According to Yahoo, JPMorgan Chase was sued by the California Attorney General. The basis of the lawsuit is that JPMorgan Chase is filing lawsuits in California without any support. Basically, these are nonsense lawsuits where Chase cannot prove anything, but filing them in an effort to bully consumers into paying.

Yahoo reports that the lawsuit claims that JPMorgan Chase assembled a “debt collection mill that abuses the California judicial process,....” The lawsuit seeks "to hold Chase accountable for systematically using illegal tactics to flood California’s courts with specious lawsuits against consumers...."

This isn't anything new. Although JPMorgan Chase filed 469 lawsuits IN ONE DAY, they are not alone. Capital One, Persolve, LLC, Bank of America, Wells Fargo, FIA Card Services, Brachfeld and Associates, are all doing the same thing. The lawyers have very little information when they file a lawsuit. Once an answer is filed, they don't want to proceed because they cannot prove the facts.

If you have been sued by JP Morgan Chase, Capital One, Persolve, LLC, Bank of America, Wells Fargo, FIA Card Services, Brachfeld and Associates, Legal Recover Law Offices, CIR Law Offices, or any other debt collector, you should immediately talk to an attorney. My office gives a free consultation to anyone sued by a debt collector.

Question: I have received a letter from an attorney demanding money after my child (or myself) was accused of shoplifting. Do I really owe this money?

Answer: Maybe.California Penal Code section 490.5 states "The parent or legal guardian having control or custody of an unemancipated minor whose conduct violates this subdivision shall be jointly and severally liable with the minor to a merchant or to a library facility for damages of not less than fifty dollars ($50) nor more than five hundred dollars ($500), plus costs."

But does this mean you are automatically on the hook? No. Many companies will have an out of state law firm, typically in Florida, send a demand letter for $500. Sometimes the letter is for more claiming additional "costs." This works out well for the retailer because it is hard for an individual to find an attorney willing to help for less than $500. So it becomes a situation where it is cheaper to pay these folks to go away then it is to hire an attorney and fight it.

If you receive one of these letters, you should look for an attorney to consult with. I offer free consultations on this issue of restitution. Call me or email me and we can talk about the letter and your rights.

Question: I have been sued by a debt collector. Who do I call?

Answer: An attorney.

Let me explain a bit. Twice in the last week, I have had people call me after being sued by a debt collector. Both folks think the lawsuits may be fraudulent, but they are named as defendants. They have been served and don't know what to do. With both people, I explained to them the process and offered to assist them. Both people decided to take other courses of action.

In these cases, both people decided to call the Federal Bureau of Investigattion (FBI". The folks at the FBI are great. They do great work. They are not going to get involved in a debt collection lawsuit that you think is fraudulent. They won't even get involved if you can prove it is fraudulent.

I received a call last week from a "payday lender." The call was clearly fraudulent. I took down all of the information and called the FBI. The fine folks at the FBI told me that the Federal Trade Commissions (FTC) is handling this. So I called the FTC. The FTC took a report and told me they would add it to their complaint list. That is it. Nothing else.

There are only two people who can answer a lawsuit for you: you or an attorney. You can call legal aid or someone like that, who may be able to assist you. You should start with an attorney. If the lawsuit is really fraudulent and you can prove it, then you may be able to recover damages under the Fair Debt Collection Practices Act (FDCPA) or the Rosenthal Act.

But calling the FBI or the FTC or the attorney general (AG) or any other entity, is not going to protect your rights. A judgment can still be entered against you. The only way to protect yourself is to file an answer with the court. 

Question: My phone rings nonstop with calls from a debt collector. Is this legal?

Answer: NO! Debt collectors cannot call you at all hours of the day. I just looked at a phone log that a client had that showed 6 calls in a row from a collector. That is a ridiculous number of calls in just a few minutes. They are clearly making her phone ring slowly to harass her.

But what was worse is that the calls were at 2:00am. She was receiving calls at all hours of the day and night. This is a clear debt collection violation.

The Fair Debt Collection Practices Act states that the debt collector cannot call you at unreasonable times. We have it better in California. The law in California is that a debt collector cannot call you before 8am or after 9pm. This is written into the Rosenthal Act.

The best approach is to tell the debt collectors that you will only correspond with them in writing. Do not accept any phone calls from them. Put it in writing. And, of course, if they violate that, call an attorney.

