownership interest in Mann Bracken or the National Arbitration Forum." But Accretive's managing partner, J. Michael Cline, was listed as an Axiant board member in the bankruptcy filing.
Mann Bracken, in its request to enter receivership, said the two remaining attorneys at the firm - Loftus and another partner - "were not aware of Accretive's misguided purchase" of part of the forum.
According to another lawsuit against the forum, filed by the San Francisco city attorney in 2008, every single claim brought by creditors against California consumers between 2003 and early 2007 ended with a ruling in favor of the debt collectors - even in cases where consumers could document they were victims of identity theft. The arbitrators also "routinely" tacked on thousands of dollars in attorneys' fees and other costs requested by debt collectors, the lawsuit alleged.
The rapidity of Mann Bracken's shutdown has proved a thorny problem for its clients - case files are stuck in storage units across the country - and people in the process of settling their debt. They can't get through to anyone on the phone. They don't know who to pay. And even some who have made good on debts have found that their troubles aren't over.
Donna Serwatka, a systems engineer from Texas, was aghast to learn that she was not getting credit for the $729 she paid Mann Bracken a year ago to settle a credit-card debt. Mann Bracken did send the money over to the bank that issued the card - Serwatka verified it at the time - but apparently never officially notified the bank that the case had been closed.
She's concerned that the bank could still pursue repayment. And meanwhile, she's stuck with the blemish on her credit report unless she can persuade the bank to act. So far, no luck: It took her nearly all of January just to get someone at the bank to talk to her because representatives kept insisting she had to deal with the unreachable Mann Bracken.
"It makes you wonder who else this happened to," said Serwatka, whose finances took a major hit a few years ago when her husband lost his job and one of their sons died. "I'm thinking I'm not even the tip of the iceberg. I'm a little snowflake that fell off of it. That's really disturbing to me."
In Georgia, the Governor's Office of Consumer Affairs - swamped with complaints about Mann Bracken - sought to launch an investigation into debt-collection there in late 2008. Mann Bracken argued that the state had no right to investigate a law firm. The office took the matter to court, but the firm collapsed before the judge ruled.
In Maryland, complaints against the firm have run the gamut.
A Montgomery County man said that Mann Bracken repeatedly called his mother about a debt the firm was trying to collect from him. Towson lawyer Jane Santoni sued on his behalf because she saw it as a violation of the federal Fair Debt Collection Practices Act. Santoni won the case in District Court, but Mann Bracken prevailed on appeal.
A Middle River man said his wages were garnished for a debt he had already paid because of a court action brought by Mann Bracken. "It was just a heck of a time trying to get the money back," said Bart Sidle, the Timonium attorney who represented him. "It took having to file suit."
And some low-income retirees in Maryland had their Social Security payments wrongfully garnished, according to Cora Ganzglass, who worked with those seniors when she was an elder-law attorney for Maryland Legal Aid. Ganzglass, now legislative director at the National Association of Consumer Advocates, said Social Security benefits are exempt from garnishment under law.
"These people didn't have access to food, they couldn't pay rent," she said.
One Silver Spring man wrote in a letter to Maryland regulators last year about how, after he made initial payments totaling $300 to avoid being taken to court, the firm went forward with a lawsuit anyway and garnished his wages. That came after his employer had cut his hours and his wife lost her job. His children were subsisting on cold cereal, he said in his appeal for help. Regulators said they didn't have jurisdiction over the creditor.
"I don't want to see my children go through this whilst [I] am alive," the man wrote.
Steve Koval, a consumer attorney in Atlanta who has sued Mann Bracken, said it appeared that different divisions of the firm didn't communicate. He said one of his clients agreed to let Mann Bracken electronically withdraw payments from her account every month but was hit with an insufficient-funds fee when the firm tried to get the money before the agreed-upon date.
The firm insisted she pay by money order the next month, so she did - but Mann Bracken again tried to withdraw the full amount electronically, which triggered another insufficient-funds fee, Koval said. Firm representatives later threatened to put a lien on her house, he said.
"The next day, my client goes to her doctor, who has to give her medication to bring her blood pressure down," said Koval, who sued on her behalf. That case, brought against the creditor as well as the law firm, is still pending.
The irony, he said, is that some settlements Mann Bracken agreed to pay to consumers will likely go forever uncollected.
"I'm going to get in a line behind ... a whole lot of other people," said Koval, who settled another case against the firm late last year and doubts he'll see that money. "If the Mann Bracken attorneys were calling you, they'd say, 'Are you the kind of person who doesn't pay your debts? Are you a deadbeat? What's wrong with you?' I guess somebody will get to call Mann Bracken and say the same thing."