California Bankruptcy Attorney Blog

As Rubidoux fair debt collection lawyers, we were interested to read a court opinion rejecting the idea that the Fair Credit Reporting Act preempts state consumer-protection laws. The FCRA regulates how creditors may report debts to the private credit reporting agencies, with penalties for knowingly reporting false debts or failing to correct known mistakes. By contrast, the dispute in Curtis v. Citibank, a decision of the Montana Supreme Court, alleged libel, credit libel and violations of the Montana Consumer Protection Act. Meril Curtis had a credit card stolen by a houseguest who ran up more than $7,000 in debt, and Citibank acknowledged that Curtis was not personally liable for the debt. Nonetheless, Citibank referred the debt to a collection agency for collection against Curtis. Citibank won summary judgment at the trial court with allegations that the state-law claims were preempted, but the state's highest court disagreed, finding that the collection agency was not regulated by the FCRA.

Curtis discovered the July 2008 false charges in a timely manner, and as instructed by Citibank, filed a police report and created an affidavit. Despite the fact that Curtis had followed procedures, Citibank referred the debt to a debt collector called Professional Recovery Services. Eventually, Curtis filed suit against both PRS and Citibank, alleging violations of the Fair Debt Collection Practices Act, the MCPA, libel and credit libel. Curtis settled with PRS, but Citibank moved for judgment on the pleadings (summary judgment) using the FCRA preemption argument. It also argued that it was not a debt collector subject to the FDCPA. This claim was dismissed without further appeal, but the district court also granted summary judgment to Citibank on the FCRA preemption grounds. Curtis appealed.

The Montana Supreme Court reversed the decision, finding that the FCRA does not preempt the state-law claims at issue. The FCRA does expressly preempt state laws that conflict with its requirement that reporting agencies report consumer information in a fair and equitable manner. One of those express provisions is at issue here, prohibiting states from imposing laws "relating to the responsibilities of persons who furnish information to consumer reporting agencies," when those laws conflict with the FCRA's sec. 1681s-2. That section regulates how credit-granting institutions report information to credit reporting agencies. Citibank argued that by referring the debt to PRS, it was simply reporting credit information pursuant to that section. The Montana high court ruled that this was an incomplete look at the issue. PRS is not a credit reporting agency within the meaning of the FCRA, it said; it is a collection agency that does not ultimately furnish credit information to businesses the way credit reporting agencies do. Thus, it is not regulated by the relevant section of the FDRA -- and that means there can be no federal preemption. Nor is there any federal preemption in the applicable statute, the FDCPA. Thus, it reversed the trial court and sent the lawsuit back down.

Our Lake Forest FDCPA attorneys believe the court could have said a great deal more about the cynical use of FCRA preemption in this case. Citibank never argued that Curtis owed the debt or that it did not incorrectly refer the debt; its entire argument hinged on federal preemption. Thus, it was in essence trying to use a technicality to escape responsibility for actions it implicitly acknowledged were illegal. Under the FCRA, creditors like Citibank have a duty to investigate disputed information and correct errors within 30 days of receiving a dispute. They also have a duty to report correct information in the first place. Curtis apparently never made FCRA claims, but Citibank's failure to correct its acknowledged mistake, and its incorrect referral to PRS, surely led to negative credit information for Curtis as well. Thus, it may well have been breaking the law that its was using to escape responsibility for its actions. As Buena Park unfair debt collection lawyers, we appreciate that the Montana high court gave Curtis his day in court.

Continue reading "Montana Supreme Court Rules Wrongful Collection Actions Not Preempted by FCRA - Curtis v. Citibank" »

Our Riverside County fair debt collection attorneys were interested to see a rare victory at the appeals court level for victims of fair debt collection violations. In Gonzalez v. Arrow Financial Services LLC, a class of people who had received a letter from Arrow Financial Services sued it for misrepresentations in that letter. Johnny Gonzalez and others alleged that the letters misleadingly represented that Arrow could report obsolete debts to credit agencies and implicitly threatened to make such reports. The trial court agreed and granted summary judgment on liability; after a trial, it awarded damages under both the federal Fair Debt Collection Practices Act and the California state-law version, the Rosenthal Act. The Ninth U.S. Circuit Court of Appeals ultimately affirmed both decisions.

Arrow buys written-off debts and attempts to collect them. The debts in this case are debts owed to health clubs, all of which were more than seven years old at the time of Arrow's purchase. This made the debts too old to report to a credit agency; the debt collector may still collect them, but the debtor can safely ignore this, because it may not be reported to debt collectors. However, in a group of 40,000 letters sent to Californians in 2004, Arrow wrote that it was willing to settle the debt for half price, at which time "if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled." A notice required by California law also said failure to "fulfill the terms of your credit obligations" may be reported to credit agencies. Gonzalez looked into it and realized that Arrow could not legally report any debt to credit bureaus, so he filed a putative class-action lawsuit under both the FDCPA and the Rosenthal Act. He won summary judgment on liability in district court, and a jury trial awarded a total of $500 per plaintiff in statutory damages, under both laws.

