Student Loan Debt Collector Misleading Debtors

Although the ability to discharge student loans in bankruptcy is limited, it's not completely impossible. So a debt collector who told a debtor that her student loan debts couldn't be discharged in bankruptcy violated the federal Fair Debt Collection Practices Act, according to 2nd Circuit Court of Appeals. Since the ability to discharge student loans is very dependent on the facts of each case, the debt collector's blanket statement to the debtor was misleading and deceptive. An unsophisticated debtor might have assumed bankruptcy wasn't an option for them. It's not uncommon for student loan debt collectors to imply that bankruptcy can provide no relief to borrowers. If you're facing debt collection on a student loan and the creditor or debt collector suggests you no repayment options or that bankruptcy can't help please contact us at melissaatthompsonlaw@gmail.com.

Financing a Vehicle

The National Association of Consumer Advocates, of which I am a member, suggests the following tips when you're financing the purchase of a new vehicle.

• Keep your current vehicle until the amount you owe on the loan is less than the resale value of the vehicle. It's best to wait until the entire loan has been paid off before trading it in. 
• Before you shop for a car, get prequalified for a loan at a credit union or bank. Take the dealer's financing only after careful comparison and if it offers the best final terms. 
• Watch out if the dealer offers you more for your car than it is really worth. While this may sound like a good deal, they are likely adding the debt you owe on the old car to the price of the new car, or inflating other costs on your new deal.
• Never tell a dealer how much you are willing to spend per month; instead negotiate a fair cash price for the vehicle.
• Negotiate the price of the new vehicle first, before the dealer evaluates how much you'll get for your trade in. Keep negotiations separate and beware of a monthly car note that hides the price of the new vehicle and what you are getting for the trade in. 
• If you are buying a used vehicle insist on seeing the title before you sign a purchase contract. The dealer can't get the title until the loan has been paid off.
• In general, avoid buying items like theft-etching, rust proofing, upholstery protection, GAP insurance, extended service contracts, and lifetime oil changes.

Delinquent Property Taxes Put Homeowners At Risk

A new report (The Other Foreclosure Crisis) by the National Consumer Law Center (NCLC) sheds light on the growing risk to homeowners of delinquent property taxes. According to the report, annual property tax delinquencies now reach almost $15 billion nationally and the number of homeowners at risk of losing their homes to tax sales is growing. The report cites studies showing one in four households have an underwater mortgage and nearly 40% of families have recently experienced unemployment, foreclosure, mortgage delinquency or negative home equity.

Property tax sales, unlike many foreclosure sales in Iowa, can result in a home being sold for much less than the property value and without the same kinds of homeowner protections. Iowa's tax sale procedure generally works as follows: When a homeowner fails to pay property taxes the tax obligation becomes an automatic lien on the property. The tax lien has priority over all other types of liens, including mortgages. If a homeowner is unable to pay off the tax lien an auction will be held. A tax sale "certificate" is sold to the bidder willing to take the lowest rate of interest on the certificate. While this may sound as though it affords the homeowner with some protection from high interest costs, the interest rate paid is still far higher than most investments are currently providing. For instance, even though someone today might be hard pressed to get a return of more than 1-3% on investments, the return on a tax sale certificate is often in the double digits. In fact, at least one source suggests Iowa is in the top five states providing the highest return to purchasers of tax sale certificates.

After a property has been sold at a tax sale, the homeowner has 21 months to "redeem" the property by paying the purchaser the purchase price plus interest, penalties and costs. Obviously, the quicker the taxes are paid, the lower the cost of the redemption. If a homeowner is unable to redeem within the time allowed, the purchaser of the tax sale certificate can obtain a deed to the property. In other words, a property worth several hundred thousand dollars might be sold at a tax sale for a fraction of the value.

If you're facing a property tax sale contact Thompson Law Office at melissaatthompsonlawoffice.net to discuss your options, including the filing of a Chapter 13 bankruptcy to delay the sale of the property and get the taxes paid before all other creditors.

Restrictions on Credit Card Fees

Rules issued by the Federal Reserve Board place several limitations on the ability of credit card companies to charge fees and issue credit cards. These restrictions, which went into affect two years ago, impose more fairness on credit card billing. A summary of some of these limitations is following:

• Interest rates cannot generally increase in the first year after a credit card account is opened and increases to the interest rate on new transactions after the first year can only increase after 45 days notice has been provided to the debtor.
• Credit card companies are required to post their standard card agreements on their websites so consumers have access to them.
• Credit card payments that exceed the minimum payment required have to be applied to the account balance with the highest interest rate.
• Credit cards can't be issued to people under the age of 21 unless the debtor shows an ability to pay or has a cosigner over the age of 21. There are also restrictions placed on companies trying to market credit cards to college students.
• Each credit card statement has to include a disclosure showing the amount of time and the total cost of paying the account balance in full by only making the minimum payment required. The statements must also disclose what the monthly payment needs to be if the debtor wants to pay the balance in full within 36 months. 
• Credit card companies have to get the express permission of a consumer before they can charge a fee for transactions that exceed credit limits. There are also limitations on when over-the-limit fees can be charged. 