This is exciting news for folks who may be behind on their student loans. President Obama has cut the commission that debt collectors get on student loans. Why does this matter?

Student loan debt collectors are some of the most aggressive debt collectors. Why? For two reasons. First, student loans are generally not dischareable in bankruptcy. So, the debt collectors don't get worried when you say you are going to file for bankruptcy. It is not really a threat. Second, some debt collectors wrongly believe that they are not bound by the Fair Debt Collection Practices Act or the Rosenthal Act. So they get more aggressive with you.

This change is going to decrease the incentive debt collectors have to be aggressive. They will not make as much money so they will not be so cavalier. This should make it easier for consumers to work out a payment arrangement with a debt collector if they get behind.

If you realize you are going to be late on your student loans, do not bury your head in the sand. Talk to an attorney about what options you have. Even if bankruptcy is not an option, you may have other rights.

Q: What is a validation letter and why should I send it?

A: A validation letter is simply a letter to the debt collector telling them that you dispute the debt. It can be sent by either the consumer or by an attorney on the consumer's behalf. But, essentially, the letter is the same. It reads like this:

"I am in receipt of your letter of XXXX, 2013. I dispute this debt. Please provide validation of this debt to me. You may not take any further efforts to collect this debt until you validate this debt. Further, your validation must include a copy of the assignment to you.

You may not report this to the credit reporting agencies while this matter is being disputed."

Short and simple. And it complies with the Fair Debt Collection Practices Act ("FDCPA" and the Rosenthal Act ("R-FDCPA"). 

Now for the second part, why you should send it. This letter, or something very close to it, is the requirement in the law that makes the debt collector stop calling you, stop bothering you, and show you that you may actually owe this debt. (Just because they send you something, doesn't mean it is true.) If you do not respond, the debt collector could allege that you agree you owe this debt since you did not respond. Thus, any time you receive a letter from a debt collector, you should send a validation letter. Note that a phone call will not protect your rights. 

A validation letter will protect your rights. When a debt collector calls you for the first time, they then have five days to get you a letter. Once you receive that letter, you only have 30 days to respond with a validation letter. Do not delay. Either hire an attorney to send one or send it yourself. But make sure you get that validation letter out.       

There must be something in the air. I have had two calls this week for helping defending lawsuits based on the concept of "written instruments." What does this mean?

As I understand the latest theory, and it has changed some over the years, the debtor takes out a credit card. They charge a few thousand dollars, usually about $2,500 or $3,000. Then, they do not pay the bill.

Now, they wait until they are 60 or 90 days behind, then they send a "written instrument" to the bank stating that they do not owe the money, that there is no money in the world and that the bank has been paid its money. They also include a check on a closed account as "payment."

Ultimately, the bank does nothing. The bank sells it to a debt collector. The collector starts its collection practices. The consumer does nothing. The collector files a lawsuit. Now the consumer wants to defend the lawsuit on the basis of the "written instrument."

DO NOT TRY THIS! It does not work. It is not legal. In fact, knowingly sending a check written on a closed account can be a crime in some areas. This is some of the worst advice you can get. DO NOT TRY THIS! (I feel like I need to be perfectly clear.)

Even if you are never charged with a crime, this will not work as a defense. This is so flawed that I do not even know where to start with the problems. Suffice it to say, that if this worked, everyone would do it and the financial system of the world would crash.

If you are going to defend yourself in a lawsuit, do not think this will work. Talk to an attorney before you follow any advice you read on the internet. Just because it is on the internet does not mean it is true!

I have had two cases recently that have shown me a disturbing trend: debt collectors settling issues and then turning around and demanding more money!

In one case, Erica Brachfeld, who also goes by Brachfeld Law Group, settled a case with me back in March of last year. In August, she sent a letter to my client demanding money on the same debt. She then sent a second letter.

Sadly, she is not the only debt collector who is doing this. There are other collectors who are "settling" matters and then demanding money. The debt collectors apparently assume that you will not be able to keep track of what cases you have resolved with them and you may then pay them on a case that you have settled.

My advice: keep a list of any debt you have settled, how it was resolved, and then scan in the settlement agreement. If you get a debt collector like Erica Brachfeld, who then comes after you again, you can use the settlement agreement to make them go away. This is a clear violation of the Fair Debt Collection Practices Act ("FDCPA") and the Rosenthal Act. You need to assert your rights to end these abusive debt collection practices.