On appeal, the Ninth Circuit was unimpressed by Arrow's arguments. Both the FDCPA and the Rosenthal Act prohibit, among other things, threatening action that is not intended or cannot legally be taken. Furthermore, caselaw says the standard in FDCPA cases is that language should not be misleading even for the "least sophisticated debtor." Arrow argued that its use of the word "if" in the offending passages makes the statement literally true, but the Ninth has ruled in the past that literally true statements can still be misleading, particularly under the least sophisticated debtor standard. For such a person, the Ninth said, the statement was clearly misleading, and the promise to report a debt paid off in full was a threat because it implied a negative report if the debtor did not pay. On the Rosenthal Act claim, the Ninth found Arrow was simply wrong in arguing that the Rosenthal Act does not permit class actions; the Legislature authorized them in 1999. Finally, it held that recovery has long been possible under both the Rosenthal Act and the FDCPA, and nothing in the FDCPA suggests preemption of state laws. Thus, it upheld the trial court.

As Irvine predatory lending lawyers, we're pleased to see the Ninth Circuit set these two unambiguous precedents. By ruling that the Rosenthal Act allows class actions, the Ninth can clear up any ambiguity that the California courts have not laid to rest. By allowing parallel recoveries under both the FDCPA and the Rosenthal Act, it gave victims of predatory debt collecting more weapons. Modern consumer protection groups agree that the maximum statutory damages of the laws, both adopted in 1977, are too low at a maximum of $1,000 per debtor. Inflation has made this sum in 1977 dollars worth nearly four times the amount today. Of course, plaintiffs still must prove both laws were violated to collect from both -- but as Corona FDCPA attorneys, we prefer to have that option.

Continue reading "Ninth Circuit Affirms FDCPA Victory on Summary Judgment for Misleading Letters - Gonzalez v. Arrow Financial Services" »

Our San Bernardino County predatory lending lawyers were interested to see a recent case here in the Ninth Circuit about to what extent consumers may recover damages when credit card companies break the law. In Lyon et al. v. Chase Bank USA, N.A., Chase bank gave plaintiff Barbee Lyon incorrect information about the basis for a $645 charge on his credit card bill. The company then failed to respond to his requests for information, and ultimately incorrectly reported the debt as delinquent in violation of multiple parts of the Fair Credit Billing Act. Lyon and his wife, Joan Kruse, sued in Oregon federal court under the FCBA and Oregon's Unlawful Debt Collection Practices Act. The Oregon court dismissed the UDCPA claims and limited Lyon's damages under the FCBA to just $1000. The Ninth U.S. Circuit Court of Appeals reversed both of those decisions.

Lyon had a Chase credit card in his wallet when it was stolen in 2006; Kruse was an authorized user on that card. In discussions with Chase, Lyon said a $645 charge was legitimate, but Chase reversed it anyway and Lyon paid it with another card. However, in the confusion, Chase incorrectly credited Lyon with $645. Later, it added a $645 charge to Lyon's bill that it identified as for payment to the same original creditor (who had actually been paid with another card). Not realizing that Chase was only trying to correct its own mistake, Lyon disputed this charge under the FCBA. That law requires credit grantors to acknowledge the dispute within 30 days and respond in writing within 90 days and before collecting the disputed debt. Grantors may not report disputed debts as past due. Nonetheless, Chase failed to respond to multiple letters from Lyon within the 90 days, including a letter Lyon sent after he figured out what happened and was trying to confirm it. During this time, Chase continued to try to collect the debt, charged Lyon interest and reported it as delinquent to the credit agencies.

The couple sued under the FCBA and Oregon's UDCPA, the state version of the federal Fair Debt Collection Practices Act. The trial court found that while the facts supported the UDCPA claim, the language of the complaint did not state a claim. It dismissed the FCBA complaint as to Kruse but moved toward trial as to Lyon. However, in pre-trial motions, the court permitted Chase to limit evidence of multiple FCBA violations, after it argued that Lyon could only collect statutory damages once; and held that Lyon had to prove actual reliance on Chase's statements to collect actual damages. As Chase had never made any statements, this killed Lyon's case for actual damages. It awarded $1000 in statutory damages and attorney fees, but quashed the attorney fees award when the bills did not separate work specifically enough. Lyon and Kruse appealed the UDCPA claim and the FCBA rulings.

