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Attorneys all over the country are increasingly taking bad debt collectors to task for their abusive tactics. This comes from Texas:
The problem's so bad; the Federal Trade Commission gets more complaints about debt collectors than anything. The tactics of debt collection agencies have been described as heavy-handed and mafia-like.
In the local news the foreclosure rate in Massachusetts "spiked" during the month of July. Local real estate agents have told me that the market is slowing. And across the pond, there is talk that portends even worse news.
Some are suggesting that the housing market in the US is in a "free fall." Their words. Not mine.
The slowdown in the US housing market will force businesses to slash 73,000 jobs a month next year and could be more damaging to the world economy than the dotcom crash, warn economists."Things do seem to be getting worse very quickly. Freefall is a strong word, but I think it's the right one to use here,' said Paul Ashworth, chief US economist at Capital Economics.
In today's Taunton Gazette, news that the foreclosure rates in Bristol County Massachusetts have doubled in just one year.
While owning a home may be a cornerstone of the American Dream, for many people adjustable interest rates, stagnant wages and prices at the pump are turning it into a nightmare.
The IRS is slated to begin its "private debt collection initiative" on September 7. In other words, they are sending private debt collectors out to collect Uncle Sam's money. In anticipation of the occassion, the IRS issued a statement today entitled "Simple Steps Can Prevent tax Scams as Private Debt Collection Begins."
The IRS sees a variety of different scams on different issues. One recent example involves a bogus e-mail claiming to be from the IRS. In this “phishing” scheme, the scam artist’s e-mail claims to be from the IRS, tells recipients that they are due a federal tax refund, and directs them to a Web site that appears to be a genuine IRS site. The bogus sites contain forms or interactive Web pages similar to IRS forms or Web pages but which have been modified to request detailed personal and financial information from the e-mail recipients.In general, all taxpayers should keep in mind the IRS never asks people for the PIN numbers, passwords or similar secret access information for their credit card, bank or other financial accounts. If in doubt about someone claiming to be from the IRS or working on behalf of the IRS, call the agency’s toll-free help line at 800-829-1040.
Today I battled a debt collector who was harassing one of my clients. I enjoyed myself, and I tend to when I know I am right. I am waiting for authority from my client to sue them. Here’s why:
My clients retained me to seek bankruptcy. They told the creditor (Discover Card) – and this collection agency (Nationwide Credit) that I was their attorney and to call me. They did, and on July 17 (shortly after they left a message seeking confirmation of retainer) I called and spoke to them and confirmed representation. But today, they called my client – and told my client that I never returned their call. They also told my client they were going to continue to call her until I returned the call. My client was troubled by this, since it’s my job to help her and her family get through this tough financial time.
So I called and spoke to the collector. She was a peach. She told me they the company never heard from me, and then in the same sentence, acknowledged that “my name was in the system” – and spelled incorrectly (McLeon). I called her out on that and said “if my name is in the system, then clearly you know I am her attorney. Why are you calling my client.” Her reply was that if I would “do my job and return the call” they would not bother my client. Can you sense how that my got my blood to boil?
I then relayed that on July 11 at 11:39 am, I spoke with NationWide Credit and confirmed representation and my contact information. Fortunately, we document those calls. She read me her phone notes – which were remarkably different: their notes stated that they called me in July and I didn’t return the call. I told her that the problem was with her phone notes – and not mine. Fortunately, my client also documents her phone calls as well.
The collector then thought she could put on her tough-girl hat and out shout me. There is a segment of the populous that believes that screaming is an appopriate means of communication; if you scream, you will successfully prove your point. Obviously, this is not true. She was rude, crass, and frankly had a poor mastery of the English language (I think she said something like “I got no notes that say that”…and yes, I had fun with that too). She was out of control. I think she likes her job. I imagine that only someone with low self-esteem who enjoys yelling at people while safely behind a telephone line several states away would want her job. I imagine it helps her feel much bigger than she can ever hope to be.
This lovely collector (whose name claims to be "Terry") violated an important aspect of the Fair Debt Collection Practices Act. Title 15, Section 1692(a)(2) prohibits contacting the consumer when they know the consumer is represented by counsel.
