Virtual Conversation | 2021 Re-Wire Policy Conference, Dec 15, 2021 Register

Attorney General’s lawsuit orders debt collectors to compensate Washington consumers

Tuesday morning the Office of Attorney General Bob Ferguson announced debt collectors Machol & Johannes, LLC must return about $475,000 to Washington consumers. A consent decree states Machol & Johannes must also forgive up to $250,000 in fees and costs for consumers, and pay $414,000 to Ferguson’s office. Money paid to Ferguson’s office will cover the costs of the investigation and fund the continued work of the office’s Consumer Protection Division.

The Attorney General filed a lawsuit in April of 2020 against Machol & Johannes. According to Ferguson’s office, Machol & Johannes arose suspicion from the King County Superior Court for filing large quantities of garnishment applications. A judge notified Ferguson, who later filed suit.

The lawsuit states:

“Machol & Johannes violated the garnishment law by routinely submitting sworn declarations to Washington courts falsely stating that the required evidence of mailing to the consumer was attached to the declaration when it was not, and then obtaining or attempting to obtain garnishment disbursement orders based on the false declarations. Machol & Johannes submitted thousands of these false declarations to Washington courts between 2015 and at least April 2019.”

Ferguson’s office stated they discovered more unlawful practices by the company, including unlawfully evaluating fees and neglecting to deliver consumers appropriate notice that they can protect a portion of the assets in their accounts from garnishments.

Ferguson commented:

“Washingtonians who owe debts have rights — debt collectors aren’t allowed to take every penny you have”

“Debt collectors must follow the law. This resolution will make Washingtonian’s whole, and assures that Machol & Johannes will play by the rules.”

The press release from Ferguson’s office details the resolutions of the lawsuit:

  • Machol & Johannes failed to offer legally required garnishment exemptions to hundreds of Washingtonians. In Washington state, consumers are entitled to exempt some money from garnishment. Until 2019, Washingtonians had the right to protect $500 from bank account garnishments. For student loan debt, Washingtonians had the right to protect  $2,500 from garnishment. Collection agencies are required to offer these protections to consumers via an exemption claim form before funds are garnished. As part of today’s resolution, Washington consumers who were not offered the exemptions will receive refunds for money collected up to the exempted amount. The Attorney General’s Office estimates this will total about $100,000.
  • Machol & Johannes added fees to about 1,000 consumer debt accounts even when they did not collect funds. Washington law allows collection agencies to add fees and costs to consumer debts only when the debt collector is able to collect money. Machol & Johannes will return about $100,000 plus a total of about $32,000 in interest to consumers from whom the company collected these fees.
  • For about 500 additional consumers whose debts have not been collected, the company will remove the fees from their outstanding debt accounts, amounting to about $250,000 forgiven.
  • Machol & Johannes failed to obtain a license to operate as a collection agency in Washington from August of 2011 to October of 2012. As a result of its failure to obtain a license, Machol & Johannes will pay $238,000. The Attorney General will return that money to approximately 4,000 consumers whom the company initiated collections against during that timeframe.

Legislation passed in 2019 allows consumers to exempt up to $2,000 from garnishment for consumer debts in Washington state. A bill passed in 2021 will automatically exempt $1,000 of the allowable $2,000 for consumers without the need for them to claim the exemption.

Machol & Johannes, LLC is headquartered in Colorado, they hold an affiliate office in Bellevue and operate under a Washington license as Machol & Johannes, PLLC. According to Ferguson’s office, Machol & Johannes operated in Washington state without a license during 2011 and 2012.

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