On the UDCPA claim, the Ninth Circuit drilled to the heart of the matter by noting that the UDCPA prohibits debt collectors from attempting to collect a debt with no right to do so. This claim was predicated on Chase's acknowledged violations of the FCBA -- failing to respond in writing to Lyon's dispute and still attempting to collect the debt. Relying on Oregon caselaw, the Ninth found that this was enough to state a claim under the UDCPA. The trial court was wrong to find that Lyon was disputing that he owed money; indeed, one of his later letters said he believed he did. The appeals court then moved on to the FBCA claims. Chase acknowledges that it violated the law, but the trial court found that Lyon had to prove actual reliance on Chase's statements in order to collect actual damages. The Ninth Circuit disagreed, saying the court was incorrectly applying Truth in Lending Act precedent to a FCBA case. If this interpretation were to stand, the court noted, FCBA cases would never exist because banks could simply refuse to respond to disputes -- exactly what the FCBA was designed to prevent. For similar reasons, the Ninth declined to apply TILA's limitation on one statutory damages award for multiple violations of the law to the multiple FCBA violations here. Finally, the Ninth found that because it reversed the trial court's findings on the merits, Lyon was entitled to additional attorney fees. Thus, it reversed and remanded all of the claims raised on appeal.

As Fullerton predatory lending attorneys, we're pleased to see that the Ninth Circuit appreciates the importance of the FCBA. If the court had ruled the way Chase suggested, it would have allowed credit card companies to simply ignore the law without consequences. Or, as the court put it, they would "find that silence is truly golden." There is already such a large imbalance between the power and information available to consumers and that available to large credit card companies that the deck is stacked against consumers. That's part of why laws like the FCBA, TILA, FDCPA and other consumer protection laws exist. Our Gardena predatory lending lawyers represent people across California who are alleging violations of these laws by lenders, including mortgage lenders as well as credit card companies.

Continue reading "Ninth Circuit Resurrects Unfair Credit Card Billing Case Under Fair Credit Billing Act - Lyon v. Chase Bank" »

Our Riverside County personal bankruptcy attorneys were interested to read a ruling reminding bankruptcy filers that there's no substitute for following the correct procedures. In Barrientos v. Wells Fargo Bank, the Ninth U.S. Circuit Court of Appeals ruled that Adolfo Barrientos must make his motion against Wells Fargo as a motion for contempt, no matter how strongly the facts back him up. Barrientos had filed for Chapter 7 bankruptcy and already received a discharge, but he says Wells Fargo continued to report his discharged debt of $80,831 to credit agencies. Barrientos brought an adversary proceeding in U.S. Bankruptcy Court for the Southern District of California, but that court dismissed the proceeding, saying there is no private right of action to sue for a violation of the discharge. The district court upheld the bankruptcy court's action, and so did the Ninth Circuit.

Barrientos contacted one or more credit rating agencies to dispute the debt owed to Wells Fargo, which should have been discharged with his bankruptcy. Nonetheless, he alleges, Wells Fargo continued to report it as a debt, harming his credit. His 2007 adversary complaint included requests for an injunction stopping Wells Fargo from reporting the debt; fines; declaratory relief; and attorney fees. Wells Fargo moved to dismiss, relying on a 2002 case in which it was involved, Walls v. Wells Fargo Bank, which found no private right to action for violations of a bankruptcy discharge. This motion was granted, and Barrientos appealed it up to the Ninth Circuit.

On appeal, the Ninth noted that while bankruptcy judges expressly have the power to hold litigants in contempt of court, this does not create a private right of action. It ruled in Walls that finding a private right of action for violations of the discharge could take power to enforce court orders away from the court that issued those orders, which would undermine the goal of having a separate bankruptcy court. Barrientos argued that this did not necessarily make adversary proceedings unavailable, but the Ninth disagree. It also said that regardless of Wall, Bankruptcy Rule 7001 expressly defines what an "adversary proceeding" is -- and contempt orders are not among the definitions. The court rejected arguments from Barrientos that it could read into the law an authorization for contempt proceedings that specifically seek to enforce injunctions. In fact, it said, Bankruptcy Rule 9020 expressly says the opposite. Thus, the Ninth Circuit upheld the lower courts' decisions.

As Redlands individual bankruptcy lawyers, we would like to point out that this decision does not deny Barrientos a chance to stop Wells Fargo from violating his bankruptcy discharge. Rather, it requires him to make a motion within the bankruptcy case. This may be less preferable than pursuing a separate adversary motion, but at least relief is available. This is vital, because clearing debt off your record is, of course, the primary purpose of bankruptcy. The failure by Wells Fargo to do this is certainly grounds for contempt of court and a court order to fix the problem. However, as this case shows, debtors must pursue these penalties through the right channels, or face a lot of unnecessary extra expense and time. One goal for our Los Angeles consumer bankruptcy attorneys is to help our clients get through the bankruptcy without problems but quickly, so they can start the hard but rewarding work of rebuilding their finances.