These events came a day after a report from the Center for American Progress that the government is not doing enough to enforce the Fair Debt Collection Practices Act. Clearly, that's true. Not only has the Boston Globe’s recent series confirmed that, but the attitude of the collector at Nationwide credit also confirmed it. If they can get away with it, they will do it again and again.
I know my client has a lot on her plate, but I do hope she gives me the authority to sue. Because if the government is not doing anything to stop this unlawful conduct, the only way these collectors will learn is through lawsuits filed by attorneys like me. And unless people fight back, there will not be any real change.
The Association of Community Organizations for Reform Now is concerned about the impact rising interest rates have on homeowners. From the Houston Chronicle:
ACORN also is worried that many of those with adjustable-rate mortgages, which made up three-quarters of all subprime, or nonconventional, loans in 2005, will find themselves saddled with debt as interest rates rise.
Some people have credit cards because they rely on them, and others have them for sheer convenience. Newsweek lists out 10 things you might now know about credit cards. This one even I found a bit surprising:
One late payment can result in a significant drop in your credit score—of up to 100 points—so pay on time every time. A drop in your credit score of just 50 points can mean you pay $100 more a month in your mortgage payment.
Retired Massachusetts Bankruptcy Judge Carol Kenner appears in today's Boston Globe with this great op-ed.
We are not talking about puppies. From MSNBC and Newsweek:
Millions of Americans bought into the real estate boom with adjustable mortgages and home equity loans. Now rising interest rates are forcing them into agonizing financial choices.
In November of last year, I wrote an article highlighting what I perceived to be some of the weaknesses in court rules that are exploited by unscrupulous debt collectors, their attorneys and their agents. I also pointed out in April that in Maryland, debt collectors were indicted. Those collectors were engaging what is called "sewer service": representing to the court that a defendant had been served, when in fact they were not. The term "sewer service" is derived from the presumption that the process papers are tossed in the sewar, rather than properly given to the defendant.
Following last week's series on the debt collection system in Massachusetts in today's Globe, Warren Fitzgerald, president of the Massachusetts Bar Association had this to say:
An amendment to current small-claims rules may be required to ensure that notice requirements are meaningful. In terms of professional debt collectors, requiring them to serve personal notice on an individual who allegedly owes money may be necessary....Collection agencies and their attorneys have every right to pursue people who owe money, but they must do so lawfully. Lawyers in particular are governed by ethical rules that clearly prohibit some of the conduct described in the Globe series. If some lawyers are not obeying the rules, they should face disciplinary charges. Such behavior is an embarrassment to the overwhelming majority of lawyers in Massachusetts who are honest and ethical.
August tends to be pretty quiet. Some people are at the beach. Others are getting the kids ready to head back to school. And others, like yours truly, are meeting with clients.
Often when I meet with people for the first time, I learn that they have done everything they can to avoid meeting with me. Sure, I am told by colleagues and clients alike that I am funny, affable and an otherwise nice guy. But if my clients had a choice between seeing me – Mr. Funny Affable Nice Bankruptcy Attorney (or Mr. FANBA) - and getting a skin biopsy with less than minimal anesthetic, they’d opt for the dermatologist and would even ask for an expedited appointment.
The debt stuff can stink. It can feel overwhelming. It can eat away at you and keep you up at night. Then, with debt collectors calling, and the constant “if only I had done something differently…” thing that runs through almost everyone’s head, it only makes a painful skin biopsy seem like a day at the beach. The problem is that some people wait so long that they do things that are not particularly helpful to themselves. In some cases they even make my job more difficult. Here are my top five avoidable mistakes:
1. Refinance and roll credit card debt into one home equity loan payment. Mortgage brokers will tell you you’re saving money. Here are the facts: the real estate market is heading south. The economy is as stable as a pipeline in Alaska, and the future is far from predictable. It’s an election year. Some one is likely to claim the economy is just fine. Don’t believe it. And do not compromise the equity in your home to pay unsecured debt (such as credit cards and lines of credit) that you're now having a tough time paying (or expect to have a tough time paying in the future).
