Debt Settlement News
Read the latest on Debt, Debt Settlement and Debt Repair.
Debt Collector Sued by Arkansas AG Wins Appeal
Arkansas News Bureau (05/17/12) ; Lyon, John
The Arkansas Supreme Court has overturned a judgment that Attorney General Dustin McDaniel won for the state against a debt collector. Last year, a Pulaski County circuit judge ordered Jack H. Boyajian to pay a $194,000 civil penalty for 776 violations of the Arkansas Deceptive Trade Practices Act. The state Supreme Court has now reversed and dismissed the order, however. McDaniel said, "While I respect the Court’s decision, I am deeply troubled by its far-reaching effect on Arkansas consumers and the likely harm that will result." The attorney general had filed a lawsuit alleging that Boyajian was "badgering and harassing" Arkansas residents to collect debts, sometimes threatening them with criminal action and sometimes targeting individuals who did not actually owe anything. Boyajian, an attorney licensed in California at the time, argued on appeal that his actions were carried out in the practice of law, making him exempt from the Deceptive Trade Practices Act. The Supreme Court agreed. Boyajian also was sued over his debt collection practices in Colorado, Connecticut, and New York.
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Seventh Circuit: Bill Collector Can Be Sued for Calls to Wrong Numbers
Legal Newsline (05/15/12) ; Karmasek, Jessica M.
The U.S. Court of Appeals for the Seventh Circuit recently ruled that bill collectors can be sued for automated calls made to the wrong cell phone subscribers, upholding an earlier decision by a Northern Illinois District Court. The case revolves around the federal Telephone Consumer Protection Act -- which restricts the use of automatic dialing systems, artificial or prerecorded voice messages, SMS text messages received by cell, and the use of fax machines to transmit unsolicited marketing materials. Two mobile phone subscribers, Teresa Soppet and Loidy Tang, allege that Enhanced Recovery Company made dozens of automated calls to their cell phones, draining valuable minutes from their plans. The pair claim they never consented to receive automated calls. But Enhanced Recovery said it had the consent of the previous subscribers. The court said that only the consent of the current subscriber can consent to the automated or recorded calls.
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Taxpayers Fund Collector Chasing Student Loans
Bloomberg Business Week (05/15/12) ; Hechinger, John
Employees and executives at the student loan debt collection company Educational Credit Management Corp. (ECMC) receive significant compensation from collecting past-due student loan debt for the U.S. Education Department. The guaranty agency generates big profits thanks to an 18-year-old agreement with the federal government. Approved by Congress, the company charges borrowers fees and earns commissions from taxpayers when it collects defaulted loans. But ECMC says it helps keep federal financial aid programs solvent by recouping the delinquent debt. The company confirms that it has returned $4.3 billion to the U.S. Treasury since 1994; but critics say those working at ECMC benefit, too. CEO Richard Boyle received $1.1 million in 2010, while five managers took home more than $400,000 each. Justin Hamilton, a department spokesman, acknowledges that some of the government's policies in relation to the debts deserve "a second look." Not only do workers at the company take home large paychecks, but the firm also reimburses large commuting bills. Additionally, it receives more money collecting from struggling borrowers than it does from those defaulting in the first place. If the company gets borrowers to make nine payments in 10 months, it gets a jackpot: up to 37 percent of a borrower's entire loan amount. Despite the criticism, National Council of Higher Education Loan Programs President Shelly Repp says, "There's no factual basis for this claim that the incentives are misaligned."
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FTC Settles With Debt Collectors Over Bogus Magazine Payments
Chicago Tribune (05/15/12) ; Samuelson, Kristin
The Federal Trade Commission has reached a settlement with Luebke Baker and Associates Inc., a debt collection agency that pursues payments on hundreds of thousands of accounts each year. The government charged the firm with violating the FTC Act, Fair Debt Collection Practices Act, and Telemarketing Sales Rule as it sought to recover payments for bogus magazine subscriptions. Among the allegations, according to a press statement, were that Luebke "illegally masked their identity and sent false information over caller ID, falsely posing as Ed McMahon, attorneys from a law firm and other entities; falsely told consumers that magazine subscription debts are exempt from the statute of limitations; and illegally threatened to garnish wages and take other unintended legal actions." Under the proposed settlement, the debt collector may not declare that a consumer owes a debt without having a reasonable basis to do so and also may not make any other misrepresentations when collecting debts or selling goods and services. Luebke also is obliged to investigate if a consumer challenges a debt. Meanwhile, Cross Media Marketing Corp. -- the company that sold the magazine subscriptions -- was successfully sued several years by the FTC for deceptive marketing. A 2003 federal court order against the firm placed special requirements on anyone seeking to collect payment on the subscriptions.
