COLORADO SUES DEBT BUYER

 
A lawsuit brought by the state of Colorado late last year sheds light on the world of buying charged off consumer debt. In a lawsuit against several debt collectors and debt buyers Colorado said the companies had purchased thousands of charged off debts from U.S. Bank and Wells Fargo for likely just pennies on the dollar. But even though the banks transferred the debts to the companies, no documents related to the debts were also transferred. The only document provided to the debt buyers was a spreadsheet containing information about the account holder's name, address, Social Security number, amount of debt and the date the debt was charged off. If the debt buyers requested additional documents related to each account they were allegedly charged more money by the banks. Because of the limitations on obtaining account documents directly from the lenders, the state of Colorado alleges that at least one of the debt buyers "engaged in a routine and pervasive scheme to fabricate documents" when pressed to do so by a defendant consumer. Unfortunately, most consumers do nothing when sued by a debt collector. If you're facing debt collection contact us immediately so we can discuss what defenses might be available.

ESCAPING THE DEBT MACHINE

Photo Credit: Randal Clark Over one billion contacts are made each year by debt collectors to consumers and the contingency fees raked in by third party debt collectors exceeds many billions of dollars. The largest debt collector, NCO Financial which is owned by JPMorgan Chase, earns nearly $2 billion annually. A report from the National Consumer Law Center (NCLC) called  The Debt Machine: How the Collection Industry Hounds Consumers and Overwhelms Courts, describes both the enormous profits in the debt collection industry and also the flaws in the legal system. For example, despite debt collectors rarely having the documentation necessary to prove their claims in court or failing to properly serve debtors or suing on debts beyond the statute of limitations, judges in Iowa estimate 85% to 90% of all collection lawsuits result in a default judgment because the consumer defendant does nothing to defend against the lawsuit.  Some debt collectors specialize in collecting debts that are uncollectible. A debt collector in Minnesota, for instance, focuses exclusively on collecting debts from dead people and Portfolio Recovery Associates has admitted continuing to earn fees on debts well beyond the statute of limitations. With consumers usually doing nothing to defend against debt collection lawsuits, collectors can pay as low as pennies on the dollar and still earn billions of dollars in revenue collecting these debts. The NCLC report also documents how some debt collectors trick consumers into making a partial payment or offering so-callled "zombie cards" that "allow" them to make payments on debt owed using a credit card. Unwittingly, these partial payments result in an acknowledgment of the debt that restarts the clock on the statute of limitations. If you're facing debt collection on an old debt or one brought by a debt collector other than the original creditor don't just let a default judgment be entered. Contact us immediately after being served with the lawsuit to determine if there are defenses.

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.