These and other restrictions on credit card companies will hopefully put an end to some of the more unfair methods companies previously used to make money off credit card holders. 

Signs of a Debt Collection Scam

Credit and debt collection scams are becoming more and more sophisticated. It's hard to tell the difference between legitimate debt collection efforts and scammers waiting to take your money. The Federal Trade Commission offers these signs of a scam:

• The caller claims to be with a government agency or law enforcement. Law enforcement never gets involved in private debt collection and the circumstances under which they might be involved after a judgment has been entered are rare. Don't make payment arrangements to anyone over the phone, even if they claim to be with an agency or law enforcement.
• Scammers want you to act immediately, before you have time to figure out who they really are. Don't agree to anything on the spur of the moment. If the caller insists you act now it's a pretty good sign they're not legitimate. Take the time you need to find out if you should do anything. Talk with a lawyer about whether you have some defenses to the debt collection.
• The caller wants you to wire money. Insist on getting a physical address, not just a post office box, where you can send a check once you determine the person or company calling is legitimate.
• Find out whether the company is registered to do business in Iowa before agreeing to do what they want.

If you're faced with someone calling trying to collect a debt and their behavior makes you nervous, contact us at melissaatthompsonlaw@gmail.com first before agreeing to do what they want.

Consumers and Unfair Debt Collection

Complaints about debt collectors are on the rise throughout the country. It's not uncommon for a consumer to feel they've been harassed by creditors and debt collectors. There are some basic rights that all consumers have when dealing with a debt collector. Here are some of these basic rights:

• A debt collector can't call you at inconvenient times or places unless you agree to the calls. They also can't contact you at work if you've told them either orally or in writing not to. 
• If you don't want a debt collector to contact you anymore you can tell them to stop but you need to do it in writing. Send a letter by certified mail saying you don't want to be contacted again. The debt collector can still contact you after that only to say that they will be taking some specific action, like filing a lawsuit. This letter won't prevent the debt collector from filing a lawsuit or make the debt go away. 
• Debt collectors can't tell you that you'll be arrested if you don't pay and they can't say your property or wages will be seized or garnished if they don't intend to actually do so. 
• Debt collectors can't contact you by a postcard and they can't send any document that looks like a court document or is from a government agency if it really isn't. 
• A debt collector can't contact a third party except for the limited purpose of finding out your address, your home phone number and where you work. If the debt collector already knows this information then they shouldn't contact anyone other than you or your spouse. The debt collector can't contact a third party to get this limited information more than once. 
• Debt collectors are required to send you a written notice within five days of their first contact with you notifying you of your right to request validation of the debt. That request for validation has to be sent within 30 days of your receipt of the letter. The debt collector can't contact you again until after that validation has been provided to you. 
• Debt collectors can't call you repeatedly to annoy you or use obscene language.
• Debt collectors can't falsely claim you've committed a crime or falsely claim they are with law enforcement. 

If a debt collector has violated the federal Fair Debt Collection Practices Act, any lawsuit brought against them for these violations has to be brought within one year of the violation. So if you're being harassed by a debt collector, don't wait to contact us about it. Contact Thompson Law Office at melissaatthompsonlawoffice.net or call 515-875-4850. 

Avoid Being A Victim of Fraud

The Federal Trade Commission (FTC), the government agency charged with protecting consumers against fraud, lists some important ways to avoid being a victim of fraud.

• Con artists often insist that people wire money because it's nearly impossible to get the money back or trace where it goes. Don't wire money to strangers or to anyone who requires that payment be made through a wire transfer.
• Don't fall for sales pitches that sound too good to be true, like "97% success rate" or "Guaranteed to save your home."
• Don't pay any business or organization who promises to prevent foreclosure or get you a new mortgage. So-called "foreclosure rescue companies" claim they can help save your home but they often want high fees in advance and then stop returning your calls. If a company wants paid in advance to help you should think twice.
• Send mortgage payments ONLY to your mortgage servicer, not another company that offers to handle your finances.
• Don't send money to someone you don't know, including online merchants.
• Read your bills and monthly statements regularly. Dishonest merchants sometimes bill you for monthly "membership fees" and other goods or services you didn't authorize.

If you fall victim to these or other schemes contact the Federal Trade Commission or email us at melissaatthompsonlaw@gmail.com. The action may violate state consumer fraud laws that could result in compensation for you.

Consumer Fraud in Iowa

Until July 2009, Iowa victims of many fraudulent, unfair or deceptive practices had little recourse. Unlike almost every other state in the nation, Iowans had no right to sue to seek damages for most claims. They could sue for some fraudulent activities but faced burdensome legal requirements, like showing that the defendant had the intent to deceive and that there was clear and convincing evidence of the fraud. The plaintiff also had to pay all their own attorney's fees, even if they won their case.