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Brewer Signs Bill to Help Debt Collectors
Phoenix Business Journal (05/14/12) ; Sunnucks, Mike
Arizona Gov. Jan Brewer signed House Bill 2664 into law on May 14. The legislation makes it easier for debt collectors to pursue defaulting consumers and small businesses by allowing collection agencies to use final billing statements to show amounts owed and interest rates. Many debt collectors purchase delinquent accounts from banks and credit card companies but often receive minimal information about the debt. Obtaining additional data can be difficult and expensive. While Arizona's new law makes it easier for collection agencies to pursue debt if they can obtain final billing statements from banks, consumer attorneys and Democrats opposed the measure, questioning the accuracy of information such as credit card statements and fees.
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5 Credit Card Rules for New Grads
Huffington Post (05/14/12) ;
New college graduates who are managing their money for the first time should be cautious about credit card use. When receiving a card offer in the mail, they should not fall for flattery. Envelopes often have language such as, "You've been selected!" and "You deserve this opportunity!" to make potential users feel special; but individuals should not apply for a new card unless they need it. Another tip for new graduates is to scour the fine print before applying for a credit account, making sure the card meets their needs. For example, frequent commuters may want cash-back cards that offer a gas rebate. Card users also should pay their balances every month, using a budget so that they know how much money goes toward credit cards; and these payments should be made on time. New graduates additionally should promise themselves to learn about money and personal finance, using sources such as books by Liz Weston and Farnoosh Torabi, or free webinars offered by CredAbility. Consumers who are already in debt and need help can reach out to organizations such as the National Foundation for Credit Counseling or CredAbility.
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Bad News for Most Debt Collectors and Good News for Consumers
Huffington Postl (05/08/12) ; Bartmann, Bill
Congress enacted the Fair Debt Collection Practices Act in 1978; but since then debt collection laws have failed to keep up with society, leaving many consumers vulnerable. Despite legislative gridlock at the national level, Massachusetts Attorney General Martha Coakley is working toward reforms in her own state. She first proposed revisions last year ago and announced final regulations last month. Under the new rules, it will be considered an unfair-trade practice for a debt collector to threaten borrowers with an action that the collector does not try to follow through on. This is a response to the industry practice of threatening to sue a consumer when the debt collector already knows that the debt is too old to be included in the statute of limitations to sue. Collection activity is also prohibited on time-barred debt without explaining in clear language that the collector can no longer sue to collect it. The new regulations additionally limit the number of calls and text messages from debt collectors to two per week. Creditors collecting on their own debts, as well as third-party debt buyers, also must be able to prove that the debt is valid.
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Some States Give Troubled Consumers a Break on Use of Credit Scoring for Insurance Rates
InsuranceQuotes.com (04/30/12) ; Anderson, Troy
Certain state laws enable insurers that use credit scores when determining rates for auto and homeowners' insurance to take into account bankruptcies brought on by death, job loss, or catastrophic illness, since in many cases bad credit can mean premiums that are up to 200 percent higher than someone with good credit. These exceptions for "extraordinary life circumstances" are available in 15 states, including Connecticut, Nevada, Texas, and Iowa, and are based on a model law from the National Conference of Insurance Legislators. The laws still allow insurers to use credit score information to determine rates, but require them to take into account life events. American Insurance Association (AIA) Vice President and Associate General Counsel Dave Snyder says that the use of credit-based insurance scores are permitted in most states. "The majority of policyholders receive discounts as a result of credit-based insurance scoring, and auto insurance and homeowner's insurance are more available because credit-based insurance scoring has improved the accuracy of underwriting. Insurance is more affordable to more people and is generally more available because insurers have an objective measurement of risk that has increased the accuracy of underwriting over the more traditional factors," he said. Insurance credit scores are used to predict the number and cost of claims customers are likely to file and use those numbers to determine the premiums they should be charged. In Illinois, insurers could be required to recalculate consumers' insurance scores upon request should lawmakers pass a pending measure, and a bill in Maryland would prevent insurers from rating risk based on credit history.
