DEBT COLLECTION COMPLAINTS INCREASING

Consumer complaints about debt collection activities have increased significantly. Between 1999 and 2009, complaints to the Federal Trade Commision about collection agencies, debt buyers, collection attorneys and mortgage servicers increased from 10,000 to almost 90,000. The growth in the "debt buying" industry has led to many of these new complaints. Each year creditors write off hundreds of billions of dollars in debt that they believe to be uncollectible. But for the consumers who owe the debt the story doesn't end there. For pennies on the dollar "debt buyers" will purchase debt to try collection of their own. Using automated robocalls, lawsuits and other tactics debt buyers work to collect debt that might be several years old. Fortunately for the consumers facing these debt collection activities there are several options. First, there might be defenses to a debt collection lawuit such as the statute of limitations or a lack of evidence that the debt is owed. Most debt collection lawuits aren't opposed by consumers and debt buyers count on no opposition so they can obtain default judgments. Raising defenses to these lawsuits might result in dismissal. Second, consumers can go on the offensive by bringing an action against debt buyers for violation of federal and state debt collection laws. Debt buyers who engage in illegal debt collection activity like robocalls to cell phones without permission, harassment, calls to third parties and many other actions can be liable for damages and attorney fees. Third, if the amount of debt is significant, bankruptcy can be filed to discharge the debt while also preserving a consumer's right to bring a fair debt collection lawuit against the debt collector. If you're facing debt collection contact us as soon as possible to discuss your options.

SPECIALTY CONSUMER REPORTING AGENCIES COVERED BY FCRA

Most people are at least somewhat familiar with the Fair Credit Reporting Act (FCRA) requirement that the big three credit bureaus (Equifax, Experian and TransUnion) report only accurate information about someone's credit. What is less known is that other agencies besides these three must also comply with the requirements of the FCRA. For instance, specialty reporting agencies that collect and disseminate information about consumers also covered. The Medical Information Bureau (MIB) collects and sells personal health information. CoreLogic SafeRent screens and provides reports on potential tenants. TeleCheck and ChexSystems provides reports to retailers about a person's check writing history. LexisNexis keeps several national databases on consumers. Each of these agencies are examples of specialty CRAs that must provide FREE reports to consumers and ensure that the information they disseminate is accurate. If you're suffering damages resulting from a database or report contact us.

BANK SETOFFS

Before filing a bankruptcy we often advise clients to move bank accounts to another lender to which they don't owe any debts. The problem is that when a borrower defaults on a debt to a lender that same lender can offset the defaulted debt against any funds they're holding in an account. So $500 in a bank account can be offset or taken to apply to a defaulted $1000 personal loan. There are restrictions on a lender's right to setoff funds however. One of the most important is that the Fair Credit Billing Act prohibits a credit card issuer from offsetting funds in an account to satisfy a credit card bill. So if you have a bank account at Wells Fargo the bank is prohibited from offsetting funds in that account against a Wells Fargo issued credit card. An exception to this rule is where you've given the bank written authorization to take automatic payments from your account. Another restriction on the ability to offset is where the bank account contains only exempt funds, such as Social Security or child support funds.

Some credit unions may try to assert a security interest in the deposit accounts that would allow them to offset funds but the requirements for having a valid security interest in an account are strict. If you've suffered an offset from a bank or are contemplating bankruptcy and owe a debt to a lender where you also have an account be sure to talk to us about it in advance.

SALLIE MAE FAILING TO HELP STUDENT LOAN BORROWERS

The Income-Based Repayment (IBR) Program allows borrowers to repay their federal student loans with a monthly payment that reflects their overall financial circumstances. Borrowers in the IBR program can even have the remainder of their loans forgiven after years of current payments. It's probably the best option for people struggling to repay federal student loans, which now exceeds $1 trillion nationally. Unfortunately, the nation's largest servicer of federal student loans, Sallie Mae, is failing to enroll as many borrowers into the program as are eligible. An analysis by the Huffington Post shows that relatively few of the loans serviced by Sallie Mae and eligible for IBR are enrolled in the program. The exact cause of Sallie Mae's poor performance in enrolling borrowers into the program is unknown but Sallie Mae's president suggested that helping borrowers take advantage of the income based repayment plan is too expensive.

According to the Huffington Post article, Sallie Mae has other problems also. The U.S. Department of Education has announced that of the four companies used by the Department to service federal student loans, Sallie Mae will be given the fewest number of loans to administer next year. Sallie Mae's contract with the Department of Education also expires next year and there are many people recommending that the contract not be renewed because of the company's poor performance in helping borrowers. If you're facing student loan problems contact us to discuss what options, including the IBR might be available.

