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Office of the Attorney General News Release Archive

Tuesday, August 1, 2000

CORNYN ANNOUNCES SETTLEMENT WITH ALLSTATE INSURANCE COMPANIES

Agreement reached over unfair collection practices

AUSTIN - Texas Attorney General John Cornyn today announced settlements with Allstate Insurance Companies and their collection agency, Credit Control Services, Inc., regarding collection practices against motorists Allstate believed to be at fault in collisions with Allstate policyholders. The settlements are in the form of Assurances of Voluntary Compliance and were filed and approved today in Travis County District Court.

The settlements were reached after the Attorney General's office investigated complaints that Allstate and Credit Control Services used misleading and deceptive tactics to collect auto "subrogation" claims against motorists Allstate believed to be uninsured. A subrogation claim results when an insurance company has paid a claim to its own policyholder then seeks to recover money from the party the company believes was at fault.

"Insurance companies have the right to collect what they believe is due, but the companies have to abide by the law, said Attorney General Cornyn. "Deceptive and misleading collection practices will not be tolerated."

The Attorney General alleged that correspondence sent by Credit Collection Services, on behalf of Allstate, falsely characterized Allstate's subrogation claim as a debt that could be reported to a credit reporting agency, or suggested that anyone who failed to pay the claim immediately could lose their drivers' license for violation of the state's financial responsibility law. In fact, the amounts Allstate was demanding were not debts, only claims by Allstate. They could not be reflected as unpaid debts on a credit report, and often were in amounts below the $1,000 threshold for drivers' license suspension proceedings at the Texas Department of Public Safety. Both companies deny any illegal activity.

Allstate and Credit Control Services have agreed that, in contacts with third parties regarding subrogation claims, they will not:

  • characterize any subrogation claim as a debt, credit obligation, or other matter which could affect the person's credit or credit rating report or disclose any subrogation claim to any credit bureau
  • use the phrase "action pending" without disclosing exactly what kind of action is pending and what will happen upon expiration of any specified time period
  • state that a liability determination was made against a person without disclosing that it was Allstate who made the determination
  • represent that it is against the law to fail to cooperate with collection activity or that failure to respond will make the person legally obligated to pay the subrogation claim
  • represent that a person is liable for the subrogation claim simply because the person is uninsured
  • represent a person could lose their drivers license when the demand is less than $1,000

Credit Control Services will pay $25,000 and Allstate will pay $50,000 to the Office of the Attorney General for its attorney's fees and investigative costs.

Assistant Attorney General Jim Wenzel, in the Insurance Practices Section of the Attorney General's Consumer Protection Division, handled this investigation.

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Contact Mark Heckmann, Heather Browne, or Tom Kelley at (512) 463-2050
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