Question: I recently found out that there is a judgment against me. They are attempting to garnish my wages. How do I fight this?
A: There are basically four options if you want to fight a wage garnishment.
1. You can attempt to reduce or eliminate the garnishment, by filing a Claim of Exemption and a financial statement with the Sheriff's Department. Note that it may not be your local Sheriff's Department. On the garnishment form, you will see an indication as to which Sheriff's department it is. This is based on where your employer is headquartered. You can either claim all of your wages exempt or agree to have a lesser amount withheld from your check. If the judgment creditor does not object, then then the garnishment will be changed in accordance with your claim form. If the creditor objects, the court will schedule a hearing and determine how much should be withheld from your check. Remember, a judgment accrues interest at 10% per year so if you are having your money garnished and it is less than 10% of the judgment amount, you are going to owe more money every year despite your payments.
2. You may be able to have the judgment set aside. You will need a reason and you must file a motion or an appeal. This should be done with an attorney. If you were served with the lawsuit, you typically only have 6 months to set aside the judgment. If you were never served with the lawsuit, and you can prove it, you have up to 2 years to set aside the judgment. (I have filed motions to set aside defaults obtained by CIR Law Offices, Legal Recovery Law Offices, Midland Funding, Nelson & Kennard, Persolve, and other debt collectors.)
3. You can consider bankruptcy. This would stay, or stop, the garnishment. Bankruptcy stops all state court proceedings.
4. You can call the creditor and attempt to negotiate the garnishment amount. This may work, but be careful and make sure you get any agreement in writing.
A wage garnishment is not the end of the road for you. You do have options. You should consult with an attorney before deciding which option is right for you.
Question: My debt has been charged off on my credit report. I read that I do not owe the debt once it is charged off. Do I still owe the debt?
A: YES. Is that clear enough?
You still owe the charged-off debt. Many people mistakenly believe a creditor does not have the right to collect a charged-off account. This is a common statement on the internet. And, it is wrong. Simply wrong.
A charge off is merely a bookkeeping entry. It literally is the creditor moving the account from an asset to a liability. On your credit report, a charge off means that the creditor does not think they can collect on the debt because it is "seriously delinquent."
However, a chargeoff does not affect your obligation to pay the debt. When it becomes apparent to your creditor that you are not paying and are not going to pay any time soon, then the creditor must “charge off” the debt. Usually that happens 6 months after you default. In other words, most creditors will mark an account as a charge off 6 months after you stop making payments on that debt. The creditor usually stops posting interest or late fees to the account when the loan becomes nonperforming and the creditor is not getting paid.
All defaulted debts are charged-off. Most charge off accounts are then sent to either a collection agency or sold to a debt buyer. (Yes, there is a difference between a collection agency, such as NCO Financial and a debt buyer such as Midland Funding or Persolve.) Sometimes these debts are sold several times to investors who will try to collect the account years later.
For example, maybe you have a credit card with Wells Fargo. You get behind and Wells Fargo charges off the account. Wells Fargo then may sell the account to CACH. CACH may try to collect on it. If they do not think they can collect on it, CACH may sell the debt to FFIF-ACM (also called FFIF). FFIF-ACM then may try to collect the debt. If they cannot collect on it, they may sell it to someone like Riverwalk Holdings. Riverwalk Holdings may then sell it to Persolve. Any or all of those companies may attempt to collect on the debt, even though it is charged off.
If you file for bankruptcy, you should include charged off debts in your bankruptcy. If you have a charged off account on your credit report, you should monitor that report and see if the debt is sold. If you are sued on a charged off account, do not bury your head in the sand and assume that the lawsuit is invalid simply due to the charge off. You should talk to an attorney about your options.
So it looks like the phony payday debt collectors are back. Don't confuse debt collectors with these folks. I may not like debt collectors, but even the worst US debt collectors don't do stuff like these people. Collectors like Persolve (also called Account Resolution Associates), Patenaude and Felix (also called P&F), CACH, FFIF, Midland Funding and the like have issues. But none of them would do this stuff.