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W. Va. Woman Fights to Collect $10 Million From Debt Collectors
WTMA (04/26/12) ;
Diana Mey of Wheeling, W.Va., has won a $10 million judgment against an abusive debt collection company, the largest award of its kind ever made. Two years ago, a representative with Reliant Financial Associates (RFA) left a message for Mey implying that her house was in jeopardy unless she paid a debt. Debt collectors are legally forbidden from making empty threats to debtors about serving them with a lawsuit or seizing their homes. Mey also says she is debt-free. Mistaken debtor identity is a frequent issue in the United States because of collectors called "debt buyers," which purchase old debts at a discount that original creditors have given up on. The debt buyers, including RFA, then try to collect them for a profit. In May 2011, Mey sued RFA for harassment and illegal collection practices. RFA's lawyer failed to show up in court in August, leaving Mey to testify unopposed. The judge called RFA's actions "malicious" and awarded $10,860,000. It later was discovered that RFA is a fictitious business name for a company called Global AG LLC -- one of several collection companies that are operated by the same people but often change names and relocate.
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Accretive Put Debt Collectors in Hospitals, State AG Says
Bloomberg (04/25/12) ; Wayne, Alex
A Minnesota official has accused a debt collection firm of pressuring payments out of patients at a hospital chain in the state, both in the emergency room and at their bedsides. Attorney General Lori Swanson said that employees of Fairview Health Services were required to use a computer system called "Blue Balls" to track whether patients paid their bills and then demand payment before they received treatment at any of the seven facilities in the company's franchise. She said the system was introduced in May 2010 when the hospital hired collection agency Accretive Health Inc. In a recently released report based on internal documents and interviews with employees, Accretive's tactics created "a high-pressure boiler-room-style sales atmosphere." Swanson has filed suit against the Chicago-based debt collector for violations of U.S. and state patient-privacy and debt-collection laws. In the report, Swanson said Accretive provided emergency room personnel with scripts for conversations with patients that "can lead a patient or her family to believe the patient will not receive treatment until payment is made." Additionally, employees were instructed to ask for credit card payments, tell patients they would wait for them to get their checkbooks, and remind them that debt-collection activities "can affect your credit score." The hospital chain recently ended a portion of its contract with Accretive. Web Link
Could Your Next Facebook Friend Be a Debt Collector?
KDVR.com (04/23/12) ; Melear, Nancy
Facebook users should be careful about which friend requests they accept, as some people may only be after their private information. An increasing number of debt collectors are using social media to track down consumers who owe money, sometimes setting up a fake profile and sending out friend requests. After receiving a first collection letter, consumers are advised to call the collection company within 30 days with a request for no contact by phone, text, or e-mail. If payment is not possible, negotiation and settlement will damage the borrower's credit score but will stop the collection. Facebook users should set their privacy settings so that their profile is visible only to friends -- not the public -- and should accept friend requests only from people they know. Users should employ common sense in their posts, avoiding details such as employment history, including current employer; e-mail; cell phone; and birth date. The Fair Debt Collection Practices Act currently does not have provisions for social media, so it does not explicitly forbid collectors from posting on a consumer's Facebook unless they talk about the debt. Consumer attorney Craig Thor Kimmel recommends that social media users save any messages they receive from collectors. They can then report the sender as spam on Facebook and file a complaint with the Federal Trade Commission. Web Link
Attorney General Sues 7 Debt Collectors
Charleston Gazette (04/17/12) ;
West Virginia Attorney General Darrell McGraw has filed a lawsuit against seven unlicensed debt collection agencies, claiming that they use unfair tactics to get money from consumers. Several consumers have complained that the agencies' collectors impersonated law enforcement and judicial officers and made threats of prosecution for failure to pay off debts. Some agencies attempted to collect nonexistent debts. The suit involves County Filing Services Inc.; Portfolio Investment Financial; Investment Management and Recoveries Inc.; Rosenthal, Stein and Associates LLC; Vision Credit Solutions LLC; National Capital Management Inc.; and Dorsey Thornton and Associates LLC. The lawsuit asks a judge to force these seven agencies to comply with an investigative subpoena.