FORMER BANK OF AMERICA EMPLOYEES CLAIM THEY LIED ABOUT MORTGAGE MODIFICATIONS

It probably won't come as a shock to homeowners with a Bank of America mortgage loan, but in affidavits filed in federal court in Boston last month, several former Bank of America employees claimed they were told to lie to homeowners about the status of their mortgage modification applications. According to the former employees, Bank of America instructed them to lie about whether mortgage modification documentation had been received, whether their application was being reviewed and whether they were eligible for a modification. In some instances the Bank would instruct employees to conduct a "blitz" denial where hundreds of applications would be denied at the same time for fictitious reasons, such as that no documentation had been received when in fact it had been. One employee claimed that about twice a month they were ordered to deny any application more than 60 days old. Similar allegations of mass modification application denials were made last year by a former employee of Litton Loan Servicing. 

The former Bank of America employees also claimed that the Bank rewarded them for denying applications and referring mortgages for foreclosure. Employees who placed ten or more mortgages into foreclosure in one month would receive a $500 bonus. Employees with high foreclosure referrals could also be rewarded with gift cards. For more information about the allegations of the Bank of America employees go to www.propublica.org. If you're still struggling with mortgage modification issues contact us to discuss your options.

GOING TO COURT IN CHAPTER 13?

People who file bankruptcy almost never "go to court" in Chapter 13 or see a judge. The only mandatory hearing is usually a meeting with the Chapter 13 trustee that will take place about a month after filing. That meeting with the trustee provides him or her an opportunity to ask questions about the budget and proposed repayment plan. Creditors are also allowed to attend these hearings but rarely do. I am at this meeting with my clients and their portion of the meeting usually lasts no more than five minutes, although they may have to be there longer to wait their turn. The hearings are nothing to be anxious about and my clients have frequently told me afterwards that they've been surprised at how easy they were and how well prepared they were to answer any questions that arose. You can view a clip of what to expect at a meeting with the trustee (also known as a 341 meeting) here. Occasionally debtors might have to appear before a judge if something is being done to modify the plan or a dismissal is being sought for failure to make payments, but even these instances are rare. Most Chapter 13 bankruptcy clients go the entire five years of their plan without ever appearing in court.

RIGHT TO CURE CREDIT CARD DEBTS

Iowa law requires a creditor to provide a debtor with a written notice of their right to cure a delinquent amount before a lawsuit can be filed to collect a consumer debt such as a credit card, line of credit or personal loan. The notice must provide the debtor at least 20 days to pay the defaulted amount. The notice to cure also has to include a statement of the total amount to be paid, plus an itemization of the charges. Failure to correctly itemize the total payment due can lead to a dismissal of the lawsuit.

A recent ruling from the Iowa District Court in Fremont County shows the consequences of a creditor failing to provide an adequate notice to cure. Capital One Bank and its attorneys had sent a notice to cure that failed to itemize the amount owed. Although the notice said how much was due in total, it failed to say how much of the amount was for late charges, interest, overlimit fees and actual credit card charges. The lawsuit brought by Capital One was also filed in a county that was neither the residence of the defendant debtor nor the county where the loan was made, another requirement of Iowa law. Lastly, at the time the debtor received the Capital One credit card she was not old enough to enter into a binding contract. As a result of all these errors by Capital One, the Court dismissed the lawsuit brought by Capital One and awarded the debtor damages and costs and ordered Capital One to pay the debtor's attorney's fees. If you're facing similar debt collection tactics contact us at Nancy L. Thompson Law Office.

STUDENT LOANS IN YOUR BUDGET

A recent blog article from usnews.com titled How Much Student Loan Debt Is Too Much? includes suggestions for how much student loan debt is reasonable for a borrower's level of income. For example, student loan debt of $25,000 is affordable for a single person with an annual income of $30,000 to $40,000 but if the debt increases to $50,000 someone earning only $40,000 to $50,000 annually is going to face budget problems. At that amount of debt, student loan payments would be about $450/month, almost equal to what would be spent on food. Student loan balances of $75,000 require an annual salary of $60,000 or more for a single person and if the student loans increase to $100,000 the blog author suggested a borrower needs to be earning over $80,000 annually. At that level of debt the monthly loan payment would exceed $1,000/month. Borrowing to finance a better education often makes sense but be careful that the student loans don't exceed an amount that your chosen career can reasonably anticipate repaying.

In other student loan news-- the commissions paid to private companies that collect student loans has been cut from 16% to 11%. More importantly, the commission is now earned regardless of the size of the student loan borrower's monthly payment. Previously, the higher commission was earned only if the debt collection company got the borrower to make high monthly payments. This led many companies to mislead borrowers into thinking the high payments were required. Federal law allows student loan borrowers to make payments that are "reasonable and affordable" and there is no minimum payment, despite what a debt collection company might say. Unfortunately, the new policy on commissions applies only to companies collecting on behalf of the federal government, not state guarantee agencies that collect student loans (even though the law is the same on these state guarantee loans). Private student loans also are not covered by the new policy because payments on private student loans are established by the lender, not federal law.

