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.