Continue reading "Debtor Must Move for Contempt of Bankruptcy Court, Not Bring Adversary Proceeding - Barrientos v. Wells Fargo Bank" »

New regulations on for-profit debt settlement companies seemed like a welcome change to our Colton consumer bankruptcy attorneys, when they took effect in October. So we were disappointed by a Dec. 21 article from CNNMoney.com, saying many of those companies have been accused of breaking or skirting those regulations. Nonprofit debt counselors, who are not covered by the new rules, wrote a letter to the Federal Trade Commission earlier this month, asking it to look into practices that seem to be attempts to find loopholes in the law, or even outright ignore it. Some are also hiring attorneys in an effort to pose as law firms, which would make them exempt from the new regulations. This is concerning because some debt settlement companies take advantage of desperate people by taking their money up front and delivering nothing.

The rules that took effect in October apply to companies that advertise their services through the telephone. They ban debt settlement companies from taking money before delivering any services. Instead, they must show agreements with creditors disclosing how much debt they can reduce. Only after the consumer agrees can the companies charge a fee. To escape the telemarketing aspect of the rules, some companies have switched to soliciting via text message or online, or setting up in-person meetings. Another way they try to create loopholes is by claiming to be law firms, or actually hiring attorneys, and calling their fees a "retainer" rather than fees. A presentation from an industry group of for-profit debt settlement firms also suggested that relocating overseas could help them escape the rules. A spokesperson for that group said the presentation was merely explaining the law, not suggesting a way for members to avoid it.

We doubt that. As Stanton personal bankruptcy lawyers, we strongly support the ban on up-front fees for the same reason we supported California's ban on up-front fees for loan modification companies. In both cases, there's a strong component in the industry of shady companies that are willing to take money from desperate people and then simply disappear, without providing actual services. In fact, we think the loopholes these companies have found are good examples of how they can be shady. Texting the customer rather than calling may technically not be telemarketing, but it's still clearly within the spirit of the law. And misleading people into believing they are represented by an attorney when they are not is actually a crime. In fact, the article mentions a successful lawsuit by North Carolina's attorney general against a Florida company posing as a law firm.

Continue reading "Consumer Advocates Ask FTC to Police Debt Settlement Firms That Break the Law" »

People who declare bankruptcy do it because they're deep in debt -- usually so deep that they can't make a realistic plan to pay it back. In the experience of our Sun City personal bankruptcy attorneys, this kind of debt is almost always accompanied by nonstop phone calls and letters from creditors. Especially these days, with the bad economy bringing down how much they can recover, creditors often use harassment, threats or lies to pressure people into paying. Many of these tactics are illegal, and people very deep in debt might add that they are also a waste of time. If you're not indebted enough to consider a bankruptcy, we can help you pursue a Fair Debt Collection Practices Act lawsuit against an illegal debt collector. But if you are considering bankruptcy, you should know that legally, creditors are required to stop all contact as soon as you file.

When you file for bankruptcy -- for most individuals and couples, either Chapter 7 or Chapter 13 bankruptcy -- it triggers something called an "automatic stay." This is a court order forbidding creditors from contacting you, repossessing or foreclosing on property, garnishing your wages or suing you. It applies to every debt you owe, as long as the property in question is part of the bankruptcy estate. For most people, it stays in effect as long as the bankruptcy is active, although creditors can petition to have the stay released. If a creditor gets notification of the bankruptcy and continues to bother you, you may sue that creditor for all actual financial damages the harassment causes, as well as punitive damages when appropriate. In addition, any lawsuit or other legal action creditors take against you during the stay is legally void.

The automatic stay is a welcome relief for many of our clients. After months of nonstop phone calls from unpleasant people, the silence alone is nice. In addition, the automatic stay gives clients relief from the stress of immediate repossessions or utility turn-offs, as well as allowing them to help us put together the bankruptcy filing. And of course, the automatic stay gives our Aliso Viejo consumer bankruptcy lawyers a chance to sue any creditor that violates it, sometimes recovering much-needed money for the clients. However, potential bankruptcy filers should realize that they cannot walk into an attorney's office in the morning and have an automatic stay by the end of the day. The 2005 changes to the bankruptcy law require all consumer bankruptcy filers to show they completed a 60- to 90-minute credit counseling session before they file. And creditors can't be sued for violations that take place before they know about the bankruptcy, which is why we take it upon ourselves to notify our clients' creditors right away.

Continue reading "How Filing for Bankruptcy Can Stop Harassing Phone Calls From Creditors" »

The Los Angeles Times article (see below) wasn't the only time Howard Law PC has been quoted in the press on financial and consumer protection issues. In fact, it was the second time within a week! Just last Friday, Oct. 22, CNET.com ran an article about the use of debt collectors to fight online piracy of music, movies and other intellectual property: Debt collectors may join antipiracy fight. This is a new tactic for the record and movie industries, which had previously come under fire for suing individual users who were caught sharing files. When those users refused to settle out of court, the industries typically sued them for more money, resulting in large judgments against people who simply could not afford to pay.