Read this from Cleveland.com. Here is a quote that should scare you: "Victims report being threatened with arrest or prosecution if they don’t send money within hours or days. Callers may falsely claim to be employees of the sheriff, attorney general or court." Then watch this story from News10.
Yes, if you have taken out a loan from a payday lender, from US Cash Loans, Advance America, Cashcall, or another payday lender, you could get a call from these folks. I have spoken to Advance America and Cashcall and I am convinced they are not behind this. This seems to be some group or groups who obtained consumer information and then abuses the consumers.
I get calls from these people. My number got put on a list because I help consumers with these fake debt collectors. They will do or say anything to try to get you to pay. If you hang up, they will continue to call. A call to an attorney may end this, but it may not. Regional Arbitration Services and FS Mediation Group use some of these same tactics and a call to an attorney may get the calls to stop.
Remember, a legitimate debt collector will not tell you that they are with the Sheriff, Attorney General, or other state agency. The police will not come arrest you for a debt. We no longer have debtor's prisons. So, if you get a call and they threaten to arrest you, get a number, hang up, and talk to an attorney.
More from the last two weeks on what a debt collector cannot do. This is based on the federal Fair Debt Collection Practices Act (FDCPA) and the California Rosenthal Act (also called the Rosenthal FDCPA). You may have seen these tactics from debt collectors. Debt collectors, such as Persolve, Midland Funding, and CACH are some of the large ones who should know better, but do not always know better.
Can a debt collector garnish my bank account or my wages?
If you do not pay a debt, a creditor or a debt collector generally can sue you to collect. If they win the lawsuit, the court will enter a judgment against you. The judgment states the amount of money you owe, and allows the plaintiff (the creditor or the debt collector) to have a writ issued, either to garnish your wages or take money out of your bank accounts (called a levy).
Wage garnishment happens when your employer withholds part of your compensation to pay your debts. Your wages usually can be garnished only as the result of a court order. A bank levy is when the bank takes money out of your account and gives it to the creditor.
Can federal benefits be garnished?
Many federal benefits are exempt from garnishment, including:
- Social Security Benefits
- Supplemental Security Income (SSI) Benefits
- Veterans’ Benefits
- Civil Service and Federal Retirement and Disability Benefits
- Military Annuities and Survivors’ Benefits
- Federal Emergency Management Agency Federal Disaster Assistance
Federal benefits may be garnished under certain circumstances, but typically not for a debt collection lawsuit. If you receive federal benefits, you should keep those in a separate account from any other accounts that you have.
Do I have any recourse if I think a debt collector has violated the law?
You have the right to sue a collector in a state or federal court within one year from the date the Fair Debt Collection Practices Act (or California’s Rosenthal Act) was violated. If you win, the judge can require the collector to pay you for any damages you can prove you suffered because of the illegal collection practices, like lost wages and medical bills. The judge can require the debt collector to pay you up to $1,000, even if you can not prove that you suffered actual damages. You also can be reimbursed for your attorney’s fees and court costs. Even if a debt collector violates the FDCPA in trying to collect a debt, the debt does not go away if you owe it. If you talk to an attorney, you should ask if the attorney negotiates the debt as well as handles the FDCPA violations or if the attorney just handles the debt collection violations.
What should I do if a debt collector sues me?
If a debt collector files a lawsuit against you to collect a debt, respond to the lawsuit, either personally or hire a lawyer to do it for you, by the date specified in the court papers to preserve your rights. At the very least, talk to an attorney about your rights.
Where do I report a debt collector for an alleged violation?
Report any problems you have with a debt collector to the Federal Trade Commission, and the Consumer Financial Protection Bureau. Many states have their own debt collection laws that are different from the federal Fair Debt Collection Practices Act. Your Attorney General’s office can help you determine your rights under your state’s law, which, in California, is the Rosenthal Fair Debt Collection Practices Act.
I will be posting more questions and answers over the coming weeks. Remember, if you are contacted by a debt collector, ALWAYS talk to an attorney about your options before you do anything else.