DEBT SETTLEMENT SCAMS

Several times each year one of our clients discloses that before contacting us about bankruptcy they had tried to settle their debts with the help of a debt settlement company they had found, usually online or on television. In every case the company led our clients to believe their debts could be settled without the need for bankruptcy. Our clients had frequently paid thousands of dollars to the companies with little relief to their overall financial situation. Even if one or two of the debts were settled it didn't prevent bankruptcy because lawsuits, garnishments and other forms of debt collection continued despite their participation in the program. The debt settlement companies usually fail to make it clear that debt collection will continue and some creditors refuse to even negotiate with the companies. By the time a client has paid enough money into the "account" that will supposedly be used to pay a creditor off, the fees paid to the company far exceed what it would cost to file bankruptcy and be on the way to recovery.

In the last few months several of these debt settlement companies have finally started facing the scrutiny they deserve. In July 2012 one of the largest of these companies, Legal Helpers Debt Resolution, reached a $2.1 million settlement with the Illinois Attorney General over their misleading practices. And a class action settlement against Freedom Debt Relief was reached in May 2012 that will hopefully reimburse its former clients at least a portion of what they paid. Nancy L. Thompson Law Office, P.C. has been able to recover some of the funds paid my clients to these companies but some have gone out of business before reimbursement can be made. Before you agree to participate in one of these debt management programs contact Nancy L. Thompson Law Office, P.C. to discuss your options.

BURYING YOUR HEAD?

The debt was so out of control she almost felt like she deserved the punishing phone calls she was getting from her creditors. In fact, she got to the point where she was just too frightened to answer her phone anymore. They found out where she worked and tried to reach her boss. They threatened to arrest her at her office. They called her names, used profanity and made her feel like a failure. Finally one day she said, "Enough is enough, I've got to do something about this." Then she called us.

A lawsuit against the debt collectors under the Fair Debt Collection Practices Act (FDCPA) was definitely in order. But, it was too late. There is a limit on how long you have to sue a debt collector for violations of the FDCPA. Generally, a lawsuit must be brought within one year of the violation's occurrence. This means that the clock starts ticking after that first phone call or message or after the first letter was sent (not received). Not all communication from a debt collector is illegal. But if you feel like you're getting bullied, bugged or punished by a debt collector than call or contact us at Nancy L. Thompson Law Office, P.C. so we can help determine whether their actions warrant a lawsuit.

What to do if you are being harassed by a debt collector:

• Keep great records! Record the day, time and message of each call. The more details the better. Did they leave a name? A name of the debt collection agency? The call back number?
• Keep all correspondence from the debt collector, including the envelopes! The envelopes are time-stamped and can sometimes provide a date when the actual bill/letter may not.
• Be your own private investigator. If you feel empowered enough to answer the calls, know the right questions to ask. Debt collectors are notorious for dodging questions because at the end of the day they just want your money. If we do pursue a lawsuit we're going to have to ensure that this debt collector is a legitimate company (and not located in a foreign country) with a real address to serve them with a lawsuit. We'll do our own digging but any information you can get from them initially will aid in our ability to sue. 

Here are some common reasons clients "bury their head in the sand..."

• You think (or hope) the problem will go away. This may be true, but don't count on it. We've seen debt collectors get pretty brutal with our clients --to the point of threatening their employment and livelihood. A lot of collection agencies will just keep selling your debt from one enity to anohter.
• You don't want to sue anybody. Litigation is risky. Litigation can be a long process. These things are true but the brunt of the work is on us, not you. Your lawsuit against this creditor might just be the one that stops their behavior for good!
• You can't afford a lawsuit. As with many civil lawsuits, we work on a contingency basis. This means that we don't get paid unless we win. And when we win, we only take a percentage of whatever money we win for you. The only real upfront costs to you may be the filing fee in either state or federal court.

Don't wait until it's too late. There are laws in place to protect consumers (YOU) from these unlawful behaviors. Don't bury your head in the sand. There's too much at stake. 

CREDIT REPAIR SCAMS

Late night television and the Internet is full of advertisements for companies promising to remove bankruptcies, judgments and other negative information from credit reports. Sometimes they even offer to help you create an entirely new credit identity. These promotions need to be approached cautiously  though. In truth, no one can remove negative information from your credit report if it's accurate. And some of the tactics suggested by credit repair companies are illegal or ineffective, such as applying for an Employer Identification Number under false pretenses or disputing every credit report entry even if they're accurate. The Credit Repair Organizations Act prohibits companies from charfing a fee for their services before they've  completed the services they promised and many of the strategies offered can be done yourself for free. The Federal Trade Commission warns consumers to avoid credit repair companies that promise to eliminate accurate but negative information and tell you not to contact the credit bureaus directly.