In July 2009 a new Iowa law became effective that creates many more opportunities for Iowans harmed by unfair and deceptive activities. Consumers now have a right to bring a lawsuit against someone who knows or reasonably should know that their conduct is an unfair practice, deception, false promise or false pretense. The conduct must be in connection with the advertisement, sale or lease of consumer merchandise but the definition of merchandise is broadly defined to cover services, goods and many other items.


Consumers can be compensated for actual damages and can also receive punitive damages and attorney's fees. Although there are several categories of professionals who are exempted from the law, it is still a very useful law for obtaining relief. It has already been used in lawsuits against debt settlement companies, car lenders and many other companies or organizations. Consumers who think they have been the victim of some deceptive or unfair practice should contact Thompson Law Office to discuss your situation.

Student Loan Collection through Tax Offsets and Garnishment

Federally insured student loans are subject to enhanced debt collection procedures that aren't available to creditors and debt collectors of private student loans or to any other type of debt. For instance, the federal government can offset tax refunds student loan borrowers might be getting if they're in default on their student loans. Before the offset can occur the Department of Education must send borrowers a written notice of the intent to take the refund. A borrower can raise defenses to the offset, including that the loan has already been repaid; the borrower is totally and permanently disabled; the borrower is eligible for a closed school discharge; or that the borrower has entered into a repayment plan and payments are being made as required under the plan.If a borrower wants to request that a repayment plan be initiated they must do so within twenty days of receiving the notice of intent to offset the tax refund. A repayment plan will be established by the Department of Education and as long as payments are current under this plan the offset won't occur. Just making voluntary payments after a default has occurred without a certified repayment plan won't avoid the tax offset though. 

Another debt collection procedure unique to federally insured student loans is the ability of the government to garnish wages even without obtaining a judgment against the borrower. If a federal student loan is in default the Department of Education can initiate a wage garnishment of up to 15% of a borrower's disposable pay (the amount after taxes and health insurance are deducted). Notice must be sent to a borrower at least thirty days prior to the start of the garnishment to give them a chance to object to the garnishment. Borrowers can dispute the amount of the debt or their default. Borrowers can argue that the wage garnishment is a financial hardship but they can typically only make that argument after the garnishment has been in place for six months. In cases where something extraordinary has occurred like an injury, divorce or serious illness the borrower may be able to show hardship earlier than six months.

Yet another debt collection option unique to federal student loans is the ability of the Department of Education to offset Social Security benefits that exceed $750/month. This does not apply to Supplemental Social Security (SSI) benefits. Social Security recipients can apply for hardship reductions in the amount of Social Security funds to be offset. There is no statute of limitations on federal student loans so these collections can last forever.

Iowa law also allows the suspension or revocation of a professional or vocational license if a borrower defaults on a state guaranteed student loan. 

If you're having student loan collection problems and want to talk about your options please call or email us at melissaatthompsonlaw@gmail.com.

Unfair Student Loan Collection

Despite the special protections given to student loan debt ( i.e. different discharge rules in bankruptcy, different garnishment rules, etc.), collection agencies that collect either federal or private student loans are still subject to both federal and Iowa fair debt collection laws. A debt collector that reveals private information to a third party, communicates with a borrower at inconvenient times of the day, telephones repeatedly with the intent to harass the borrower, contacts a borrower at work without permission, makes any false representation or states that nonpayment will result in arrest, has violated fair debt collection laws. The debt collector can be sued and the borrower can be awarded damages and attorney fees.

The types of violations listed above are typical of those any debt collector might be sued for, but for student loan debt collectors the list of possible violations is larger. For instance, a student loan debt collector might violate fair debt collection laws if they misrepresent a borrower's ability to get a discharge of their loans, mislead borrowers about loan repayment options, push borrowers into loan consolidation or loan rehabilitation programs rather than better repayment options or charge excessive collection fees. Like the violations mentioned above, these violations unique to student loan debt collection can result in damages and attorney fees being paid to the borrower. These damages may not result in the elimination of the student loan but it might help result in broader solutions like reasonable repayment plans.

If you're facing any debt collection issues related to student loans please email us at melissaatthompsonlaw@gmail.com so we can review what kinds of options might be available to you.

Welcome.

Welcome to the Iowa Consumer Rights blog for Nancy Thompson. I'm an attorney who has nearly 30 years experience advocating for consumers. We pursue fair debt collection violations by creditors and debt collectors, fair credit reporting violations by creditors and credit bureaus and consumer fraud violations by a variety of entities like debt settlement companies, creditors and others. This blog will help provide some basic information about the many difficulties facing Iowa's consumers. If you have a consumer problem that needs attention, email us at melissaatthompsonlaw@gmail.com so we can review your case to see if we can help.