American Banker reports that JPMorgan Chase has abruptly stopped suing consumers over past due debts. Jeff Horwitz writes that the bank has also laid off in-house attorneys and fired regional collections teams. A former attorney for Chase said that the bank may have been investigated by the Office of the Comptroller of the Currency, and a whistleblower last year accused Chase of “robo-signing” affidavits. The article notes that, in a single Florida county, Chase filed 640 collection lawsuits in January 2011. Though an electronic court records search, American Banker found that the bank’s consumer debt lawsuits had disappeared altogether in Florida, Maryland, New York, California, and Washington.
Better Business Bureau Releases Debt Collection Study
The Better Business Bureau in St. Louis published a study entitled, “They Deal in Billions: A BBB Study of the Debt Collection Industry, Its Soaring Growth and Problems for Consumers.” The full study can be downloaded in PDF format here: http://stlouis.bbb.org/Storage/142/Documents/Bill%20Collector%20Study%20(FINAL%20WITH%20CHANGES)%2012%2027%202011.pdf
The BBB’s press release notes that “The study points to the problems in the industry and their causes, and outlines the weaknesses in laws and their enforcement.” Although some of the study’s findings and recommendations pertain to Missouri law, the BBB also examined nationwide trends. For example, the BBB notes that debt buyers (who buy old debt for pennies on the dollar) purchased debts with a face value of $12 billion in 1995, and $215 billion in 2008. It also says that, in the past three years, debt buyers have filed as a creditor in almost a quarter of a million bankruptcy cases. It notes, “They presumably seek the face value of the debt for which they paid pennies.”
All too often, when debt collectors take consumers to court, the consumers don’t appear in order to defend themselves. This may be because the consumer isn’t aware of the lawsuit against them or because the consumer doesn’t think the debt is theirs. This results in default judgments, and then in debt collectors garnishing consumers’ wages or taking money from consumers’ bank accounts. In its recommendations, the BBB echoes the Federal Trade Commission, saying that rules need to be developed to “prevent default judgments being entered based on insufficient or false information.” The BBB notes that, in order to file a lawsuit, debt collectors should have to provide the following information:
* The name of the original creditor and the last four digits of the original account number.
* The date of default or charge-off and the amount due at that time.
* The name of the current owner of the debt.
* The total amount currently owed on the debt.
* The total amount owed broken down by principal, interest, and fees.
* The relevant terms of the underlying credit contract.
Massachusetts Senate Comes through With Consumer Debt Collection Protections
This week, the Massachusetts Senate took a giant leap forward in protecting consumers who face property seizures for uncollateralized debt. The Boston Globe reports that creditors who win legal judgments against consumers can’t wipe out their bank accounts, take their cars, or touch Social Security or disability income. Previously, the law allowed collectors to seize cars worth more than $700 or all but $125 from a bank account. The legislation, which still needs to be approved by the House, raises the limit for cars to $7,500 and for bank accounts to $2,500. Definitely a step in the right direction.
Debt Collectors Scheming in Anticipation of Economic Recovery
The debt collection industry publication, Inside ARM, provides a wealth of insights into what debt collectors are thinking, doing, and planning. One of their recent blog posts brought to light one way in which debt collection agencies are getting primed to take advantage of our country’s eventual economic recovery.
As we’ve discussed on numerous occasions, both here on the StopCollector blog and in the media, debt collection agencies are increasingly using the court system (and taxpayer dollars) to do an end run around consumers and get judgments in their favor. Often, consumers aren’t aware that they’re being sued, aren’t present to defend themselves, or don’t have legal representation. All too often, this results in a judge finding in favor of the debt collection agency.
If you don’t have a job and are in financial straits, you may think that a legal judgment is no big deal. After all, a debt collection agency can’t squeeze money out of a proverbial turnip, can they?
As it turns out, the debt collection industry may be planning to take a truckload of lemon judgments and make sweet lemonade. According to the blog post by Denise Cross, “As the economy recovers, [a legal collection strategy] might gain even more traction with the rise of employment, a key aspect in leveraging the legal channel through wage garnishment.”
What does this mean? If you’re currently unemployed but eventually find a job, a debt collection agency that already has a judgment against you can garnish your wages. That’s like handing a drowning man a life jacket made of lead.
Blogger Denise Cross is counseling debt collection agencies “with recent vintage judgments re-run employment and asset verification as part of their ‘dead judgment’ strategy.”
So, be forewarned that the hammer may drop. And, if you find out that you’re being sued by a debt collection agency, it’s critical to mount a vigorous defense. Your future income and assets may depend upon it.
SCOTUS Rules Against Debt Collectors, For Consumers
Today, the Supreme Court ruled that debt collection agencies can’t claim that they simply made an error when they send collection notices to consumers. Although it’s a fine point of the law, it could have a far-reaching positive impact on everyday Americans who are on the receiving end of collection notices.
The case revolved around a law firm that filed a foreclosure suit on behalf of Countrywide Home Loans against an Ohio woman. The woman successfully disputed the debt, but sued the law firm for violating the Fair Debt Collection Practices Act by saying that the debt would be considered valid unless she objected.
A lower court ruled that the law office had violated the FDCPA, but that it couldn’t be held liable because their mistake was what’s called a “bona fide legal error.” It’s a no-harm, no-foul loophole that gives those making minor mistakes a pass. Today, however, Justice Sotomayor wrote for the 7-2 majority that Congress didn’t give debt collectors a pass when it enacted the FDCPA. She referred to an 1833 case, Barlow v. United States, and wrote, “We have long recognized the ‘common maxim, familiar to all minds, that ignorance of the law will not excuse any person, either civilly or criminally.’” She went on to say that Congress has amended the FDCPA several times, but has not explicitly applied the mistake-of-law defense to the FDCPA.