Of course, my old advice is still true: the first time you hear from a debt collector, call an attorney.

I have written on the California Personal Injury and Insurance Blog about talking to an attorney after a car accident. But, it is also important to talk to an attorney if you are in debt or receiving calls or letters from a debt collector. There are a few different scenarios when you need to talk to an attorney.

First, if you are getting behind on your bills, you should talk to an attorney. The sooner you get someone involved, the better it is. I have helped people who were less than 30 days behind on their debts figure out a plan to avoid having problems with their credit. A little planning goes a long way.

Second, if you receive a phone call or a letter from a debt collector, you need to talk to an attorney. Maybe it is your debt and you want to know your rights under the Fair Debt Collection Practices Act ("FDCPA") and the Rosenthal Fair Debt Collection Practices Act ("Rosenthal Act"). Maybe you want to come up with a plan on what to do. For example, the debt collector has 5 days from the first phone call to send you a letter. You need to know that, and to keep the envelope.

Of course, it may not be your debt. I have consulted with several people in the last few weeks who are getting calls for people with similar names, but who are not that person. How do you stop these calls? There are a few things to do, depending on your specific situation.

Finally, if you have been sued by a debt collector, you need to talk to an attorney. Some planning before you file a response to the lawsuit can go a long way towards getting it resolved. Just last week a debt collector agreed to dismiss a case before I even filed an answer. While that does not happen in every case and your results may be different, it does show that some early work may be able to resolve it. Of course, you may consult with an attorney and then determine you need to file for bankruptcy or take some action other than responding. You will not know unless you have that consultation.

Talking to an attorney early on may save you headaches down the road. The consultation is free so you have nothing to lose by picking up the phone and calling.

I just settled a case with these folks. The gist of the complaint was that they were harassing my client. They would call repeatedly. When my client told them he was represented by an attorney, they still called him. When I told them I was representing my client, they continued to call him. Interestingly, they would call from different numbers, including some in the 916 area code when they are not based here. A call back, of course, led to a message that the number was disconnected.

With today's spoofing technology, it is easy for debt collectors, in fact, anyone, to spoof a number. You cannot rely on the area code or prefix to determine where someone is calling from.

Dynamic Recovery simply did not want to deal with an attorney. The debt was well past the statute of limitations. So they figured my client would do nothing about it. Unfortunately for them, my client decided to enforce his rights. And it cost them money. But, as I explained to my client, it was just the cost of doing business for them like Ford decided in the 70s that the cost of paying lawsuits on the Pinto was cheaper than correcting the mistake.

When people start enforcing their rights, then there will be changes in how debt collectors act. Until then, despite the law, debt collectors will continue to push the envelope in an effort to get money no matter the cost.

I was just reading through some rulings from yesterday in Sacramento Superior Court. In one case, Capitol One filed a lawsuit. The individual filed an answer. Capitol One asked the court for permission (we call it leave) to amend the lawsuit so that they could "clarify" some elements of the lawsuit. The court granted this permission. Capitol One then took a default against the defendant when she did not have to file an answer.

She just had the default set aside. Why? Because an amended lawsuit that does not change anything, only clarifies, does not need an answer filed. The Judge wrote "The Court has noticed a pattern of plaintiff filing motions to amend in similar cases where the only amendment is to attach supporting documents to the complaint."

This woman was successful. But it is a troubling trend that debt collectors seem to be amending their lawsuits and then using that as a trap for the unwary to get a default.

As I have said before, if you get sued by a debt collector, call an attorney immediately. In fact, once you get contacted by a debt collector, you should talk to an attorney about your options. Even if you do the right thing, as this defendant did, they may try to trick you. Be careful!

I have recently been contacted by several people who have had dealings with this company. As far as I can tell, Regional Arbitration Services is not an arbitration company at all, but rather a debt collection agency. I have never heard them use the words debt collector, but they sure do have fancy titles. They refused to talk to me for one of my clients.

So, I went online. I found this and this and this without even doing much checking. They used to be called District Restitution Service. It appears to be a company out of Canada with offices in Colorado, New York, Las Vegas and Salt Lake City. They also use landlines that seem to be based in California, including the 415 and 916 area codes.

