JPMorgan Chase has allegedly withdrawn credit card suits because suit documents were "robo-signed." Photo Credit: jebb/Flickr.com/CC-BY-SA

JPMorgan Chase withdrew more than 1,000 lawsuits nationwide against delinquent credit card holders over the past few months, for unknown reasons. However, it is rumored the suits are being dropped because many of the suits were “robo-signed,” or initiated without sufficient review of the paperwork.

Spontaneous withdrawal of credit card suits raises eyebrows

Credit card companies sue people for not paying their credit card debts every day. Any person can look at the court filings section of the local newspaper and see several suits being initiated against a delinquent borrower on any given day of any given week. However, when one of the nations’ largest banks withdraws a large number of suits without explanation, it looks odd.

Recently, according to the Wall Street Journal, JPMorgan Chase withdrew a large number of lawsuits from various courts in several states over the past few months. It is believed that more than 1,000 individual suits were withdrawn from courts in California, New York, New Jersey, Illinois and Florida since April without much explanation. However, it is rumored that the suits were “robo-signed” just like the rubber-stamped mortgage foreclosures that caused a scandal.

Too many potential robo-signings to ignore

JPMorgan is the second largest bank in the United States in terms of assets. JPMorgan is owed $45 billion in the five states where the suits were withdrawn, in delinquent and current accounts. It is said that paperwork in credit card lawsuits, though, is not up to snuff. A New York judge was quoted in the Wall Street Journal as saying that that number of potentially “robo-signed” credit card lawsuits was “significant.” The judge also had dismissed 150 credit card suits in the past year for having large amounts of paperwork signed by the same people.

A lawsuit was filed against JPMorgan in San Antonio last year, according to Fortune, due to large stacks of legal papers having been signed by the same attorney without having done the due diligence on the numbers. Forbes notes that at least one person has been fired for questioning practices of selling off portfolios of write-offs to debt collectors, which are delinquent credit card debts for collectors to try and collect on.

Not unheard of

Banks not following the best practices concerning legal action on bad debts is not unheard of. Earlier this year, no less than 38 state attorneys general petitioned for a class action suit settlement to be far higher in the case where Encore Capital Group was sued by 1.4 million people for “robo-signing” affidavits in debt collection suits, according to Reuters. Encore settled for less than $6 million, which was considered pitifully low by the panel of state lawyers, as it amounts to about $10 per person. The banking industry was infamously found to have signed foreclosure documents regularly nationwide without having done all the legwork to see if the foreclosures were valid, and a debt collection company is not likely to go through a bank’s files to see if they are suing to collect a valid debt.

Sources

Wall Street Journal

Fortune

Forbes

Reuters

Beware of payday loan collection scams. / Image: ivanpw/Flickr/CC BY

Many of us in this tight economy are living from paycheck to paycheck. Payday loans can be a resource for people living close to their means when unforeseen expenses occur. Scammers, however, are preying on these already financially stressed people with threatening phone calls, trying to bully them into paying non-existent debts.

Lenders bound by laws

Legitimate payday loan companies offer small, short-term loans for people who wish to borrow against their next paycheck. However, when collection becomes an issue, these lenders are bound by laws. They are not allowed to harass their debtors, nor can they threaten arrest or jail.

Scammers in many states

In February, Maria Brown of Houston, Texas, contacted authorities reporting scammers. “They contacted me and really had me believe I was going to jail for check fraud,” Brown said. She had taken out payday loans before the calls, and the scammers seemed to have access to those applications. They sounded legitimate because of the information they possessed about her. Brown realized she was being scammed only after checking records and verifying that she had paid off her loans.

Consumeraffairs.com warns of a North Carolina caller described as “having a thick accent” who has been harassing North Carolina consumers for “a couple of years now.” The man uses abusive language and threats to frighten consumers into paying phantom debts with their credit cards. Arizona’s Attorney General’s office reported a similar scam in May. Callers claimed to be from fictitious law firms or government agencies and threatened legal action if the victims didn’t pay money owed on payday loans.

Company names to look out for

Scammers may say they represent real companies that they are not actually affiliated with, or they may use use made up company names. Illinois Attorney General Lisa Madigan reports that consumers should beware if callers say they represent Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, Cash or ACS.