More from last week on what a debt collector cannot do. This is based on the federal Fair Debt Collection Practices Act (FDCPA) and the California Rosenthal Act (also called the Rosenthal FDCPA). You may have seen these tactics from debt collectors. Debt collectors, such as Persolve, Midland Funding, and CACH are some of the large ones who should know better, but do not always know better.
A debt collector cannot harass you. What is harassment? For example, a debt collector may not:
- threaten violence or harm;
- publish a list of names of people who refuse to pay their debts;
- use bad language, with bad being obscene or profane; or
- repeatedly use the phone to annoy someone. In other words, they cannot keep calling you and hanging up or calling you and yelling at you.
A debt collector cannot make false statements. The false statements include:
- a claim that they are attorneys or work for the government;
- a claim that you have committed a crime;
- represent that they operate or work for a credit reporting agency;
- misrepresent the amount you owe;
- tell you that papers they send you are legal forms if they are not legal forms; or
- tell you that papers they send to you are not legal forms if they are legal forms.
Also, a debt collector cannot tell you that:
- you will be arrested if you do not pay your debt;
- they will seize, garnish, attach, or sell your property or wages unless they are permitted by law to take the action and intend to do so. Typically, this means they must have a judgment against you first; or
- legal action will be taken against you, if doing so would be illegal or if they don’t intend to take the action. In other words, they cannot tell you that they will sue you if the statute of limitations has already expired.
A debt collector also cannot:
- give false credit information about you to anyone, including the credit reporting agencies;
- send you anything that looks like an official document from a court or government agency, if it is not an official document from a court or the government; or
- use a false company name.
A debt collector cannot engage in unfair practices. What is an unfair practice? For example, a debt collector cannot:
- try to collect any interest, fee, or other charge on top of the amount you owe unless the contract or state law allows them to add these fees;
- deposit a post-dated check early;
- take or threaten to take your property unless it can be done legally. This typically means they need a judgment first; or
- contact you by postcard or another means where people can see your name and that this is a debt.
I will be posting more questions and answers over the coming weeks. Remember, if you are contacted by a debt collector, talk to an attorney about your options.
I get a lot of questions about the Fair Debt Collection Practices Act. People are confused about what it means and what rights they have. This is important to know when you are contacted by a debt collector such as Persolve, Midland Funding, CACH or any other debt collector. Here are some answers to some basic questions.
What types of debts are covered by the Fair Debt Collection Practices Act?
The Act covers personal, family, and household debts, including personal credit cards, auto loans, medical bills and mortgages. It does not cover business debts.
Can a debt collector contact me any time?
No. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night. Collectors may not contact you at work if they are told that you’re not allowed to get calls there. You can tell them in writing or by phone.
How can I stop a debt collector from contacting me?
Tell the collector by writing a letter to stop contacting you. Make a copy of the letter and send it by delivery confirmation or certified mail, return receipt requested. This does not mean you do not owe the debt, but should stop any contact. If you get any calls or letters after your letter is received, document those in a journal.
Can a debt collector contact anyone else about my debt?
If an attorney is representing you about the debt, the debt collector must contact the attorney, rather than you. If you don’t have an attorney, a collector may contact other people to obtain contact information for you. A debt collector cannot harass other people to get this information.
What does the debt collector have to tell me about the debt?
Every collector must send you a letter telling you how much money you owe within five days after they first contact you. This notice also must include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money. In California, the Rosenthal Fair Debt Collection Practices Act has other requirements for the notice, including telling you about your rights.
Can a debt collector keep contacting me if I don’t think I owe any money?
If you send the debt collector a letter stating that you don’t owe any or all of the money, or asking for verification of the debt, that collector must stop contacting you until they send you validation of the debt. You have to send that letter within 30 days after you receive the validation notice. But a collector can begin contacting you again if it sends you written verification of the debt.
I will be posting more questions and answers over the coming weeks. Remember, if you are contacted by a debt collector, talk to an attorney about your options.
