The appellate court decision, which can be downloaded from http://law.justia.com/cases/federal/appellate-courts/ca7/11-3819/11-3819-2012-05-11.html, is important in that it’s the first appellate court ruling regarding situations where a consumer is assigned a mobile telephone number once held by someone who is behind in their bills, and then that consumer – who is not the person being sought by the debt collection agency – receives robo-calls from the debt collector.

In this class action suit, Enhanced Recovery was collecting on behalf of AT&T, and called one consumer’s number 18 times and another consumer’s number 29 times. When the calls started, it had been three years since the people who owed the money had provided their telephone numbers to AT&T.

In its decision, the Court summarized the situation by saying, “An automated call to a landline phone can be an annoyance; an automated call to a cell phone adds expense to annoyance. This suit arises from dozens of automated calls made to two cell numbers, which went to voicemail and thus consumed minutes from the subscribers’ plans. All of the calls were made in a futile effort to reach previous subscribers to these numbers.”

Enhanced Recovery argued that the Telephone Consumer Protection Act said that a consumer’s consent to be called at a cell phone number remained in effect until that consent was revoked by a different consumer who was subsequently assigned that phone number. The debt collector said that the language of the TCPA equated the terms “called party” and “intended recipient.” The appellate court didn’t buy that argument, writing, “The idea that one person can revoke another’s consent is odd.” It also provided the following analogy:

Borrower agrees with Bank, as a condition of a loan, that Bank can enter Borrower’s garage and repossess his car if he does not keep current on payments. After signing this contract, Borrower sells his house, moves, does not tell Bank his new address, and defaults on the loan. Can Bank now enter the garage of the house where Borrower used to live and seize the car the repo men find there? Surely not. Borrower can consent to an entry on his own land and the use of his own car as collateral, but he can’t consent to an entry on anyone else’s land or the seizure of someone else’s property. Borrower’s consent follows Borrower’s change of address: Bank has permission to enter the garage where Borrower keeps his car at the time of entry; Bank does not have consent to enter the garage of the new owner of Borrower’s old house. Similarly, Customer could consent expressly to receive calls at his current Cell Number, even if that number changes, but simply providing Creditor with a number—which is how Customer consented here—does not authorize perpetual calls to that number after it has been reassigned to someone else.

Enhanced Recovery’s other argument was that the applicable law is out-of-date, since people often exclusively use mobile phones (rather than landlines) and that landline numbers are often moved to cell phones, utilizing robocall technology would increase risk, and therefore increase the cost of doing business. The Court noted that it is not in the business of the judiciary to improve upon existing laws. It wrote, “If Congress has failed to appreciate changes in the telecommunications business, Enhanced Recovery and the bill collectors’ trade association (ACA International, which filed an amicus brief) should alert their lobbyists.”

The Court also noted that debt collectors have other options that would still enable them to use predictive dialers, including having a human being make the first call to verify that the cell phone number is, indeed, that of the consumer in question; using a reverse lookup directory to determine who currently has the cell phone number; and obtain indemnity from the original creditor if it turns out that the contact cell phone number is incorrect.

The bottom line? The court ruled that there is a difference between the “called party” and the “intended recipient,” and that debt collectors can be held accountable under the Telephone Consumer Protection Act for robocalling cell phone numbers owned by folks who aren’t the people the debt collectors are trying to reach.

A number of agencies are involved in the investigation, including the FBI, the IRS, and the Special Inspector General for the Troubled Asset Relief Program.

According to the FTC press release, Luebke Baker allegedly didn’t adhere to these requirements, and allegedly:

“* Illegally masked their identity and sent false information over caller ID, falsely posing as Ed McMahon, attorneys from a law firm, and other entities;
* Falsely told consumers that magazine subscription debts are exempt from the statute of limitations; and
* Illegally threatened to garnish wages and take other unintended legal actions.”

The proposed settlement includes a monetary judgment of $3.1 million, but the money won’t be collected because of the defendants’ inability to pay. The ultimate irony.

The New York Times recently ran a story written by Andrew Martin and Andrew Lehren that delves into the real lives of real people who are struggling with student loan debt. Some interesting statistics emerged from their research. For example, the percentage of borrowers who earn a bachelor’s degree has soared from 45 percent in 1993 to 94 percent. In 2011, the average debt was $23,000. Total public student loans top out at $902 billion, with another $140 billion in private loans. A disproportionate number of borrowers are those who attend for-profit colleges…Although only 11 percent of students attend for-profits, these students constitute 25 percent of federal loans.

Add into the mix the increasing cost of college and the plummeting funding provided by states for public higher education, the reporters argue, and the result is akin to the housing bubble. Graduates are increasingly “underwater,” owing more in monthly student loan payments than they can reasonably hope to repay. The article says, “Nearly one in 10 borrowers who started repayment in 2009 defaulted within two years.”

The reporters use Ohio as an example of one issue that is mirrored in other states: as state spending on higher education lessens, prison spending is on the rise. In Ohio over the past 30 years, support for public colleges and universities was reduced form 17 percent of the budget to 11 percent, while spending for prisons has doubled from 4 percent to 8 percent.

For those who are facing the prospect of comparing costs and financial aid packages, the process is confusing at best and misleading at worst. Colleges and universities often present “financial aid packages” that include an assumption that the prospective student will take on tens of thousands of dollars of student loans. While it may appear as though the student is getting a free or low-cost education, he or she could take on enormous debt. This is particularly true if it takes the student more than four years to graduate – a phenomenon that’s on the upswing as universities are slashing staff and class sections, meaning that students are unable to register for classes required for their majors.