Fair Debt Collection Practices Act

According to the Fair Debt Collection Practices Act, debt collectors are not allowed to threaten arrest if you can’t pay. There is no law in the U.S. that allows arrest for unpaid loans. Collectors are also not allowed to harass, annoy or threaten any kind of violence. It is also a crime to falsely represent themselves as lawyers.

What to do if targeted

Consumers who receive these calls should never verify personal information over the telephone. Ask for written proof of the debt, which is something legitimate collectors are required to supply. Suspicious consumers may also wish to check their credit report to be sure there have been no unauthorized credit card purchases or loans taken out in their name. Report any suspicious or threatening calls to the Federal Trade Commission, the Better Business Bureau and your state Attorney General’s office.

Sources

Credit.com
Lawyers.com
Consumeraffairs.com

Debt collectors, many of whom are perfectly normal people working hard in call centers and offices nationwide, are trying to get a fairer shake in the media. Image from Wikimedia Commons.

One group of people that are almost universally despised is debt collectors. They could easily be misunderstood, as they do provide a somewhat necessary service and the only media coverage is when people are abused by collectors, not when debts are properly and calmly collected in a reasonable fashion.

Media picking up story humanizing the face of debt collection

An article that recently appeared in the New York Times has been getting a lot of mention around the web, on sites like Time and MSNBC. The focus of the piece is an effort by debt collectors to be seen as more “human” by the general populace. One of the collectors cited in the piece, who works for a debt collection firm in Minnesota, said that some customers are every bit as awful as collectors are supposed to be, as people trying to do their jobs and collect a debt will be threatened with everything from lawsuits to death on a daily basis.

Mark Neeb, the head of the trade group for debt collectors, ACA International, insists debt collectors are hard-working folk just like everyone else, and that the rotten ones are really the exception to the rule.

An uphill battle

Rehabilitating image will be hard, since most of what the public hears is that debt collectors are unethical. Searching for “debt collection” on any search engine provides many examples. For instance, according to Reuters, Encore Capital Group LLC, the largest debt collection agency in the country, is being sued by the Minnesota Attorney General for improperly “robo-signing” collection letters just like some fairly well known banks were doing, and unjustly attempting to collect the debts. A Florida debt collector, Brooks, Newman and Stone, Inc., was recently fined $7,500 by the state of Minnesota for collecting a debt on behalf of a South St. Paul business and pocketing the money, according to the Minneapolis Star Tribune. In Eugene, Ore., an attorney named Derrick McGavic was disbarred and fined $70,000 for garnishing wages without notifying people he was trying to collect a debt, according to KCBY 11, a CBS affiliate in central Oregon.

Convenient timing

Looming over the debt industry is the Consumer Financial Protection Bureau, the agency that will police everything from credit cards to payday loans. The CFPB is soon to begin operation, and will share jurisdiction with the Federal Trade Commission over debt collectors. Debt collectors have been getting in trouble with regulators more these days, as there were 140,036 complaints filed last year against debt collection agencies, up 14 percent from 2009. Debt collection is fairly simple. A debt, held by a business, is bought by a debt collector, who tries to collect it from the customer.

While most debt collection practices are legal, there are some that are prohibited by the Fair Debt Collection Practices Act. If a person is being contacted by a collector, they should familiarize themselves with the FDCPA. Also, negotiations for paying less than the total is possible, since collectors typically buy debt for pennies on the dollar.

Sources

MSNBC

Time

Reuters

Minnesota Star Tribune

KCBY 11

Federal Trade Commission and Fair Debt Collection Practices Act

Facebook has become a vehicle for debt collectors to harass people. Image: Flickr/benstein CC-BY-SA

Most businesses these days are creating social media positions to co-opt the reach of Facebook, debt collection agencies included. A Florida woman made headlines late last year when she hired an attorney to sue a debt collection agency for harassing her via Facebook. The federal government, which received more complaints about debt collection than any other industry in 2010, is considering how to update consumer protections for the social media era.