If you've identified false entries on your credit report there are procedures for disputing the entries and perhaps obtaining damages from both the credit bureau and furnisher of the information. Contact  us at www.thompsonlawoffice.net if you have inaccurate information on your credit report that has caused actual damages.

STUDENT LOAN DEFERMENTS

Deferring payment on student loans is necessary when circumstances prevent a borrower from staying current on payments. There are many types of deferments available depending on the kind of student loan and the situation. For instance, deferments on private loans are completely discretionary to the lender. If a private lender wants to grant or deny a deferment they can, without consequences. Ironically, they may also charge a borrower requesting a deferment because they're unable to pay. Sallie Mae often charges $150 for a three month deferment.

For deferments of federal loans there are rules to be followed and made available to borrowers. The most common deferment on a federal student loan is the "in school" deferment. In other words, if a borrower is in school for at least half-time, payments on the federal loans will be deferred. For Stafford loans there are also deferments available when a borrower is unemployed, in a rehabilitation training program, in a graduate fellowship, in the military service or following active duty, temporarily totally disabled or caring for a disabled spouse or dependent. Deferments are also available for economic hardship.

Economic hardship deferment applications must be in writing and can be issued in one year increments for a maximum of three years. To qualify for an economic  hardship deferment a borrower must show that they are receiving federal or state public assistance, are a Peace Corps volunteer, have an economic hardship deferment on another loan or is working full time but still at 150% of poverty. An unemployed borrower seeking a deferment must be registered with an employment agency and must show proof of eligibility for unemployment benefits. To obtain an economic hardship deferment on a Parent PLUS loan, all cosigners to the loan have to be unemployed.

In addition to deferments, borrowers can verbally request a discretionary forbearance for causes such as poor health or other personal problems. While a forbearance may be needed for a short term crisis it's important to remember that when a forbearance ends, all interest is capitalized, creating a long term significant increase in the amount of the student loan debt. If you're having student loan issues contact us at www.thompsonlawoffice.net.

DEBTORS' PRISON

The practice of putting people in prison for not paying their debts ended in the United States more than a century ago. Some state constitutions include provisions banning these "debtors' prisons." But some creditors are increasingly using a little known tactic that, to the people they target, feels a lot like being sent to jail for not paying their debts. In Iowa, as in many states, a creditor who gets a judgment against a debtor but is then unsuccessful at collecting the debt can ask for a "debtor's examination." These "exams" take place before a judge and are used to find out where a debtor has bank accounts, what property they own and where they're employed. Debtor's exam hearings are unlike other debt collection hearings that are frequently ignored by debtors without consequence, though. Failure to attend a debtor's exam is considered contempt of court and can result in the creditor asking for a bench warrant to have the debtor arrested and brought before the judge. If the arrest takes place at night or in a different county then where the lawsuit occurred, the debtor may be put in jail until they can be brought before a judge. Some of these jail stays last for days. Bond to be released from jail is the amount of the debt itself, which is often impossible for the debtor to pay. When the debtor can be brought before a judge the examination takes place. If the debtor has no money or property available to pay the debt they're released without further proceedings. But the consequences of being arrested, perhaps placed in jail and being brought before a judge can be severe to someone's employment and family life.

The lesson is to never ignore a notice of hearing for a judgment debtor's examination. If you're not certain about a hearing notice contact us at www.thompsonlawoffice.net. But more importantly, even before a debtor's exam is scheduled make plans for how to deal with the debt. If you're not going to file bankruptcy then how will you pay the debt? Are you going to try to negotiate  a payment plan or settlement with the creditor? If so, contact them immediately. If this debt is just one of many, how do you plan to deal with them all? Start making plans for whatever solution you choose sooner rather than later. Don't wait to take action until the result of missing a hearing lands you in jail.

TELEPHONE CONSUMER PROTECTION ACT

The Telephone Consumer Protection Act (TCPA) prohibits debt collectors from calling a cell phone number using an automatic telephone dialing system without the debtor's prior express consent. Automatic telephone dialing systems include "predictive dialers" and any equipment that has the capacity to store or produce telephone numbers using a random or sequential number generator and to dial the numbers automatically. You can often recognize calls made with these systems because of the brief delay between when the call is answered and the caller speaks. 

Prior express consent means the debtor gave his or her cell phone number to the original creditor at the same time the debt was incurred, for instance in a credit application. If the cell phone number was provided to the creditor after the debt was incurred, it doesn't fit the law's definition of prior express consent. Violations of the TCPA can result in statutory damages of $500 for each call, or up to $1500 per call if the violation was willful or knowing. Since most debt collectors know whether they are calling a cell phone or landline, their phone calls are frequently willful or knowing, leading to treble damages. If you think a debt collector is violating the TCPA start keeping good records and contact us at www.thompsonlawoffice.net.