The Consumer Financial Protection Bureau, created by the Dodd-Frank Act, is working toward developing a standardized form that institutions can use to inform prospective students of the costs and loan burden associated with their financial aid packages. The CFPB is soliciting input for such a form, and you can voice your opinion here: http://www.consumerfinance.gov/students/knowbeforeyouowe/ The CFPB also has a beta version of a cost comparison worksheet (http://www.consumerfinance.gov/payingforcollege/costcomparison/), where you can enter the names of schools and universities and obtain a side-by-side comparison of the “sticker price” of a school, the average amount of grants and scholarships, and the estimated student loan amount and debt after school.

The report notes that complaints against student loan debt collectors are on the rise, even as they remain underreported, and that the Education Department has not used its considerable leverage to hitch compensation (or the awarding of contracts) to the number of complaints an agency receives.

While the Department of Education has clear standards and procedures for student loan debt collection agencies to implement regarding borrower complaints, the NCLC found that compliance with these policies was lacking. And while debt collection agencies do not make it easy for borrowers to complain, neither does the Department of Education. The NCLC found that “Borrowers must click through five web pages to learn how to complain about [debt collection agencies] and gather the Department’s contact information to submit their complaint.”

The NCLC developed five recommendations, including that the Education Department should develop an accessible collection agency complaint system, that the Department should change its commission system to reward good service, and that the Department provide financial incentives to agencies who have transparent and responsive complaint systems.

The defendant in King v. General Information Services is arguing that those privacy provisions are an unconstitutional restriction of commercial free speech. The FTC is arguing that the provision “directly advances the substantial government interest in protecting individuals’ privacy and is no more extensive than necessary to serve that interest.”

In a revealing article by Tara Siegel Bernard in the New York Times, the morass that is the world of medical billing hurts consumers in often invisible ways. Here’s the scenario: Your insurer tells you a procedure or a test is covered, but then doesn’t pay the invoice. You begin getting calls and letters from a debt collection agency, and end up paying the bill yourself. In the meantime, your credit score has taken a severe hit – and you may not even be aware of it.

Siegel Bernard reports that, with consumers shouldering an increasing share of the cost of medical care, and with doctors and hospitals more quickly turning over accounts to debt collection agencies, mix-ups are common place. Anyone who has ever pored over a doctor’s or hospital’s bill knows how complex and confusing it can be, and that it can take months for payments, co-payments, and insurance payments to align. But if service providers are turning to third-party collection agencies before the cycle is complete, consumers move into the crosshairs.

The article cites research that, in 2010, 9.2 million consumers were contacted by debt collectors because of a billing mistake, and 30 million more were hounded because of an unpaid bill. Consumers have little recourse, although a bill pending in Congress could change that. The Medical Debt Responsibility Act passed the House of Representatives in 2010, but then died. A similar bill was introduced in this Congressional session, and would remove medical debts from credit reports within 45 days of being paid. Upon introducing the legislation, Senator Jeff Merkley (D-OR) said, “Medical debt is not a great predictor of a person’s credit-worthiness, and folks should not be shackled from getting loans to start businesses or buy their dream home because they got very sick. We can’t see the future to plan ahead for medical emergencies, but we can stop them from damaging our working families’ credit scores for years in the future.”

Debt collectors are the scourges of society in my book. Who would call an elderly woman struggling to feed herself on Social Security and tell her that if she doesn’t pay her past due medical bills, the hospital will take all her Social Security money and force her into a nursing home to die? A debt collector would, and this story was told to me by a very real client.

In the above situation, the debt collector would most certainly be liable for significant damages under the federal law known as the Fair Debt Collection Practices Act. But sometimes, there are just too many creditors knocking at your door to want to fight that battle over and over again.

Fortunately, there exists a solution to your debt problems that is fully endorsed by the U.S. Government. That solution is found in Title 11 of the U.S. Code, otherwise known as the Bankruptcy Code. Each year, millions of Americans file bankruptcy to achieve a fresh start and obtain freedom from overwhelming debt.

You may ask how bankruptcy can actually stop the creditors from calling. When a person files bankruptcy, something called the “automatic stay” goes into effect that does just what its name implies. It “stays” all creditor collection activity against the newly filed debtor. Collection activity includes everything you could think of regarding creditor action against you, including all forms of communication (phone calls, letters, emails, etc.), garnishments, repossessions, and foreclosures.

Regardless of whether you file a Chapter 7 bankruptcy or a Chapter 13 bankruptcy, you will receive a discharge shortly before your case is closed, meaning that all the debts you owed prior to filing bankruptcy will be wiped out. The only exceptions are a few debts Congress felt should not be dischargeable, such as student loans, DUI fines, debt incurred by fraud, and certain tax obligations.

Not only that, but subsequent to filing, a permanent injunction is put into place, meaning that none of your creditors from before you filed can ever contact you again regarding your debts.

Hopefully this information will give you some comfort in knowing that a solution to your debt problems does exist, whether it is fighting debts you truly do not owe or filing bankruptcy to obtain a fresh start on life.

Bankruptcy is not for everybody, and only an experienced attorney specializing in bankruptcy law can advise you whether or not filing for bankruptcy relief is the appropriate solution to your debt problems.

Given that people move and that court records can contain mistakes, there will undoubtedly be some consumers contacted who don’t owe the debts being collected. Some debt collection agencies have track records of harassing consumers even after having been told they have the wrong person. Sergei Lemberg, who was used as a source for the article, provided a reminder that “residents will be in a precarious position because the Fair Debt Collection Practices Act doesn’t cover government fines.”