2. Shop. While an extreme example, folks who take the family to Florida the weekend before meeting with me courtesy of the good people at American Express don’t usually end up being my clients. And if they end up someone else’s, they end up in trouble. Interest rates and late fees will push you deeper in debt. Don’t make the situation worse by using credit cards for items you know you cannot afford and you know (or expect) you’ll never pay back, especially if you’re contemplating bankruptcy.
3. Clean out retirement accounts to pay off debt. In most cases, people with retirement accounts will not lose them in bankruptcy – although individual circumstances may vary. As everyone with a retirement account knows, if you take a disbursement you’ll get hit with taxes and penalties. If the disbursement is not enough to pay off the debt, you’ll be stuck with taxes, penalties and debt. Before you explore whether this is a good idea, run some numbers. Can you afford the taxes? If you cannot afford the taxes and pay off your other debt, leave your retirement account alone. Depending on the circumstances, you will not be able to include these taxes in your bankruptcy discharge.
4. Borrow money from a friend or family member. Actually, this is not a bad idea if (a) it’s enough to pay all of your debt in full; (b) your relative or friend is offering better rates and affordable payment terms than your credit card companies…or the local loan shark (I sometimes confuse the two); and (c) you cut up your credit cards and take an oath to never use credit cards while you’re paying your other debt off. Unfortunately, I meet with folks who owe money to Chase, Amex, Sears and their friends and family. Then I hear “but we’ll keep my family’s loan out of the bankruptcy.” No-can-do. All debt is included and listed. With that said: Think before you borrow. It’s one thing if American Express doesn’t want to speak with you. The holidays might not be as pleasant however if your father-in-law doesn’t want to speak to you.
5. Hide or transfer property. Don’t. Enough said there.
There are many rules in bankruptcy, but if you strictly adhere to these five before you even make that appointment to see a bankruptcy attorney, the process will be a lot less complicated and stressful. More than likely, it will be less expensive too.
Today’s Consumer Bankruptcy News, a publication for consumer bankruptcy attorneys, had the following headline story:
Get Ready for Random Audits of Debtors: Criminal Referrals will Increase as Schedules Get Scrutinzed
Effective October 20, 2006 one out of every 250 debtors will be audited. However, at a recent conference, an assistant US Trustee confirmed that audits would still be conducted in cases that met certain criteria, such as high debt amounts because the new law requires audits of anyone with unusually high income or expenses. These targeted audits will be directed to debtors whose income or expenses are higher than the “statistical norm.”
If material misstatements are identified, the US Trustee is obligated to report it to the US Attorney. While there is some case law and guidance as to what might constitute a “material misstatement”, there is no case law yet as to why might constitute a material misstatement in the context of this bankruptcy code provision. This is yet an undeveloped area of the new bankruptcy law.
Certainly, some things are easily identified as a material misstatement: concealment of assets, a false oath in a bankruptcy case, false declarations, fraudulent prepetition transfers for the purposes of placing property out of the reach of creditors, and concealment or destruction of financial records are all going to get debtors into big trouble.
While this provision was designed to target abuse, prudent consumer bankruptcy attorneys will be (if they are not already) spending a lot more time verifying the information in bankruptcy documents before they are filed with the court. Debtors hould be expecting higher legal fees.
But for cost-conscious debtors, I have a word of advice: ask the attorney your meeting with what they and their staff are doing to verify the information in bankruptcy filings to ensure that you get through a random audit unscathed. If they do not know what you’re talking about, if they tell you not to worry about it, or if they sit there and stare with a blank look on their face take that as a cue to look elsewhere. You deserve to have your bankruptcy case prepared right the first time.
Was the Boston Globe’s four part series this week was just the wake up call that elected leaders needed to seek a revamping of the debt collecting industry? In what appears to be a collective quest to do away with the wrongs cited in the reports, leaders including state attorney general and gubernatorial candidate Tom Reilly to Boston Mayor Thomas Menino are vowing to seek various changes in response to the report.
Too little, too late.
