Tag Archives: debt collectors

Lawmakers to Question Executive of New Jersey’s Controversial Student Loan Agency

A ProPublica and New York Times investigation has prompted a state Senate hearing on aggressive collection practices by the state loan program.

The New Jersey State Senate has announced it will hold a hearing to examine the state’s student loan agency, which administers the largest state-based loan program in the country and one that employs aggressive and unforgiving collection practices.

A ProPublica and New York Times investigation has shown that New Jersey’s loan program charges higher interest rates than similar federal programs, and that its officials, armed with the power of the state, have garnished wages, rescinded tax refunds, and even sought repayment from families whose children have died. The state’s student loans now total $1.9 billion.

The hearing, set for Aug. 8, will be led by New Jersey state Sen. Robert Gordon, chairman of the Legislative Oversight Committee, and New Jersey state Sen. Sandra Cunningham, chairwoman of the Higher Education Committee.

“We need to be sure we are properly advising prospective borrowers and not aggressively targeting students and families that are having financial difficulties,” Gordon said in an emailed release. “The state should be supporting students and young workers in particular, not putting up additional barriers to their future success.”

Read on.

Debt Collectors’ Harassment Tactics Are Put On Notice For First Time In 40 Years

Debt collectors, either in-house or third-party entities in the business of trying to get people to pay up debts that they owe for things like student loans or medical bills, have become notorious for their often harassing tactics. Consumers have complained of debt collectors calling them endlessly while threatening violence, lying, and using profane language in trying to cajole them into paying, sometimes for debts they don’t even owe.

But on Thursday, the Consumer Financial Protection Bureau (CFPB), the watchdog created by the Dodd-Frank financial reform act, released new proposed rules to rein in the industry, the first time a federal regulator is cracking down on the industry in nearly four decades. It wants to limit how many times a collector can contact a consumer, require them to have better information about the debts they try to collect, and make it easier for consumers to fight debts they say they don’t actually owe.

Congress passed a law in 1977 that was meant to get rid of abusive debt collection practices by imposing restrictions on their activities as well as disclosure requirements. But until the CFPB came along, there was no federal agency that could issue regulations to make sure that the law was being implemented.

In that time, the industry has grown such that a huge share of Americans are touched by it. As of 2014, about 77 million Americans, or about a third of people with a credit file, had a debt that was in collection. The CFPB found in a recent study that about a third of all consumers had been contacted by a collector in the last year.

Read on.

Can a Debt Collector Restart the Clock on My Old Debt?

You have a very pleasant phone call with a debt collector. The person begs you to send in a just a small sum, say $10, to settle the payment and promises to never bother you again. Suddenly, you get a new bill with the date of the collection account reset to the current date. Is it legal?

Yes, most likely.

“You send in that $10, and that starts the statute of limitations all over again,” said Margot Saunders, counsel at the National Consumer Law Center. “Their promise is not enforceable.”

The statute of limitations on debt — how long a collector can sue you over a debt — varies by state. But that ticking clock can reset from the moment you pay part of it, or even if you say the wrong thing over the phone.

In some states, if debt collector calls the consumer and asks, “Do you admit that you owe this debt and you’re just refusing to pay it?” and the consumer says “Yes, I can’t pay it, but I agree I owe it.” That can count as a reaffirmation of the debt, which in some states restarts the statute all over again.

What should a consumer say?

“‘I don’t agree I owe it,'” said Saunders. “There’s no reason to ever have a friendly conversation with a debt collector. You don’t need to be rude, but you also don’t need to give them any information, whatsoever.”

One of our readers commenting on our site may have been caught in such a technicality:

I have a collection on an account from 2010. It has been dated at 2015 by the debt collection company. This is illegal or re-aging, isn’t it? What can I do? I live in Alabama and 6 years is the max from original date of the contract.

Read on.

In Bill, Lawmakers Propose New Limits for Seizing Workers’ Pay Over Old Debts

For the first time in nearly 50 years, a new federal bill seeks to lower how much lenders and collectors can seize from debtors through the courts, revisiting caps set in 1968 by the landmark Consumer Credit Protection Act.

