PAYDAY LOAN COMPANY ON RESERVATION SUBJECT TO IOWA LAW

Photo Credit: Holly McCoy An important September 2013 ruling from the Iowa Department of Inspections and Appeals said that Western Sky Financial, an Internet payday loan company owned by a member of the Cheyenne River Sioux Tribe and located on the Cheyenne River Sioux reservation in South Dakota is subject to Iowa consumer laws. Western Sky sells the loans it makes to WS Funding, a subsidiary of CashCall, which services all the loans made in Iowa by Western Sky. The payday loans made by Western Sky can carry interest rates in excess of 135%. Western Sky and CashCall had argued that since it was owned by a tribal member and located on a reservation it was entitled to sovereign immunity and not subject to Iowa state laws. The Administrative Law Judge ruled, however, that since Western Sky was not the Tribe itself and most of the transactions occurred off the reservation, Iowa laws controlled. The judge said that since Western Sky solicited Iowa consumers to enter into loan agreements via the Internet it couldn't hide behind tribal sovereign immunity to shield itself from Iowa laws. If you're having problems with Western Sky or another payday loan company connected with a tribe contact us about what might be done.

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.