Lieutenant Governor Kerry Healey, the presumptive Republican nominee for governor, said Reilly "has failed to do enough to protect consumers in Massachusetts." But Healey also found fault with the state court system. It has been, she said in a statement, "too lax, loosening notification rules for debt collectors instead of enforcing them to protect average citizens."Deval L. Patrick, one of two Democrats vying with Reilly for the Democratic nomination, was less direct in his criticism. But he said the lack of enforcement is stark evidence that, "at both the federal and state level, the government is on the side of the big players, and not the little guy."
Harvard Professor Elizabeth Warren comments Harvard Professor Elizabeth Warren comments on the four part Globe series I have written about here:
It isn’t just the debt collection agents who get a black eye in this series; it is the government officials who are charged with the responsibility to watch out for the public and who instead made themselves the dupes of out-of-control debt collectors.Do three things: First, read the series. Second, drop an email to the Globe to tell them what you thought—this makes a huge difference on the amount of follow-up reporting. Third, post a blog here about what you thought was the most outrageous act or your view about what is happing.[sic]
I want to taste this awful stuff one more time. The people who were featured in the Globe articles deserve at least that much, and the officials who didn’t help them deserve so much more.
If Professor Warren's weblog is not in your favorites yet, it should be.
I just got through reading many of the comments posted to the Globe’s Spotlight series Debtor’s Hell.comments posted to the Globe’s Spotlight series Debtor’s Hell. They range from folks sharing their own experiences, to other more pompous remarks that the consumers profiled got what they deserved because they should not buy what they cannot afford. The latter reflects a profound lack of understanding of those things in life that push people into debt to begin with.
It’s rare that my clients have not suffered through a divorce, a job loss, a health care crisis, or in some cases, a death of the primary bread-winner. I have represented people who have had to use credit cards to put food on the table. In addition, as I have commented on here, there is a lack of financial literacy education in our schools. If parents cannot control their money, how are their children going to do it?
But more importantly, the latter comments reflect a lack of understanding of how the credit card industry engages in tactics that are not all together dissimilar from a stereotypical loan shark. Default interest rates, interest rates upwards of 20 and 30 percent, and card user agreements that are often stuffed into monthly bills along with advertisements for useless trinkets. The system is one-sided and fundamentally unfair. It is also perfectly legal.
Richard Daniels, a creditor’s attorney, made this astute observation:
''Any system that puts people's backs up against the wall doesn't work,'' he said in an interview. Daniels described the penalties and fees that credit card companies tack onto consumer bills as ''usurious'' and ''totally unconscionable,'' making it impossible for people to get out of debt. Such charges, Daniels declared, amount to ''classic abuse I wish to hell Congress would do away with.''''This used to be an honorable business,'' Daniels said, when discussing collections for credit card companies. ''Now, the guys on the other side are thieves.''
The final of the four part Globe Spotlight series, Debtor’s Hell, asks if regulators and legislators (and in some case gubernatorial candidates) unaware of the debt collection industry's free-for-all or are they simply unwilling to act.
Unwilling? Or simply uncaring?
Every person who comes before the courts in Massachusetts has the right to be treated with dignity and respect, to be accorded an opportunity to present his or her case and to have that case decided in a way that is fair, impartial, and timely. The Boston Globe’s report on debt collection in small claims sessions of the District Court focuses attention on an “industry which has swamped the court dockets with lawsuits.”
The rest is here
The third Globe installment focusing on the hell debtors go through looks at constables as well as county sheriff offices.
The office of constable is as ancient as it is obscure, governed in Massachusetts by laws that date back to the 1600s. One power of the office - never repealed - is to ''take due notice of and prosecute all violations of law respecting the observance of the Lord's day, profane swearing and gambling.''Nowadays, constables, and the deputy sheriffs who perform parallel work, busy themselves delivering subpoenas and other court papers, placing liens on real estate, and seizing personal property to satisfy court judgments - in the case of constables, judgments of no more than $2,500.
Where they differ is in accountability. Constables, for example, can legally operate only in the communities that license them. But that restriction, the Globe found, is often ignored.
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