Now, the article says, the industries are skipping the lawsuits and cutting straight to debt collection, something that may be illegal. As our partner, Vincent Howard, explained to CNET, the Fair Debt Collection Practices Act and state laws strictly limit how debt collectors can do business. Attempting to collect on a debt before a lawsuit and legal judgment would be illegal -- because it would be attempting to collect on a debt that does not exist. Here's what he said:

The law is very specific about when and how lenders can collect a debt, said Vincent Howard, managing partner of the Anaheim, Calif., law firm Howard Law. His firm represents clients in cases of predatory lending and violations of the Fair Debt Collections Practice Act, the law designed to eliminate abusive practices in the collection of consumer debts. He questioned the language of the CEG contract.

"It seems to me that sending in debt collectors there is premature because it assumes you have the judgment against the alleged defendant," Howard said. "But you have to prove your case in court first. These people may not have committed any violation. What would happen if this person pays and then after trial isn't found liable?"

Unfortunately, debt collectors aren't pleasant to work with even when the debt is legitimate. Because they know it scares some people into paying, collection agencies are well known for using harassment, vulgar language, threats, calls to inappropriate people or at inappropriate times and more to get money. Even when the victims can show that the debt truly is not owed, many don't believe this and continue the harassment over the long term.

Continue reading "Article on unfair debt collection quotes Howard Law partner" »

A recent article about a California collection agency in legal trouble caught the attention of our Fontana unfair debt collection lawyers. The Ventura County Star reported Sept. 12 that Forensic Case Management Services Inc., which has been headquartered in several Ventura County cities, has lost its license to collect debts in Minnesota. It is also facing $35,000 in fines and fees in that state, which alleges that the business has lied to and misled consumers in order to collect debts. The business, owned by David M. Hynes, has changed its name and location several times, the article said, and is currently known as Rumson, Bolling & Associates of Van Nuys. The legal action in Minnesota does not affect the company's ability to do business in California because our state does not regulate debt collectors.

Minnesota accuses the Hynes business of making false and misleading statements to consumers and threatening legal action in order to collect debts. When asked to comment on those accusations, the company responded through its attorney, who said it is the victim of a "long sustained Internet defamation campaign perpetrated by a handful of disgruntled individuals." Nonetheless, the Star reported, the company has been the subject of hundreds of complaints to the Better Business Bureau of Ventura, Santa Barbara and San Luis Obispo Counties. A spokesman for the BBB said the complaints tend to be the same even when the name of the business has changed. The Hynes companies have also been sued dozens of time, the newspaper noted, including six federal lawsuits in the last 11 months. Five of those lawsuits were based on the Fair Debt Collection Practices Act, the newspaper said, but a sixth was filed by a client that said the company never made the collections it was hired to make.

As Garden Grove debt collection harassment attorneys, we see plenty of stories about debt collectors that are sued by consumers, but not about lawsuits by clients. We suspect this shows that the state of Minnesota was correct to identify this business as dishonest. Unfortunately, in our experience, dishonest collection agencies are not at all unusual. Clients with Fair Debt Collection Practices Act claims come to us with stories about being lied to, harassed, threatened and more. All of these practices are outlawed by the FDCPA and its California cousin, the Rosenthal FDCPA, because they unfairly prey on consumers' fear and frequently, their ignorance of their rights. However, for the exact same reasons, these tactics work on most people -- which is why debt collectors continue to use them. In essence, they rely on consumers to remain too ignorant and scared to question a collection effort, even when they do not owe the money in question.

Continue reading "Ventura County Debt Collector Loses Minnesota License After Reports of Law-Breaking" »

Our Rancho Cucamonga fair debt collection attorneys frequently write about the borderline illegal tactics debt collectors use to extract money from people, including people who do not owe that money. So we were very interested to see a recent interview with the author of an exposé about the debt collection industry. WalletPop ran an interview Sept. 7 with Fred Williams, a business journalist who left his job temporarily to take a job as a debt collector with an unnamed Buffalo, N.Y. company he describes as mainstream and well known. The result was a book on debt collectors' tactics and consumers' rights, in which he discusses some of the unprofessional and outright illegal behavior he observed in that job. He also goes into detail with advice for consumers looking to protect and enforce their legal rights.

In the interview, Williams says trainee debt collectors at his firm were not instructed on what was legal and what was not. This was not a result of negligence, he said, but an intentional choice intended to give the company plausible deniability if a trainee violated the law. If the company got into trouble, he said, it could always say the employee made a mistake because he or she was just a trainee. These trainees were a substantial portion of the entire workforce, he added. After an initial classroom training, he said, all training was done by shadowing existing employees. It was not uncommon for those employees to use illegal tactics like threats or implying they were law enforcement officers, he said, but there was no official policy with such tactics. Similarly, Williams said, trainers emphasized that the debt collectors' notes were the only official documentation of their calls, implying but not outright stating that they would not be caught if they lied.