The calls I am receiving deal with people who are being told they are being arrested or referred to the district attorney. This is a violation of the Fair Debt Collection Practices Act and the California Rosenthal Act. No one can threaten to arrest you for not paying a debt. Both the FDCPA and the Rosenthal Act make this clear.

If you receive a call from these folks, you should immediately talk to an attorney.

Jim Puzzanghera of the LA Times wrote a great story on debt collection tactics. Jim's first paragraph tells the story of most people these days:

"Hard economic times have helped push millions of Americans deeply into debt, plunging many into a dark world filled with relentless collection agents, aggressive lawyers and companies that profit mightily if they can get people to pay up."

In his story, Jim focuses on two debt collectors based in southern California: Encore Capital Group Inc.of San Diego and Brachfeld Law Group. Both have had numerous complaints filed against them. A quick search of the federal court system, PACER, turns up 31 lawsuits against Brachfeld Law Group in the last two years and 65 against Erica Brachfeld individually. Unfortunately, California does not have a unified computer system to search for lawsuits, but suffice it to say, these cases are not the only ones out there.

And this does not even include a list of all of the debt collectors. I know of cases involving CIR Law based in San Diego, NCO Financial (remember the Whattaburger lawsuit I wrote about?), Frederick J. Hanna & Associates, and more. A detailed study of the number of times these folks are sued would take weeks, but, sadly, to them its the cost of doing business, a la Ford and the Pinto. Most consumers do not aggressively defend themselves and fight back.

What is a consumer to do? Know your rights. Read the Fair Debt Collection Practices Act ("FDCPA") and the Rosenthal Act - sometimes called the Rosenthal FDCPA. Talk to an attorney the minute you get a letter from a debt collector. When they call you, immediately tell them that you will only deal with them in writing and send them a letter, via fax or mail, confirming this. Do not let them bully you.

Only when enough consumers push back, will the actions of the debt collectors change.

This is interesting. Whataburger, which by the way, has great burgers, has sued NCO Financial for debt collection violations. Why, you ask? Because NCO kept calling Whataburger and harassing its employees.

From Chron.com:

"Everyone hates harassing calls from unrelenting debt collectors, even the folks at Whataburger Restaurants.

Exasperated officials at the San Antonio-based burger chain have gone to court in an attempt to stop persistent collections calls made to its corporate headquarters to get an unidentified employee to pay up on a debt allegedly owed.

Whataburger last week sued NCO Financial Systems, saying the collection efforts of one of the nation's largest debt collectors "amount to a campaign of harassment against Whataburger that is unreasonable ... and reckless.""

This is one of the funniest things I have read in a while. A debt collector who went so over the top that the employer sued the collector. It would be nice if more employers were this aggressive. But, for now at least, Whataburger is doing something about it.

If you are getting called at work, tell the collector that you cannot take calls at work. Then send them a letter. Track any more calls made to your work and then talk to an attorney about the debt collection violations, both under the Fair Debt Collection Practices Act (FDCPA) and the Rosenthal Act. Aggressive action by the consumer will put an end to these abusive practices.

It has been a while since I have shared this so I thought I would put it out there again. I have written a TON of free reports about the legal system, the law, insurance companies and personal injury cases. Here is a list:

1. 8 Must Read Tips for High Risk Borrowers;

2. 9 Most Frequent Debt Collection Violations;

3. 10 Mistakes to Avoid with Your Credit;

4. Small Claims Court

If you want one of these, all you neeed to do is send me an email to freereports@jonathangstein.com. I am happy to send it to you.

The New York Times has an excellent article on the problem with debt collection lawsuits. The article starts with this:

"The same problems that plagued the foreclosure process — and prompted a multibillion-dollar settlement with big banks — are now emerging in the debt collection practices of credit card companies."

Of course, those of us in the trenches who are defending consumers know that this is not an issue that is "now emerging." This is an issue that has been going on for a long time. Debt collectors have no paperwork that supports their claim that the consumer owes money. Why not?

When a debt collector gets a new case, whether its a debt buyer who is buying junk debt or a collector who is collecting on behalf of the original creditor, the collector gets a CD with a ton of information, some of which is correct and some of which is incorrect. There is no supporting paperwork, however. There are no credit card statements, no receipts. There is nothing. So they cannot actually prove anything at the time they get the file.

How bad is it? I am filing a motion to set aside a default judgment on a case. The debt collector had the client "served" on an address that does not exist. Further, when they asked for the judgment, they included paperwork that showed the address of my client, an address my client has been at for over 20 yeras. But no one seemed to care or check to see if my client was properly served.