Yes, it is true. The internet is hurting you. It is out there making your life more difficult and making my life more difficult. It is causing you to believe things that are not true.
Let me start with this: I like the internet. It has a lot of good information. You can find an attorney. You can buy things. You can learn how to do something new. You can watch some funny videos. It helps me stay up to date on soccer around the world. But............
Lets be honest, when it comes to debt collection lawsuits, there is a LOT of bad information out there. In the last week alone, I had people call me and tell me that they wanted to file a motion to dismiss for lack of proof, that they had no contract with the debt collector and therefore, the debt collector could not sue them, and that the banking system is a fraud. All of these are interesting discussions, but none of them are actually appropriate for a debt collection case in California.
You may have a lot of valid defenses. You may not. Each case is fact specific. You need to talk to a real, live lawyer about your case. You need to figure out what defenses apply to YOUR situation. This applies whether you have been sued by Midland Funding, Persolve, CACH, or any other debt collector.
When you receive that first letter, talk to an attorney. When you receive a summons, tak to an attorney. At no time should you rely solely on what you read online, especially from websites that appear to be run by non lawyers.
The California 5th District Court of Appeals came out with a decision on August 15, 2013. That decision, in People v. Persolve, is an interesting discussion of the litigation privilege.
Here is a good blurb in Enligsh from California Appellate Report:
"A debt collector (and its attorneys) engages in conduct expressly prohibited by both the California and the federal Fair Debt Collection Practices Acts. The Kern County District Attorney brings a civil enforcement action under the unfair competition statute to get them to stop and to obtain restitution of ill-gotten booty.
A righteous action if ever I saw one.
The trial court nonetheless dismisses the action. Holding that everything illegal that the debt collectors might have done was protected by the litigation privilege.
The trial court's holding makes even less sense to me than it did to the Court of Appeal."
Here is the background from the appellate court:
"Persolve is a debt collection company. Persolve purchases old, defaulted debt in batches of 1,000 or more accounts at a time, for which it pays pennies on the dollar. Thereafter, Persolve sends a letter to the debtors demanding payment. These letters are sent to the debtors by Persolve's attorneys, Patti-Jelsvik and [Edit] Alexandryan.
According to the People, the letters Persolve sends to debtors are misleading, unlawfully threaten postjudgment remedies to which respondents are not entitled, and fail to make full disclosures required by the California [Rosenthal] Act and the Federal [Fair Debt Collection Practices] Act. Specifically, the People allege that Persolve violated the Federal Act's prohibition against false and misleading representations by failing to accurately apprise debtors of the total amount required to settle the account (15 U.S.C. § 1692e); violated the verification requirement by specifying conflicting time periods of both 30 and 10 days for the debtors to respond to letters and by threatening legal action before the expiration of the required 30-day period (15 U.S.C. § 1692g(a)); and violated provisions of the California Act and the Federal Act by threatening to obtain attorney fees that Persolve was not entitled to (15 U.S.C. § 1692e; Civ. Code, § 1788.17). The People further allege that when Persolve filed collection actions in the trial court, it published personal information about the debtors, including Social Security numbers and driver's license numbers, in violation of the California Act and the Federal Act." 218 Cal. App. 4th 1267, 1271-1272 (2013)
Let me give you my take on this:
Persolve is a debt collector. They buy debts by the thousands. Edit Alexandryan files lawsuits based on very limited information. Persolve is hoping to win by default with its limited information.
What do I base this on? I have read this case carefully. But I also have half a dozen cases with Persolve currently pending. Edit Alexandryan has done the same thing on each case - filed a lawsuit and then, on the last day discovery is due, she has a paralegal ask for extension so they can "get information from the original creditor." Of course, Persolve is buying debts from debt collectors who bought them from debt collectors. They are not buying, in my experience, debts from the original creditors. And while that is not required, one would think due diligence would require someone to check with the original creditor before simply filing a lawsuit.