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Chicago Woman Says She Was Ripped Off by Debt-Settlement Firm
CBS 2 Chicago (04/16/12) ;
Letitia Mika, a resident of Chicago, says she fell prey to a scam artist pretending to be a legitimate debt-collection agency. The Lincolnwood firm PN Financial offered to settle her overdue credit card balance, for which Mika paid $1,800. She later learned that PN Financial was keeping the money, not using it to pay off her debt. The Illinois attorney general's office is now suing PN Financial for fraud in four dozen cases, including Mika's. AG spokesperson Natalie Bauer says PN Financial also was threatening to sue people while it posed as a law firm. In some cases, the firm had sent out letters with fake court case numbers, dishonestly claiming to have filed suit against the letter's recipient. Consumers should be aware of their rights: debt collectors may not call at all hours, may not use threats or call a person's employer to tell them about the debt, and they must apply any payment to the actual debt.
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Debt Collectors Increasingly Using Abusive Threats, Insults, Lies: Report
Huffington Post (04/13/12) ; Eichler, Alexander
A recent report from Marketdata Enterprises points out that debt collectors have been adopting increasingly nasty tactics -- including curses, threats, insults, and even telling lies that break the law. In the current economic climate, people are more unwilling or unable to pay cash for their debts when demanded to do so. Debt collecting remains a profitable industry, with revenues at $11.74 billion in 2010. Still, many companies are experiencing shrinking profits with an increasingly crowded collection field. One firm allegedly told a debtor that they would dig up her dead daughter and hang her from a tree if she did not pay her bills. Others go on a campaign with calls early in the morning and late at night, or try to recruit relatives to apply indirect pressure. Sometimes, collection agencies call people who do not owe any money. At least one company has been accused of lying to people and threatening them with arrest, a tactic that is also against the law.
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BBB Study: Consumers Paying Scammers Thousands for Services They Can Do Themselves at No Cost
Better Business Bureau (04/10/12) ;
A St. Louis Better Business Bureau (BBB) study has found that many consumers mired in debt are paying scammers thousands of dollars for credit repair, when they can do the same thing themselves for less or even for free. The study, "Are They Creditable? A Study of the Credit Repair and Debt Settlement Industries, Complaints, Laws & Enforcement," explains that credit repair offers to rid a consumer’s credit report of damaging marks. Debt settlement, on the other hand, promises to reduce debts or monthly payments through negotiations with creditors. Complaints to BBBs across the United States about credit repair have ballooned from just 133 in 2006 to 711 last year. The study notes that the credit repair industry attracts customers with enticing ads that suggest, for example, that they can boost their credit score by a hundred points or more -- for what is supposed to be a nominal fee. Grievances lodged with the St. Louis BBB, however, showed that 85 percent of complainants received no services from credit repair companies, despite paying an average of $816 each. Most of these customers received no refunds. Complainants paid an average of $2,000 for debt settlement and averaged only $67 in refunds. The study recommends that consumers follow advice from the Federal Trade Commission and not hire credit repair companies. Only outdated or inaccurate information can be erased from a credit report. Consumers should turn to a trustworthy not-for-profit organization to resolve debt and credit problems.
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Bill Could Cut the Time Collectors Have to Sue Over Debts: Plain Dealing
Cleveland Plain Dealer (04/10/12) ; Harris, Sheryl
SB 224, introduced last fall in the Ohio legislature, would reduce the amount of time available to people and businesses to file suit over breach of a written contract, cutting the statute of limitations from 15 years to just six. The proposal also would reduce the amount of time for debt collectors to file suit against consumers for old debts. Currently, only Ohio and Kentucky allow parties to wait up to 15 years to sue over breach of a written contract; but reducing the time to six years would align Ohio with most other states. In Ohio, if debt collectors sue a borrower over a time-barred debt, the burden is on the consumer. The consumer can ask the court to dismiss a suit over old debt, but only with enough legal knowledge to raise the age of the debt as a defense. Unlike other states, Ohio does not require collectors to show that the debt is not time-barred. SB 224 does not resolve that issue, but it makes the issue of time-barred debts less confusing.