Of course, getting a judgment when they know they have not properly served a lawsuit is a violation of the FDCPA (Fair Debt Collection Practices Act) and California's Rosenthal Act. Unfortunately, most debt collectors just consider this the cost of doing business since so few people fight them.

If you get a letter from a debt collector be it an attorney like Frederick J. Hanna or Erica Brachfeld, or a company like Equable Ascent Financial or Financial Recovery or Vital Recovery, you should immediately talk to an attorney. Make sure you know your rights. And if they file a lawsuit, don't assume you owe the debt. Talk to a lawyer and see if you can fight it.

I have seen a new trend and one that troubles me. Debt collectors are not being the big mean jerks we expect. Rather, they are trying to be your friend. I even had a guy call me on behalf of a client and call me "Jon." Sure, I don't mind my friends calling me Jon, even my clients. But at work, its Jonathan or Mr. Stein.

Debt collectors are doing a job. A fair number of them do it properly. However, some of them are very willing, eager, even to break the law. You have to keep your guard up. Do not become friends with them. Do not even become friendly with them. Let them talk and listen. If you need to respond, do so in writing. Create a paper trail. Make sure you know the Fair Debt Collection Practices Act (FDCPA) and the Rosenthal Act. You need to know your rights.

Unfortunately, too many people call me AFTER they talk to a debt collector and have said something that they should not have said. We may be able to fix it. But the best advice is do not talk to them. And the more they want to talk to you like friends, the more concerned you should be!

If you have been unfortunate enough to get a letter from Frederick J Hanna & Associates (sometimes they go by FJH, sometimes Frederick J Hanna and Associates), you should tread carefully. I have dealt with a lot of debt collectors in my life. But these folks take the cake.

Last month, I sent them a letter that I was representing an individual. In response, Hanna and his employees tracked down my unlisted home phone number and called me at home. I have never had a collector call me at home. It is clear that these folks will stop at nothing in an attempt to collect a debt - whether valid or not.

If you get a letter from them, email me at debt@jonathangstein.com and we can talk about your options. Do NOT call these people until you talk to an attorney who handles debt collection issues. These folks will not stop until they harass you into paying money you may or may not owe.

Minnesota Senator Al Franken recently announced that he plans on introducing additional protections for consumers under the Fair Debt Collection Practices Act. Franken’s actions were prompted by a newspaper’s investigative reporting which uncovered some of debt collectors’ shadier tactics, including seizures of bank accounts and paychecks, and the use of arrest warrants to collect consumer debts.

Under Franken’s changes to the law, it would be considered an unfair practice for private firms to use arrest warrants in debt collections, and consumers would be able to sue debt collectors who used those tactics. The amendment would also require debt collectors to give consumers more information about their debts, including a summary of fees and interest.

Under the bill, penalties for violations of the FDCPA would be increased, and enforcement of the law would be left up to consumers through lawsuits against the offenders. Judges would be allowed under the bill to issue injunctions to stop violations of the FDCPA. The bill would not call for an increase in the FTC’s budget or staff members.

Currently, Franken is discussing the bill with an unnamed Republican senator in the hopes of obtaining bipartisan support for the bill. According to Franken’s office, a wide range of consumer groups have been supportive of the bill.

You may be surprised to learn that your credit card information, which many of us go to great lengths to protect, is worth only about $1.50 on the black market.

A Washington Post reporter recently shopped for stolen credit and debit cards online. He found a variety of sites to choose from. He opened an account at one of the sites and found that U.S. card numbers are for sale for $1.50, and U.K. resident account information sold for $4. In addition to purchasing the card numbers, the site the reporter visited allowed extra cardholder information to be purchased, such as the cardholder’s mother’s maiden name and the cardholder’s date of birth. Most of the card information is obtained through malware that steals data from computers infected with a virus.

However, the reporter was surprised to find that if he wanted to use the website’s search tools, he was nailed for extra convenience fees. In order to buy a credit card number that was stolen from a certain city, it would cost an extra 60 cents. Apparently, the company that sells stolen information believes in nickel and diming the online would-be thieves.

You may be wondering if you can use data from a stolen credit card to purchase more stolen credit card data. No, payment on that particular website can only be made using LibertyReserve or Webmoney, which are popular in the underground.