I am going to keep an eye on this case. It will be interesting to see what Persolve does with it as it proceeds. In the meantime, I am going to stress my usual advice: if you are sued by Persolve, contact an attorney immediately. In fact, if you receive a letter from Persolve or Edit Alexandryan, I would talk to an attorney at that time.
Debt collectors have been suing consumers for years with very little proof that the consumer owes any money. You have probably heard some of these names: Persolve, LLC, Asset Acceptance, CACH, FFIC, Midland Funding, Cavalry, etc....
In two recent cases of mine, the debt buyer only had a bill of sale between different debt buyers and attached those as proof that my client owed money. Nowhere did my client's name, address or account number appear. But this has long been accepted as proof that consumers owe money - even when they don't.
California Senate Bill 233 is going to change this. The Fair Debt Buying Practices Act goes into effect on July 1, 2014. The new law will require debt buyers to confirm the identity of the consumer, as well as prohibiting a lawsuit from being filed without the debt buyer being able to verify ownership and the amount of the debt. As noted in the press release, 95% of consumer debt collection cases end in defaults. A lot of these lawsuits are based on nothing more than papers that don't prove anything.
You will also be able to sue the debt buyer for violating the Fair Debt Buying Practices Act. If the consumer prevails, he/she will be able to recover damages, both actual and statutory, as well as attorney fees and costs.
While this will not end the abuse by debt buyers, it is a good step in making sure debt buyers play by the same rules as everyone else who wants to sue someone and have proof, not just pages, before filing suit.
I was doing some checking on a debt collector that left a voice mail for one of my clients. In the voice mail, the debt collector threatened to turn this matter over to the DA for a bench warrant. (That is an obvious violation of the Fair Debt Collection Practices Act and the Rosenthal Act.) So I googled the debt collector.
In this case, the debt collector is Four Star Resolution, LLC. Of course, they are also known as FourStar Resolution, LLC, 4Star Resolution LLC and 4 Star Resolution, LLC. So we will figure out which name is the right name. But I went to the Better Businsess Bureau website. And I found this warning:
"BBB has seen a major increase in collection agencies starting business in the Upstate New York area over the past several years. In an effort to keep consumers informed about which collection agencies are operating in accordance with federal and state law, we have asked for specific information from all collection agencies located in our service area, including proof of licensing, bonding, and or registration required by NY state or other governments where the business is located, as well as proof of licensing required by any state in which the business operates. This collection agency has not responded to our requests. BBB advises consumers to be aware of their rights in regard to collections. This includes New York States law prohibiting any collection agency from collecting on Payday loans in the State of New York. The Fair Debt Collection Practices Act (FDCPA) outlines prohibited behavior when attempting to collect a debt, and outlines specific rights for consumers. There are penalties for agencies found in violation of the Act. BBB advises consumers to become familiar with their rights under the Act, which can be found at the link below: http://upstateny.bbb.org/storage/75/documents/debtcollection.html To file a complaint with BBB click the link below: https://www.bbb.org/consumer-complaints/file-a-complaint/get-started"
This is the first time I have seen this. But it is interesting that there is a warning about debt collectors starting up in Upstate New York. Apparently, its a hot bed for debt collectors. I am dealing with three debt collectors up there who have warnings by the BBB.
If you get a call from a debt collector, take notes on what they say. If they leave a voice mail and you think its a violation of the law, save the voice mail. Do not give out your information to anyone. And if you have heard from Four Star Resolution, talk to an attorney. Based on the voice mail I heard and their lack of willingness to discuss it with me, it concerns me.
I previously gave you 5 mistakes to avoid with your credit. So as people are ramping up their holiday shopping, I thought I would share with you 5 more mistakes to avoid with your credit. The difference between good credit and bad credit can be thousands of dollars. So here are 5 more mistakes to avoid with your credit:
1. Requesting a credit limit reduction. You may believe that you have too much credit and that you are better off with a credit limit reduction for existing credit cards. In fact, the only significant effect a limit reduction has on your credit score is a negative effect on your debt ratio.