As Moreno Valley debt collection abuse lawyers, we are not at all surprised to hear about this. Debt collection agencies frequently claim that bad collectors who are caught are outliers, and that complainers just want to avoid paying what they owe. That may be true, but it by no means exonerates the debt collection industry for quietly encouraging behaviors that violate the law and consumers' rights. The Fair Debt Collection Practices Act, the federal law that regulates debt collectors' behavior, exists precisely because debt collectors have discovered that they have better luck when they threaten, lie to and intimidate their victims. Those practices are allowed to go on today because they make money for the collection agency -- and because consumers do not realize they have the right to sue to stop them.

Continue reading "New Book Exposes Illegal and Borderline Illegal Practices Used by Debt Collectors" »

As Rialto unfair debt collection lawyers, we were pleased to see a consumer-friendly ruling from a federal appeals court saying that the Fair Debt Collection Practices Act applies to some communications by loan servicers. The decision in Gburek v. Litton Loan Servicing LP (PDF) came from the Seventh U.S. Circuit Court of Appeals, which hears appeals of lower court rulings in the Midwest. Camille Gburek sued her mortgage servicer, Litton Loan Servicing, for hiring a third party, Titanium Solutions, to communicate with her about her mortgage debt. She alleged that Litton violated the FDCPA by telling Titanium about her debt; by contacting her despite knowing she was represented by an attorney; and by using deceptive means (hiring Titanium) to obtain her personal information.

Gburek, a northern Illinois resident, was in default on her mortgage when Litton contacted her to discuss it. This initial letter asked her for a variety of financial information and invited her to contact the company to discuss alternatives to foreclosure. The bottom of that letter contained a standard disclaimer that the letter was an attempt to collect on a debt and that Litton was a debt collector. A few days later, Gburek received a letter from Titanium, a company that facilitates communications between homeowners in default and loan servicers. That letter also asked Gburek to send a lot of financial information to Litton, but it contained language specifically saying Titanium is not a debt collector and cannot accept payments.

Gburek sued. In trial court, Litton moved to dismiss the case, saying the two letters were not covered by the FDCPA because they were not sent "in connection with the collection of any debt" as the law requires. The trial court granted that motion, saying the FDCPA did not apply because the letters did not explicitly demand payment of a debt. Gburek appealed.

On appeal, the Seventh Circuit disagreed. The issue was whether the letters to Gburek were made in connection with the collection of her debts. There's no hard and fast rule for testing this, the court wrote, but past Seventh Circuit cases showed that a demand for payment is not necessary for a communication to be considered an attempt to collect a debt. Other factors to consider include the relationship between the parties and the purpose and context of the communication. Applying these, the court found that both Litton's letter and Titanium's were communications from debt collectors, as were the communications between the two companies. In all three cases, content and context make it clear that the communications were attempts to further debt collection. In this case, the court noted, Gburek was seeking only to survive a motion to dismiss, which is a relatively low bar. The decision does not make a judgment on the underlying FDCPA claims.

As Chino abusive debt collection attorneys, we appreciate the court's ruling on this matter. Although the case does not directly affect our clients here in California, because we fall under a different federal appeals court's jurisdiction, it does set a precedent that our own courts may look to if the issue comes up here. Unfortunately, that is a distinct possibility in California, where unemployment and real estate prices have conspired to keep mortgage defaults high. Illegal debt collection attempts are not uncommon in better times, but with the economic downturn, they have also been increasing. As a result, we would be disappointed but not surprised to see aggressive, illegal debt collection tactics in the mortgage arena as well. This ruling helps show that these tactics are just as illegal from loan servicers as they are from conventional collection agencies.

Continue reading "Federal Appeals Court Rules Fair Debt Collection Practices Act Covers Mortgage Letter" »

As San Bernardino unfair debt collection attorneys, we were pleased to see an article highlighting the problem of debt collectors adding false information to victims' credit reports. On Aug. 8, the Washington Post reported that the practice, nicknamed "debt tagging," has become increasingly common as the economy has worsened and made it hard for people to pay their debts. Rather than go after people who genuinely owe debts, however, the newspaper said "debt taggers" go after people who happen to have the same name or same phone number, even though this is illegal under the Fair Debt Collection Practices Act and Fair Credit Reporting Act, as well as numerous state laws. To fix the problem and stop the harassment, consumers must spend hours on the phone or even sue the debt collector. The Federal Trade Commission, which enforces federal debt collection laws, also recently won a $1 million judgment against a collection agency called Credit Bureau Collection Services for "debt tagging."

The article starts with the story of Michael L. Hughes, who ignored months of phone calls that he thought were a scam until he took the trouble to listen to one. Then, he discovered that they were actually collection calls -- to collect on a debt owed by Michael B. Hughes, a different person. The credit report for Michael L. Hughes incorrectly showed the debt belonging to Michael B. Hughes, but the debt collectors didn't care -- they just wanted money. It wasn't until Hughes hired an identity theft repair company that he cleared his credit report. Another victim of mistaken identity sued the debt collector harassing him, only to have the harassment start up by a different collection agency. The original creditor has responsibility for making sure the information on the debt is accurate, the article noted, but as debts are sold and re-sold, information decreases or gets confused.