Debt collectors and social media

It’s no secret that debt collection agencies use the Internet to find people who owe money. The Orlando Sentinel first reported about Melanie Beacham of Tampa, Fla., last November when she fell $362 behind with her car payments. Beacham’s auto loan account was promptly sent to collection. Calls, text messages and emails started rolling in. After she worked out a payment plan with her creditor, a debt collection agency called MarkOne Financial sent a message to all Beacham’s friends on Facebook asking them to urge her to call the debt collector. Beacham hired an attorney to sue MarkOne, citing violations of federal and Florida law. The lawsuit claims the debt collection agency harasses consumers, their families and their friends using Facebook. The lawsuit is pending, but in March, a judge ordered MarkOne not to contact Beacham, her friends or family via Facebook or any other social networking site.

The Fair Debt Collection Practices Act

After the court scolded MarkOne, Beacham’s attorney, Billy Howard, head of the consumer protection department at the law firm of Morgan & Morgan, said it was the first ruling in the country that specifically banned a debt collector from using social media. But that hasn’t stopped MarkOne. Three weeks ago Howard filed a suit on behalf of another woman against MarkOne for Facebook debt collection harassment. But posting messages on Facebook telling the world someone is behind on a debt could be a violation of the Fair Debt Collection Practices Act of 1978. That was enacted decades before the advent of Facebook, but the Association of Credit and Collection Professionals said the rules apply to social media the same as phone calls or letters. Debt collectors can only contact third parties if the collection agency can’t locate the debtor. Debt collectors are also barred from disclosing to a third party why the debtor needs to be contacted. In both these instances, MarkOne appears to violate the law.

Debt collection 2.0

A Federal Trade Commission’s annual report required by the Fair Debt Collection Practices Act shows that the agency received more complaints about debt collection in 2010 than any other industry. The FTC recorded 140,036 complaints about debt collectors, 27 percent of all complaints received by the agency and an 18 percent increase from 2009. The FTC will host a public workshop in Washington, D.C., April 28 called Debt Collection 2.0 that will include a discussion about social media. In July, the new Consumer Financial Protection Bureau will begin working with the FTC to create debt collection rules, field complaints and educate both consumers and debt collectors.

Sources

MSNBC

Orlando Sentinel

Money Talks News

Are old charge-offs still giving you the blues? (Photo Credit: CC BY/Caitlin Doe/Flickr)

Maintaining good credit can be challenging, particularly after a life-altering event like job loss. Understand that if a creditor throws in the towel and charges off one of your debts, that doesn’t mean that you’re in the clear. It’s quite possible that you will still be liable for that bad debt – even after it disappears from your credit report.

Charge-offs: The light side

Imagine this scenario involving a charge-off on your credit report. While the credit item may say it’s going to drop off your credit report at a certain time, that debt may still have legs because the rules for collecting a debt and the rules for reporting a debt aren’t the same, reports Bankrate. The Fair Debt Collection Practices Act (FDCPA) provides the guidelines for debt collection, while the Fair Credit Reporting Act (FCRA) holds jurisdiction over how a charge-off is reported.

On the plus side, the FCRA mandates that a charge-off must be removed from your credit report after 7 years. That includes whatever debt collection agency owned the debt. Check your credit report about a month after the charge-off is supposed to occur. If the bad debt is still there, dispute it with the three credit reporting agencies: Equifax, Experian and TransUnion.

Student loans, tax liens and Chapter 7 bankruptcies cannot be charged off.

Charge-offs: The dark side

Thanks to the FCRA, bad debt will disappear from your credit report. Unfortunately, the FDCPA makes it possible for debt collectors to pursue your debt almost in perpetuity. As there is a lucrative secondary market that purchases bad debt, there is still cause for concern on the part of the consumer who needs debt repair. Each collection agency will likely try to collect at least once before selling your charge-off.

Can a consumer escape from that bad credit card debt amassed during a span of unemployment? Because there is typically a statute of limitations, the answer is yes. The amount of time in which a debt is subject to collection via the court system varies by state, although it is usually 4 to 6 years for credit cards and 6 to 10 years for installment loans, payday loans or auto loans. Contact your state’s attorney general for more specific information.

Know your debt collection rights

If a charged off debt is past your state’s statute of limitations for collection, it cannot be legally pursued and you can ask not to be contacted against regarding that debt. If a debt collector continues to chase, you may have the option to levy a counter-suit.

Legal action will require time, money and the advice of a lawyer, however. The best way to get out from under a debt collector that is pursuing your debt in a legal fashion is to either pay what you owe in full or come to a settlement.