2. Utilizing the first credit counseling service you hear about. Most credit counseling services cannot advise you all of your options, such as bankruptcy. And, quite often, the ones that advertise the most are the ones that you should avoid. Use the FTC’s advice (http://www.ftc.gov/bcp/conline/pubs/credit/fiscal.htm) and find a reputable credit counseling service in your area. If you are going to use one, call several of them and ask the questions from the FTC page to find ones that seem legitimate, then check with the Better Business Bureau before moving forward. Then call an attorney to find out the rest of your rights before you hire anyone!
3. Declaring bankruptcy too quickly. Many people go forward with bankruptcy because they believe it is the only way out. Instead of taking such a drastic measure, seek counseling first and make sure to consider all of your options, including negotiations with your creditors.
4. Practicing credit card arbitrage. This can seriously damage your credit score if you do not know what you are doing. Stay away unless you know exactly what you are doing. One mistake and your credit score could easily be demolished.
5. Never checking your credit report. Most people who behave well with their credit just assume that their credit is fine, but sometimes incorrect things can show up on your report. Visit http://www.annualcreditreport.com/ to get a free report once per year. You may catch mistakes or even identity theft.
The best thing you can do is to take ownership of your credit. Avoiding these mistakes can save you hundreds, if not thousands, of dollars. It will also make your life so much less stressful!
This comes to you from the Consumer Protection Financial Bureau:
We want to hear about your debt collection experience—weigh in now.
Since we began taking debt collection complaints a few months ago, companies have responded to more than 5,000 debt collection complaints. We see that this is an important issue for consumers and today we’re adding these complaints about debt collection to our public Consumer Complaint Database.
We’re also taking the first steps to gather information to determine what rules would be appropriate to protect consumers who are subject to debt collection. We’re issuing an Advance Notice of Proposed Rulemaking (ANPR) today —and what that means is that we are considering issuing rules for the debt collection industry, but first we want to hear from you so we can learn more about the debt collection system. We’d like to hear about your experience with debt collectors and how they should act when they try to recover debts.
Getting input from the public – you – is an important part of the process. Debt collection is a complicated topic, with many consumer protection concerns. We are issuing an ANPR in order to ask a number of questions about different aspects of the industry and the consumer experience. The ANPR will be published in the Federal Register, where anyone can submit comments to respond to the questions. We’re particularly interested in learning about the accuracy of information in the debt collection industry, whether consumers are aware of the debt and their rights, and whether consumers are being treated fairly.
Although the public can submit comments formally in response to the notice at regulations.gov, we want to make it easier for consumers and small businesses to tell us what they think about debt collection practices. To do that, we’ve partnered with RegulationRoom.org, operated by the Cornell University’s eRulemaking Initiative, where you can provide your comments in an interactive and intuitive way.
RegulationRoom.org is not a government website. It’s operated by law students and staff at Cornell Law School, with the goal of making it easy for people to submit comments to government agencies. They are working on removing barriers to public participation, and we are excited to be partnering with them again.
The staff at RegulationRoom.org realizes that most people are generally unfamiliar with the formal commenting process at Regulations.gov (the official government site). So they present information, conduct a conversation, and then collect views until the forum closes about a week before the end of the comment period, so that their team can assemble all the feedback into an official comment. Those who have participated get one more chance to react to the summary before it is submitted formally to the CFPB through regulations.gov. And, like all other formal comments, we will read and consider them as we consider consumer protection rules for the debt collection market.
Explore the data
Adding debt collection complaints will take the number of complaints in the Consumer Complaint Database to more than 155,000. When you look at the data for debt collection complaints, you can even see what type of debt is involved (auto loan, credit card, medical, student loan, mortgage, etc).
Dig in and explore this new frontier of information, and remember – if you think you’ve found something interesting in the consumer complaint data, we definitely want to hear about it! We encourage the public, including consumers, analysts, data scientists, civic hackers, and companies that serve consumers to analyze, augment, and build on the information in the database to develop ways for consumers to use the complaint data or mash it up with other public data sets to reveal potential trends.