Our Garden Grove debt collection harassment lawyers believe that's true, but we would add that debt collectors don't really care whether the information is accurate or not. Like all businesses, they are in business to make money, and some of them have found that it's just as lucrative to harass the wrong people as it is to harass the right people. They can do this because very few Americans understand their legal rights well. We all have the right under the FDCPA to challenge debt collectors to prove that the debt is valid, but many people don't realize this, or choose not to try because they believe it's hopeless. In fact, if you can prove the debt is not yours, you can stop the harassment -- or, if the debt collector won't stop calling, take them to court. You can also take collection agencies to court for a variety of other legal violations, including harassment, threats, profanity and providing information on the debt to the wrong people.

Continue reading "Washington Post Reports on Inaccurate Credit Reporting by Debt Collectors" »

Our Yucaipa unfair debt collection lawyers were interested to note a legal settlement involving a collection agency accused of illegal, anti-consumer practices. The Buffalo News reported July 28 about a settlement reached between the state of New York and a company in the area, Lewis Hastie Receivables of Hamburg, N.Y. State Attorney General Andrew Cuomo had accused LHR of violating the Fair Debt Collection Practices Act and a similar New York state law with harassment and intimidation that included multiple phone calls at work as well as failure to investigate disputed debts. The company will pay $125,000 in penalties and costs and has agreed to reform its business practices.

According to Cuomo's office, LHR was accused of making multiple phone calls in the same day to some victims, including calls to victims' workplaces made after they were told that the employer does not allow this type of call. It also allegedly tried to recover debts from several people who did not owe any debt, and in one instance, three times the cost of the original debt. One woman in Oswego received 16 calls in a day about her husband's 10-year-old debt. The debt collector told her, incorrectly and illegally, that if she refused to pay, she would be arrested, her wages would be garnished, her car would be repossessed and a lien would be placed on her home. Another victim was an Iraq war veteran who was deployed overseas when the contract was signed for the debt at issue. He provided proof, but the calls kept coming.

The article notes that Cuomo's office has made abuses by debt collectors in New York state a priority, and our Pomona debt collection harassment attorneys are glad to hear it. The abuses listed in the article are flagrant violations of the laws -- multiple violations in cases like the Oswego woman's -- but a certain kind of collection agency routinely breaks those laws because it believes breaking the law works. All too often, they're right -- these illegal tactics scare consumers into believing they must pay up now. Before they have time to think about whether and what they might truly owe, they have sent checks or authorized the crooked debt collector to pull money from their accounts. This is easy money for the debt collector, but it is an illegal and exploitive practice victimizing consumers who may not understand their rights.

Continue reading "Buffalo-Area Company Settles Debt Collection Violations Case With State Prosecutors" »

As Corona debt collector harassment attorneys, we were interested but not surprised to read an article about a Florida man who sued after repeated legal violations by debt collectors. Hernando Today reported July 21 on a lawsuit by Anthony Zoda of central Florida, who sued Hudson Valley Collection Agency after a series of actions he alleges violated the Fair Debt Collection Practices Act and Florida's Consumer Protection Practices Act. Zoda does not dispute the debt he owed, which was a car loan for a Range Rover, on whose payments he later fell behind. But he was surprised by the lengths to which the collection agency went, including calling about once an hour over a 36-hour period and contacting family members in other states.

Zoda got behind on payments after his work truck needed repairs and other financial problems. He was still hoping to work something out with the bank that had the loan, Wachovia, when he got a call informing him that the debt had been sold to Hudson Valley. Over the next weeks, he says he logged about three dozen calls in a 36-hour period, including calls very late at night. When she reached Zoda, she told him he would be arrested for stealing the Range Rover if he didn't pay -- a legal impossibility. During one call, the debt collector told Zoda that she had seen lists of his friends and family through his MySpace page. Shortly afterward, Zoda got calls from his mother, his stepfather and two friends saying the collection agency had called to repeat the false threat of arrest. He also said the caller badmouthed his mother for failing to lend Zoda the money to repay the debt. The Range Rover was eventually repossessed, but Zoda is now suing Hudson Valley in Orlando federal court for $1,500 in damages.

The article didn't specifically note this, but our Cypress unfair debt collection lawyers counted three to four violations of the Fair Debt Collection Practices Act described in the article, in addition to any violations of the Florida statute. It is illegal for debt collectors to call after 9 p.m., your time; to threaten legally impossible actions; to call repeatedly or continuously; and to contact anyone other than the debtor, any spouse or any attorney. Unfortunately, this is not unusual -- debt collectors routinely break these and other parts of the law, because they know it works. They have also gotten especially aggressive recently thanks to the bad economy, which makes it harder than usual for many people to make ends meet and have enough left over to pay debts. As a result, the FTC recently reported a 50% increase in complaints about debt collectors between 2008 and 2009.