Sources

Bankrate.com
Equifax dispute form
Experian dispute form
TransUnion dispute form

How to deal with collections

The Community Financial Services Association of America stands united against unscrupulous debt collection practices. (Photo Credit: CC BY-ND/LULAC National Convention)

The Community Financial Services Association of America (CFSA), a national organization dedicated to the promotion of responsible regulation of the personal loans industry, has issued a press release that denounces aggressive debt collection practices that violate consumer rights, reports the Wall Street Journal. According to the newspaper, more than 5,000 arrest warrants were issued against defaulted borrowers last year in more than a third of U.S. states. The CFSA is lobbying to eliminate this legal practice as used by rogue debt collectors, which the organization considers an affront to consumers in dire financial straits.

The industry stands up for same day loan customers

CFSA board chair D. Lynn DeVault envisions a U.S. same day loans industry that will stand together to put unscrupulous debt collectors out of business.

“It is simply wrong to pursue criminal complaints against consumers who have defaulted on personal debt,” said DeVault. “Lenders should be working with their customers to figure out a solution. Our members offer borrowers an extended payment plan at no extra cost to the borrower and adhere to CFSA Best Practices, which prohibit any criminal recourse.”

A key provision of the CFSA’s Best Practices is that no member personal loans company will threaten borrowers or pursue criminal action against them in relation to a customer’s check or account going unpaid.

“We stand ready to work with regulators and policymakers to block rogue lenders and debt collectors from pursuing criminal complaints,” said DeVault.

Washington State House bill requires debt collectors to provide proof

In early March, the Washington state House of Representatives unanimously passed a bill that would require debt collectors to provide indisputable proof that a borrower has been notified of a potential lawsuit before an arrest warrant can be issued. The bill is expected to pass the state Senate and meet the approval of Gov. Christine Gregoire. A trade group representing debt collectors has also come out in support of the legislation in light of the fact that some rogue debt collectors have abused existing laws.

Nationally, the Federal Trade Commission is currently investigating aggressive debt collection practices.

Sources

BusinessWire

Community Financial Services Association of America

Wall Street Journal

A word from CFSA President Darrin Andersen

As the debt collection industry booms, debt collection arrest warrants are interfering with pursuit of serious crimes in some states. Image: CC David Hudson Floyd/Flickr

The use of debt collection arrest warrants has mushroomed since the financial crisis. People often assume that the debtors prison is ancient history and they can’t be arrested for not paying a debt. But more than a third of U.S. states have laws that allow the debt collection industry to obtain arrest warrants to recoup money.

Debt collectors profit from public resources

More than 5,000 debt collection arrest warrants have been signed by judges in the U.S. since January 2010, according to the Wall Street Journal. In some states, debt collection arrest warrants can be issued if a borrower ignores court order to settle a debt or fails to attend a hearing. However, buying old debt for pennies on the dollar and using illegal tactics to collect those debts has become a booming industry. The  volume of debt collection arrest warrants in some states is draining the law enforcement resources needed to pursue more serious crimes. A growing number of legislators, judges and financial regulators are looking into limiting the debt collection industry’s ability to obtain debt collection arrest warrants to pressure borrowers.

Borrowers in contempt of court

Debt collection arrest warrants were typically issued for borrowers who defy repeated summons to appear in court. In debt collection cases, the warrant and arrest are usually for contempt of court. In the aftermath of the recession, many unscrupulous debt collectors use sloppy documentation and, in some cases, mistruths that that result in an arrest of a person who had no idea they were being charged with a crime. Last summer, the Federal Trade Commission began investigating the increasing use of arrest warrants in debt collection lawsuits. Last fall, Senator Al Franken, D-Minn., introduced legislation that bans the use of arrest warrants by private debt collection firms. Franken said the collection industry is taking advantage of sheriffs’ offices and other public resources to enrich themselves at the public’s expense. Franken’s bill would also require debt collectors to provide borrowers with information that verifies exactly what they owe.

How to avoid a debt collection arrest warrant

Despite the growing number of debt collection arrest warrants, an arrest is unlikely for most borrowers who get behind on their payments. Debtors prison was abolished in the U.S. in 1833. It is also illegal under the Fair Debt Collection Practices Act for debt collectors to threaten borrowers with arrest. Borrowers who are threatened with arrest by a debt collector are advised to get help immediately from a consumer law attorney. Those who do receive a summons to appear in court over a debt must not ignore it. It is even more important to appear before a judge if they are unaware of the debt or aren’t familiar with the company suing them.