KSL-5 out of Utah is reporting on debt collectors using social media to track down debtors. This shouldn't come as a huge surprise to anyone. Debt collectors will use whatever technology they can to try to get as much information about you as they can. The more they know about you, the easier they can collect money.
According to KSL, "Some [debt collectors] even create a fake account and try to "friend" a debtor. If the request is accepted, a debt collector can learn all sorts of things about a debtor such as his or her job, their hobbies and even their friends." They will then be able to see everything about you.
The Fair Debt Collection Practices Act, what most people call the FDCPA, is the law that regulates debt collectors. It was written in 1977. That was before the internet and well before Facebook. The Consumer Protection Financial Bureau is looking at updating the FDCPA.
For now, here are some tips:
1. Do not accept a friend request from someone you do not know.
2. Mark your settings to private.
3. Do not talk to a debt collector. If you do not hire an attorney, send them a debt validation letter and tell them that any communication must be in writing.
I wrote before about Regional Arbitation Services. You can read it here and here. I sued them twice and have two defaults against them. I will soon be turning those into judgments. In the meantime, I received a call from a potential client yesterday.
He calls me up with a familiar story. Someone calls him and claims he is going to jail. They say that he owes money to someone. Then he gets a call from his mom. She is told that he is going to be arrested. He then finds out his boss got a call with the same story.
He calls my office. It turns out that he was getting calls from a company called FS Mediation Group. There is nothing about this group that involves mediation. They are not mediators. They do not mediate disputes. They do, however, share the same address with Regional Arbitration Services. Yep, the same story coming from the same place.
The moral of the story: Be wary if you get a call from FS Mediation Group, RAS, Regional Arbitration Services, or any other entity claiming that you are going to get arrested. Get their name and number and then call an attorney.
Today in my mail came a letter dated October 22, 2013 from GGG Partners in Atlanta, GA. The letter states "On October 20, 2013, Brachfeld Law Group, PC ("Brachfeld") determined that it was in the best interests of all stakeholders to liquidate the current business operations."
Okay, so what does that mean in English? Brachfeld Law Group apparently is going out of business. They sent me this letter since I have a client who is owed money from them. They are asking anyone who claims they are owed money to write to GGG by December 31, 2013 and tell them the total amount owed.
At this time, I will keep researching this and determine what this may mean. You are not REQUIRED to take any offer Brachfeld makes to you, if they owe you money.
In the "not so surprising" news category, a new report rips the debt collection industry. This report, however, goes a step further. The report suggests that states are not doing enough to help struggling consumers. The report from the NCLC, states that the best states are only earning a B+ grade while some states get a D-.
The gist of this 44 page report is that the debt collection industry is not doing anything to help consumers. Rather, the industry forces consumers into poverty by not working with them, by emptying out bank accounts, by forcing families to lose their only means of transportation. And, this report is right.
I understand that when someone gets behind on their debts, a debt collector can help a small business, or even a big business, collect their money. The most successful debt collectors should be working with consumers to set up a payment plan that works for everyone. However, at least twice a week, I get a call from someone who goes to get money from the bank and finds out that a levy was executed on their account and they have never even been served with a lawsuit. How do I know this? Because when we get the proof of service, its at the wrong address or for the wrong person.
The 2nd part of the report findings is also correct. States need to do more to proteect consumers and enforce their laws. Too many times, a debt collector can find a loophole to get out of their legal obligations. These loopholes need to be closed.
Don't despair, fine consumers of the world. There is help out there. Just make sure you find someone who knows this area of law and can assist you.
Last week's post received such a response that I thought I would share more concerns about payday loans. These short term loans look like a good solution for some people, but for over 90% of the population, they are a trap. A better option is to go to your bank or credit union and get a loan that way.
But, since people continue to get these short term loans, I thought I would share more concerns about these payday loans:
1. Aggressive litigation. High risk lenders are more willing to take on aggressive litigation tactics. These tactics can include “sewer serves” where the process server may not serve the borrower personally, litigation in an improper location, like in a county different from one where the borrower lives, or suing for an amount that they may not be entitled to collect. These tactics make it important that you talk to an attorney as soon as you get behind.