Continue reading "Florida Man Sues Debt Collectors for Harassment, Calls to Family and False Threats" »

As Chino unfair debt collection attorneys, we were pleased to see a recent New York Times article about an anti-consumer practice by collection agencies. The July 13 article said courts around the U.S. are seeing a marked increase in debt collection lawsuits. In a bad economy, this may not be so surprising. But according to the article, many debt collection law firms are filing those lawsuits almost automatically, using software that sends letters, summonses and other notices without the need for a human being to pay close attention. As a result, one New York firm files about 5,700 cases per lawyer every year. Critics believe this allows cases to be filed incorrectly, resulting in unjust judgments that legally compel people to pay debts they don't owe.

Debt collection lawsuits are always likely to go up in a bad economy, one collection attorney noted in the article, because more people aren't able to pay their bills. But judges, legislators and the Federal Trade Commission have complained about the high volume of cases, particularly of cases that are cannot be substantiated if the defendant challenges them. The FTC called the legal system for collecting debts "broken" the day before the article, and North Carolina passed a law last fall requiring extra documentation for a debt collection suit. In New York, some courts are demanding this on a case-by-case basis, whenever debtors challenge the claim. One judge in the article dismissed a case brought by the 5,700-case-per-lawyer firm, after its attorney could not prove it was suing the right person. That firm has also been sued for trying to collect a debt that has already been paid.

The trouble, as the article notes, is that most people who are sued by debt collectors don't show up to court. In some cases, the collection agency intentionally evades legal requirements for notifying the defendant. But in many others, the defendant does not show up because he or she believes the case is hopeless or already decided. As Fullerton abusive debt collection lawyers, we strongly advise readers not to do this. If you don't show up for a lawsuit, the debt collector wins by default -- and it's rare to get another chance to defend yourself. Even if it's a debt you don't really owe, you will likely have your wages or property garnished to pay it. You can sue debt collectors for attempting to collect on an illegal debt or collecting in an illegal way, but the chances are good that you will face a lot of financial strain and personal stress before succeeding.

Continue reading "Courts See Flood of Debt Collection Lawsuits Prepared Automatically by Software" »

As Redlands unfair debt collection attorneys, we were disappointed to see a recent article about debt collector harassment of a woman whose credit card was stolen. The Home News Tribune of East Brunswick, N.J. ran an article July 6 about Linda Wright of South River, N.J., who was held responsible for $15,000 in debt on a credit card that her adult children stole. Despite a police report and a probation sentence for the perpetrators, Bank of America told Wright that she was being held responsible for the charges, then turned the debt over to a debt collector when she couldn't pay. Only a call from a reporter convinced the debt collector and the bank to take a second look at the situation, the article said.

Wright, 54, left her credit card in a dresser drawer when she moved away from home temporarily to care for a sick uncle. She left her daughter, 28-year-old Lisa Wright, to pay the bills -- not using the credit card. Instead, the article said, Lisa Wright and her brother, 31-year-old Isaac Wright, ran up $13,000 in debt for food, cab rides, cash withdrawals, cell phone bills and entertainment. Meanwhile, the elder Wright was away from home and knew nothing about it until she received a phone call at work from Bank of America. Wright had to call the police on her children, who were eventually convicted of fraud and put on probation. But despite the fact that she explained the situation many times, Wright says, Bank of America rejected the fraud claim, saying she "provided access to [her] account and/or account information" to her children.

Wright says the bank placed 200 to 300 phone calls at the flower shop where she works over a period of about four months, then turned the debt over to a debt collector working with a Nebraska law firm. Wright says she called that law firm, but it didn't help. In fact, she says, the law firm ignored her request that it not call her at work, a violation of the Fair Debt Collection Practices Act. She eventually quit the job, in part because of the phone calls, and says her credit was ruined. It wasn't until a late June phone call from the Home News Tribune that the debt collector agreed to drop its pursuit of Wright. The same afternoon that the newspaper called, Wright called the debt collector and was told that her account would be "zeroed out"; Bank of America later confirmed this.

Our Riverside County debt collection harassment attorneys are glad Wright's situation has been cleared up, but we're disturbed that it took a phone call from a reporter -- with an implicit threat of negative publicity -- to achieve that. A police report saying that a credit card has been stolen is one of the clearest ways to prove that the cardholder has been defrauded. That the victim happens to be the perpetrators' mother does not mean the police report is lying; it means this woman's trust has been violated by her own children. Ruining her credit and making her legally responsible for the fraud injures her yet again, and it's difficult to think of any motive other than profit. In addition, the article suggests that the debt collector violated at least one provision of the Fair Debt Collection Practices Act with the repeated calls to Wright's workplace. As the article notes, it's difficult to pursue a FDCPA lawsuit -- but it's one of the few ways to enforce your legal rights when you don't have a government agency or a newspaper on your side.

Continue reading "Debt Collectors Harass New Jersey Woman About Debt From Stolen Credit Card" »