Sources

Wall Street Journal

Startribune.com

Debt Collection Answers

Financial Football is an online game that blends personal finance and the gridiron endorsed by Super Bowl MVP Drew Brees. Image: Ian Rainsley Design + Illustration/Flickr

Financial Football 2.0 is a video game developed by Visa Inc. and endorsed by New Orleans Saints quarterback Drew Brees. Financial Football is available online to play for free. Players control the action on offense and defense by answering multiple choice questions about personal finance. Brees said he learned about personal finance the hard way and wanted to help others avoid the same mistakes he made. Whether Financial Football 2.0 helps accomplish that is unknown, and people who have played the game were underwhelmed.

Drew Brees: personal finance the hard way

Financial Football, developed by Visa Inc. in cooperation with the NFL, uses Drew Brees’ name to promote financial education by teaching children and young adults how to manage their money through the context of the gridiron. The Washington Examiner reports that Brees, the reigning Super Bowl MVP, has been working with Visa to publicize the game for about five years. Brees told the Examiner about financial lessons he learned the hard way, including a delinquent cell phone bill that came back to bite him later. He went over his minutes, didn’t pay the bill and it was sent to collections. Even with NFL millions in his bank account, the blemish on his credit report boosted the interest rate he paid on his first mortgage.

How to play Financial Football

Financial Football can be played online for free at practicalmoneyskills.com. The game features three different levels: Rookies age 11-14, Pros age 14-18 and Hall of Famers age 18 and older. Players can match up against the computer or match up head-to-head. On offense, players move the football with correct answers to questions about personal finance, student loans, credit cards, credit scores, debt collection, economics, retirement and investments. On defense, correct answers generate tackles, quarterback sacks and negative yardage for the opposing team. Players choose real NFL teams, and Financial Football shows stats about wins and losses for each team.

Struggling offense all too realistic

Gamers used to the cutting edge graphics of Madden NFL 11 will be gravely disappointed in Financial Football. Connie Prater at creditcards.com said her biggest complaint was that the game doesn’t tell players why their answer is wrong or provide more details about the correct answer. The game clock is always on and players only have 40 seconds to call a play, read the question and pick from the selection of answers. Running out the play clock results in a five yard penalty for delay of game. Apparently some people play without moving the ball enough to score any points — a feature that may seem all too realistic for some current NFL teams.

Consumers can see through the payday loan debt collection scam if they understand their rights, the law and their finances. Thinkstock photo.

A payday loan debt collection scam has been victimizing consumers in Illinois. Con artists posing as debt collectors have somehow obtained the phone numbers and personal data of current and former payday loan borrowers. Reaching their targets on the phone, the fraudulent payday loan collectors use scare tactics such as bullying and the threat of lawsuits and jail. The payday loan debt collection scam has proliferated to the point that Illinois Attorney General Lisa Madigan has issued a consumer alert.

Debt collection scammers use threats and intimidation

In recent weeks, the Illinois attorney general’s office has fielded a marked increase in consumer complaints about phone calls from bogus payday loan debt collectors. Consumer Affairs reports that people who have gotten payday loan scam calls say they’ve taken out payday loans, most often from online payday lenders, but have paid the debt on time. They say the scammers know their names, social security numbers, employer and bank account numbers. Because the con artists have such sensitive personal information, their victims often believe the debt collectors are legit. The scam artists use threats and intimidation, such as lawsuits and jail, to dupe them into authorizing a direct withdrawal from their checking account. Sometimes, consumers are tricked to sign promissory notes and fax them to the bogus collectors.

Legitimate payday lender compromised

Illinois payday loan customers aren’t the only ones getting harassed by debt collection scammers. Wallet Pop reports that the payday loan scam calls have surfaced in Ohio, Colorado, Florida, Indiana and other states around the nation. Madigan said the scammers say they are from a variety of bogus companies, such as Morgan & Associates, Federal Bureau of Investigators, DNR Recovery, DNI Recovery, Legal Accounts Association, Department of Law and Enforcement, CashNet USA, America Legal Services, Quick Cash and ACS. Most of the names are fake. However, CashNet USA is real. On its website, CashNet USA has posted a warning about the scam.