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Franchisee Sues Big Debt Relief Law Firm
Courthouse News Service (04/09/12) ; Lee, David
A franchisee of debt-resolution company Legal Helpers filed a suit charging that the firm terminated its contract without just cause after it helped build the law office into a national organization -- a violation of U.S. franchise laws. Velocity Processing Debt Resolution filed a complaint in Dallas County Court, accusing Legal Helpers Debt Resolution of selling franchises to debt-resolution companies to take advantage of state and federal laws that make it challenging for companies that are not law firms to provide debt settlement services. Velocity took the majority of the financial risk, while franchisees were referred market and service debt settlement clients under the Legal Helpers brand. But Velocity claims Legal Helpers terminated its relationship with between 15,000 and 20,000 franchisees on the same day, "without any notice and to establish good cause for termination, Legal Helpers violated the Illinois Franchise Disclosure Act." Additionally, the firm said Legal Helpers told Global Client Solutions to halt all contract payments owed to the company and its affiliates. The company said it is owed between $800,000 and $1 million. Velocity is seeking damages for wrongful termination, conversion of personal property, and more.
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Consumer Loan Delinquency Rates Drop Across the Board
International Business Times (04/05/12) ; Li, Hao
Consumer loan delinquency rates fell in all 11 categories that the American Bankers Association (ABA) tracked in the fourth quarter of 2011. This indicates that Americans are reducing private debt and stabilizing their personal finances. "It's very rare that delinquencies improve in every single loan category. The last time that happened was in the fourth quarter of 2004," ABA Chief Economist James Chessen said. Despite the declines, however, loans in certain housing categories remain high compared to historic levels. The health of the jobs market also remains poor compared to pre-recession levels, though this market has seen improvements since mid-2009. The Federal Reserve's financial obligation ratio (FOR) is also below pre-recession levels. The FOR compares obligations in debt, automobile, rental, homeowners' insurance, and property tax payments to disposable personal income; it is now at the lowest level since 1984.
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Judge Fines Texas Debt Reduction Company
Vermont Public Radio (04/03/12) ;
A Vermont judge has ordered Credit Solutions of America (CSA), a debt settlement firm in Texas, to pay a penalty and reimburse customers that it allegedly committed fraud against. The state attorney general's office had taken CSA and its owner to court in 2010 for marketing its services through unsubstantiated claims that borrowers could slash their debt "in 60 seconds." It also was accused of not being licensed to operate in Vermont and neglecting to properly inform consumers to their right to rescind their contract with the company. The judge handed down a fine of $2 million and ordered CSA to distribute full refunds -- an estimated $350,000 worth -- to 207 affected Vermont residents.
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Borrower Beware: B of A Customer Repaid Her Bill Yet Faced a Collections Nightmare
American Banker (03/30/12) ; Aspan, Maria
It cost a Maryland woman nearly $1,900 to pay off a delinquent debt owed to Bank of America in October 2006, only to spend the following three years -- starting in December 2006 -- fighting off demands from collections agencies that she repay the debt again. Neither a canceled check nor creditor's letter stating that she had fulfilled her obligations deterred debt collectors, which apparently had purchased the rights to her account from BofA not long after she settled her balance with the bank. Karen Stevens of Hagerstown said she received numerous collections letters and calls from various credit agencies, demanding the money and interest. She sent the collectors a copy of the settlement papers, but that did not stop the calls or letters. Finally, Stevens had to hire an attorney to counter-sue the debt agencies. Douglas Bowman said he has defended approximately 500 people in similar situations. He said the problem stems from collection agencies' inability to produce paperwork to support their demands. The case was settled in July 2009, but the problem remains for numerous consumers throughout the country.
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