The Wage and Garnishment Equity (WAGE) Act of 2016, sponsored by Rep. Elijah Cummings, D-Md., and Sen. Jeff Merkley, D-Ore., would substantially reform protections for debtors by exempting many lower-income workers from garnishment and reducing what collectors can take from the paychecks and bank accounts of others.

As ProPublica has reported in a series of articles over the past three years, consumer debts such as medical or credit card bills result in millions of garnishments every year. But the scale of the seizures and their consequences for the poor have largely been ignored by lawmakers, in part because no one tracks how often they happen.

In their press release announcing the legislation, Cummings and Merkley cited ProPublica and NPR’s reporting that 4 million workers had wages taken for consumer debts in 2013. The garnishments hit low-income workers most frequently: Nearly 5 percent of those earning between $25,000 and $40,000 per year had a portion of their wages diverted to pay down consumer debts in 2013.

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So Sue Them: What We’ve Learned About the Debt Collection Lawsuit Machine

ProPublica spent years gathering data to shed light on how debt collectors use the courts. Today, we run through the most important lessons we learned about a tactic that affects millions.

Millions of Americans live with the possibility that, at any moment, their wages or the cash in their bank accounts could be seized over an old debt. It’s an easily ignored part of America’s financial system, in part due to a common attitude that people who don’t pay their debts deserve what’s coming to them.

A couple of years ago, we set out to find out more about the growing use of the courts to collect consumer debts. How many lawsuits are filed? Who is filing them? Who is getting sued?

The suits are filed in state and local courts, and many states rely on antiquated systems or only keep data at the county level. We ultimately collected what details we could from a variety of states and large, urban counties. Then, we wrote a series of stories sharing what we found:

But there’s a lot more to understand about the rise of this legal tactic — one that continues to alarm judges who see it firsthand.

Read on.

Debt collection practices received the most complaints not mortgages in March

The Consumer Financial Protections Bureau’s monthly consumer complaint report listed debt collection as receiving the most complaints from consumers in March, instead of mortgages.

This is the first time mortgages have not been No. 1 since the Bureau began accepting complaints in July 2011.

These numbers, however, are national, and some state still claim mortgages as the top complaint. In Florida, for example, it is the most complained about product, and produces about 30% of total complaints, according to the report.

For some, this is not surprising, as Florida is a judicial foreclosure state. Foreclosure processes take longer and even slow the market down in its recovery process in states that require judicial foreclosures, according to Pro Teck.

March’s trends show that the most common debt collection claim is collectors attempting to collect on debt that the consumer does not believe they owe, according to the report. As of March 1 2016, the bureau has handled 834,400 complaints across all products. Of those, about 219,200 have been debt collection complaints.

“Today’s report shows that inaccurate information about debts continues to be a source of frustration for many consumers,” said CFPB Director Richard Cordray. “We will continue to hold debt collectors accountable for ensuring that they are collecting the right amount from the right person.”

Read on.

CFPB orders Citibank to pay customers over debt and collections practices

The Consumer Financial Protection Bureau said on Tuesday it ordered Citibank to pay $5 million (£3.5 million) back to customers and $3 million in penalties over its debt sales and collection practices.

In a statement, the agency said it took action against the financial services company for selling credit card debt with inflated interest rates and for not forwarding consumer payments promptly to debt buyers.

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Debt Collection Foul Play: CFPB Sanctions Practice Reminiscent of Robo-Signing

Credit card and student loan debt-collector Frederick J. Hanna & Associates settled charges last month with the Consumer Financial Protection Bureau (CFPB) over allegations that it used illegal debt collection practices on a variety of consumer loans. Hanna agreed to pay $3.1 million stemming from a CFPB investigation that led to a lawsuit filed last July in U.S. District Court in Atlanta.