Debt collection harassment is illegal

Under the FTC’s Fair Debt Collection Practices Act, it is illegal for debt collectors to call before 8 a.m. or after 9 p.m. They also can’t demand more money than what is owed, reveal a consumer’s debt to a third party or threaten lawsuits or arrest. Even so, some victims of the Illinois payday loan scam calls told Madigan’s office that they were fooled into paying several hundred dollars. Illinois TV station WIFR reports that Madigan offered some advice for people if they are contacted by the scammers.

People don’t go to jail for failing to pay a debt in this country.

Never give out any personal information over the telephone, especially bank account numbers or credit card numbers.

When in doubt, ask the debt collector to produce documentation that qualifies the debt they seek to collect.

Contact the original creditor to confirm if the debt has been paid. If not, confirm that the debt was sold to a third party collector before making a payment.

Consumer default during the recession has led to an explosion of collection agencies that rely on harassment and computerized lawsuits. Flickr photo.

Debt collection has been a growth industry in the U.S. thanks to the Great Recession. As millions of Americans struggle to pay their bills, creditors are unloading debt to collection agencies for pennies on the dollar. The collection agencies are coming down harder than ever on hurting consumers. Consumer complaints about collection agency harassment are skyrocketing. Law firms using debt collection software are swamping courtrooms. But consumers should know that they can hire an attorney to sue debt collectors for abusive practices.

Collection agencies: abuse, violence and bogus claims

More collection agencies are trying to pry money from more people who don’t have it. CNN reports that harassing phone calls, abusive language and physical violence are becoming a bigger part of the collection agency business. The New York Times reports that a single law firm can use computer software to file thousands of debt collection cases, often based on inaccurate or incomplete information supplied by creditors who sold the debt. The Post-Bulletin in Minneapolis reports that accounts have been tapped, wages seized and people threatened with arrest for debts they don’t owe or for inflated amounts.

Collection agency harassment skyrockets

Complaints of collection agency harassment swelled by 50 percent in 2009, according to the Federal Trade Commission. The CNN article said they are on track to jump 13 percent more in 2010 based on FTC complaints filed in the first six months. The top complaint is repeated calls. It is common for debt collectors to harass consumers with calls for days, weeks, months and even years. When they get someone to answer the phone, they are more likely to be abusive. Complaints of collection agencies using obscene or abusive language spiked 35 percent last year. Complaints of debt collectors threatening or resorting to violence more than doubled last year.

Debt collection software sues indiscriminately

While harassment by collection agencies is increasing, they are also hiring lawyers to sue on a mass scale. The New York Times article said a debt buyer sends a law firm a database that contains consumer data including names, home addresses, outstanding balances and the date of default. The law firm runs the data through debt collection software that runs suits through the entire legal system automatically, including collection letters, summonses and lawsuits. Most consumers who get sued by debt collection software fail to show up in court, and those who do rarely have a lawyer. A court judgment gives debt buyers the ability to collect on the debt through actions like wage or property garnishment.

Bankruptcy laws fuel debt collection industry

The debt collection industry exploded starting in 2005 with sweeping changes to federal bankruptcy laws that made it harder for people in financial trouble to get a fresh start. Instead, many defaulted on loans, expanding the debt buyers’ market. The Post-Bulletin article said the nation’s five publicly traded debt buyers last year paid $835 million to acquire $20 billion in old debts. Credit card debt makes up most of the total. But almost every type of charged-off debt, from unpaid cell phone accounts to hospital bills is for sale. Debt buyers base their claims on data up to 15 years old that can be impossible to verify, and they are ready to hound people for years.

Consumers sue to get even with collection agencies

Aggressive tactics are becoming more common. The CNN article said collection agencies calling before 8 a.m. or after 9 p.m., demanding more money than what is owed, revealing a consumer’s debt to a third party or threatening “dire consequences” like prosecution, jail time, property seizure or job loss. These practices are illegal under the FTC’s Fair Debt Collection Practices Act. Consumers can take a collector to state or federal court for harassment. If they win, the collection agency has to pay for any damages caused by the harassment, as well as court and attorney fees.