Debt Collection: Avoiding Wage Garnishment
The New York Times recently reported on a disturbing trend: debt collectors are increasingly getting legal judgments against consumers and then garnishing their wages. More distressing is that, if a consumer doesn’t fight back, the debt collection agency may be able to deduct a considerable amount from a person’s paycheck, and tack on high APR finance charges, late fees, and the like.
The article makes several good points, but the main takeaway is that, if a debt collector takes you to court, you need to show up with an attorney by your side in order to make the fight fair. All too often, a consumer either ignores paperwork sent by a debt collection agency saying that they’re taking the consumer to court and doesn’t show up with a defense, or is pressured into a settlement by the debt collection agency on the courthouse steps.
If you don’t show up for a court date, the judge will automatically rule against you, and might even make you pay the debt collector’s attorney fees. You may not even know what happened until you open your paycheck and see that there’s a chunk taken out. If you attend the hearing, though, a judge will often carefully review your ability to pay and the amount that the debt collector is trying to collect, and reduce the penalties, late fees, and other charges that have been tacked on. Often, a third party collector will drop the lawsuit because he doesn’t have the documentation to back up his claim that you owe money.
The bottom line? Don’t ignore legal notices, and make sure to bring an attorney to any court proceeding. Often, a fair debt attorney can turn the tables on a debt collector and either have the case dismissed or negotiate a reasonable payment plan.
Over $1 Million Settlement for Consumers In Class-Action Fair Debt Lawsuit
The Billings Gazette reported that an estimated 31,000 consumers won a total of over $1 million in settlement of a lawsuit alleging illegal debt collection practices. The federal class-action suit was filed last year in Montana under the Fair Debt Collection Practices Act (the “FDCPA”), and included allegations of civil racketeering.
Plaintiff, Jeannie Cole, claimed that the defendants used false affidavits to win judgments against consumers. The affidavits in question were signed with the name of a dead woman.
The defendants named in Cole’s complaint included CACV of Colorado, Portfolio Recovery Associates, Johnson, Rodenburg and Lauinger, a debt collection law firm, and the bankrupt Washington Mutual Bank and two of the bank’s employees.
The Cole case was initially filed in state court by Portfolio Recovery Associates, a debt collector, in order to recover a credit card debt allegedly owed by Ms. Cole. Portfolio attempted to prove the debt with an affidavit signed by a Martha Kunkle, purportedly an agent of Washington Mutual. When Ms. Cole’s attorney tried to verify the affidavit, he learned that Martha Kunkle had died in 1995. Her daughter, a Washington Mutual employee, had authorized other employees to sign her deceased mother’s name on thousands of affidavits.
All three of the defendants have reached tentative agreements in settlement of the lawsuit. Thousands of class members could receive $25 to $500 in potential recovery. More details regarding the proposed settlement can be found here.
Can Debt Collectors Leave Messages?
The Fair Debt Collection Practices Act was passed in 1978, and hasn’t been substantially amended since then. As such, it hasn’t kept up with technological advances. For example, although some people had answering machines back then, they weren’t in wide use. How then, do the provisions of the FDCPA that require that debt collectors identify themselves to consumers jibe with the provisions that prohibit debt collectors from disclosing their identities to third parties? In other words, if a debt collector calls and leaves a message on an answering machine (or voicemail), does he say he’s with the XYZ agency? If so, and if someone else hears it, he’s violating the law. Yet if he calls and leaves a message saying to call back, without identifying himself as a debt collector, he’s violating the law.
In a case recently decided in the 11th U.S. Circuit Court of Appeals, Niagara Credit Solutions argued that it had to violate one law to comply with the other. Thankfully, the judge didn’t buy that argument, saying, “The law does not guarantee a debt collector the right to leave answering machine messages.”
Form Letters from Law Firms May Violate FDCPA
Last month, Forbes.com published a nice round-up of consumers’ rights under the Fair Debt Collection Practices Act, and noted that, when a debt collector violates the law, a person can take him to court and obtain damages, attorney’s fees, and court costs.
A more recent column noted that a decision was handed down last week by the Eastern District of New York saying that a law firm must conduct a meaningful investigation of underlying debt before taking a consumer to court. The judge said that a law firm that does things like process a high volume of notices, and use form letters and facsimile signatures, without reviewing your file is violating the FDCPA.
FTC Gets $1 Million from Internet Payday Lender
The Federal Trade Commission recently announced that it has reached a settlement agreement with a group of Internet payday loan companies operating out of the United Kingdom. The defendants included Cash Today, Ltd., and The Heathmill Village, Ltd. (both registered in the United Kingdom); The Harris Holdings, Ltd. (registered in Guernsey, an island between England and France); Leads Global, Inc., Waterfront Investments, Inc., ACH Cash, Inc., HBS Services, Inc., Rovinge International, Inc.; and Lotus Leads, Inc. and First4Leads, Inc. (both now dissolved); each also doing business as Cash Today, Route 66 Funding, Global Financial Services International, Ltd., Interim Cash, Ltd., and Big-Int, Ltd.
The settlement requires the companies to pay over $970,000 to the FTC and almost $30,000 to the State of Nevada. According to the FTC, the defendants violated the Fair Debt Collection Practices Act “by using unfair and deceptive collection tactics. The Commission alleged that they falsely threatened consumers with arrest or imprisonment, falsely claimed that consumers were legally obligated to pay the debts, threatened to take legal action they could not take, repeatedly called consumers at work using abusive and profane language, and improperly disclosed consumers’ purported debts to third parties. They also allegedly failed to make required written disclosures to consumers before consummating a consumer credit transaction, such as the amount financed, the annual percentage rate, payment schedule, total number of payments, and any late payment fees, in violation of the Truth in Lending Act (TILA) and Regulation Z.”