The CFPB charged that Hanna used its capacity as a law firm to disguise its activity as a bulk debt collector, where legal papers were rubber-stamped by the firm without verification of their contents, reminiscent of the practice known as robo-signing that surfaced in home mortgages during the financial crisis. The CFPB suit charges that Hanna filed hundreds of thousands of lawsuits without bothering to make sure that the people they were taking to court actually owed any money. The CFPB charges that one Hanna attorney signed off on 138,000 lawsuits in two years.

“The Hanna firm relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed,” said CFPB Director Richard Cordray. “Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers.” The CFPB suit demanded that the court “order disgorgement of ill-gotten revenues” and impose civil money penalties. It also asked that Hanna pay the CFPB’s costs in bringing the case to trial.

But the suit did not stop at Hanna’s doorstep, where the firm has offices in a Marietta, Ga. shopping mall. J.P. Morgan Chase and the two largest debt buyers in the United States, Encore Capital Group and Portfolio Recovery Associates, all Hanna clients, have been tarred with the same brush.

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At Capital One, Easy Credit and Abundant Lawsuits

This story was co-published with The Daily Beast.

Several years ago, Capital One gave Oscar Parsons, 46, his first credit card. At the time, he didn’t need a loan. But he banked at a Capital One branch near his Bronx apartment, and when it was offered, he thought, “Why not?”

Initially, he had little problem keeping up with the payments. But after a run of construction jobs came to an end, he fell behind and found himself ducking the bank’s collections calls, he said. Each time the company’s TV commercials popped up, asking, “What’s in your wallet?” Parsons thought: “It’s not enough to pay you back.”

This year, Capital One provided Parsons with another first: his first lawsuit. For failing to pay his $1,800 debt, the company took him to court. Currently on public benefits and in a job training program, Parsons has nothing Capital One can take. But should Parsons find work, Capital One could use a court judgment to seize money from his bank account or take a portion of his wages.

It was a hard lesson — one learned by hundreds of thousands of the bank’s cardholders. No lender sues more of its customers than Capital One, according to ProPublica’s review of state court data.

Over the past year, ProPublica has sought to illuminate the scope of debt collection lawsuits, which, though they are often filed by public companies in public courts, are a largely hidden part of the nation’s financial life. The suits hit workers who earn below $40,000 a year the hardest and federal garnishment laws provide scant protection. Even workers near the minimum wage could have a quarter of their take-home pay taken or their bank accounts cleaned out. State laws typically offer little more protection.

To identify which companies file the most collection suits, ProPublica obtained and analyzed court data from 11 states. In every state, Capital One stood out.

During the years of the recession, particularly 2008 through 2010, when the number of credit card defaults surged, many banks filed more lawsuits. But Capital One dwarfed them all, reaching levels never matched by any company before or since, according to ProPublica’s review of data going back to 1996.

By our estimate, the suits exceeded half a million per year nationally during those peak years.

Since 2011, Capital One’s suits have dropped considerably, though they have continued to far exceed the totals of any other bank. For example, in Indiana counties for which court data is available — home to about two-thirds of the state’s population — the bank filed about 3,360 suits in 2014. That’s about a quarter of the suits Capital One filed in 2010, but still more suits than all other national banks combined in 2014. In Clark County, Nevada, which includes Las Vegas, Capital One’s suits comprised about 40 percent of all suits by major banks. In Miami-Dade County, Florida, the tally was about the same.

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Sued Over Old Debt, and Blocked From Suing Back

Clifford Cain Jr., a retired electrician in Baltimore, was used to living on a tight budget, carefully apportioning his Social Security and pension benefits to cover his rent and medication for multiple sclerosis.

FROM OUR ADVERTISERS

So Mr. Cain was puzzled when he suddenly could not make ends meet. Months later, he discovered why: A debt collector had garnished his bank account after suing him for about $4,500 the company said he owed on an old debt.

Mr. Cain said he never knew the lawsuit had been brought against him until the money was gone. Neither did other Baltimore residents who were among the hundreds of people sued by the collector, Midland Funding, a unit of the Encore Capital Group, in Maryland State Court. Some of them said they did not even owe any money, or their debt had long expired and was not legally collectible, according to a review of court records.

In any case, the Encore subsidiary was not licensed to collect debt in Maryland.

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