2. Attempting to get money from your bank account. Consumers have reported that these high risk lenders may try to deposit post dated checks prematurely or they may try to collect money from your bank account even without your authorization. These tactics, while generally not legal, may be authorized by your loan agreement. You need to read this agreement carefully and you should advise them in writing that they are not allowed to do this.
3. Fees on top of fees. Especially for consumers who end up rolling one loan into another, high risk lenders may add fees on top of fees on top of fees. For example, if the first loan cost you $45 for a $300 loan, and you cannot pay it back on the due date, you may end up paying another $45 in fees plus fees on the $90 in fees. The loan agreement will spell out these fees and terms.
4. Consider your alternatives. According to the FTC, you should consider alternatives to these loans. These alternatives include shopping carefully for credit, asking your creditors for more time to pay your bills, contacting credit counseling agencies or an attorney, and if you must borrow money, borrow only as much as you can afford to repay with your next paycheck.
Sadly, I have seen the first three all this month and we are not even half way through the month. Lenders have tried to ACH, or electronically remove money, from accounts without authorization, have filed lawsuits in the wrong venue, or location, and have added fees on top of fees.
Before you get a payday loan, consider these concerns and talk to your family about other options that may be available for you.
I just helped a woman with a payday loan. The interest rate was 180%. Her payments were going to total over $9,000 in this loan from California Check Cashing, LLC. Her $2500 loan was going to cost her $10,000 when she was done repaying it. We got the matter resolved for substantially less.
This situation reminded me that many people are unsure what to do if they find themselves with one of these short term or high interest loans. So here are some things to think about when you are considering one of these loans.
1. Getting stuck in the “debt cycle.” According to some studies, 91% of users of “payday loans” and other high risk loans are people who are borrowing five or more times. Only 1% of users are people who take out one loan for an emergency. You can quickly get stuck in a cycle of borrowing to pay off your existing loans.
2. High interest rates. Some of these lenders charge 90% interest for a loan to be repaid over several years. However, that can be on the loan end. Some lenders have charged interest rates that are 100% and higher. Compare this to a cash advance on a credit card at 25% or 30% and it is substantially more expensive.
3. Lack of regulation of collection practices. The Federal Fair Debt Collection Practices Act (“FDCPA”) only applies to third party debt collectors. Since most of these high risk lenders handle their own collections work, they are not subject to the FDCPA. Thus, the borrower will not have he same protections he or she may have with other types of loans.
4. Aggressive collection practices. Without the protection of the FDCPA, high risk lenders are free to use more aggressive collection techniques. For example, they may try contacting coworkers or third parties to obtain information on the borrower. They may also not advise borrowers of the right to have a debt validated or other protections available to a borrower.
Remember, if you need a loan, talk to your bank or credit union first. A short term, high rate loan should be your last option. But if you take one out, talk to an attorney if you cannot make the payments. Do not call the lender until you know your rights.
Here is the opening paragraph: "A debt collector is paying $1 million to settle charges that it illegally revealed consumers' debts by mailing them dunning notices in an envelope featuring a large arm shaking money from an upside down man, and using text messaging to collect debts unlawfully." But you really need to read the article, and more importantly, look at the picture on the envelope.
I have never dealt with National Attorney Collection Services or National Attorney Services, the two entities involved in this. But this envelope is over the top. I can't believe anyone sent this out and thought "hmmm.......this does not offend anyone." It offends me, and I wouldn't qualify as the least sophisticated consumer. The envelope is a clear violation of the Fair Debt Collection Practices Act and the Rosenthal Fair Debt Collection Practices Act.
Further, I am not sure how they are tracking down cell phones, but clearly they are. This is an area ripe for abuse. If you get a text message from a debt collector, save it. Do not delete it. It may not be the greatest thing to have on your phone, but it will be evidence. Don't assume your attorney can later retrieve the text message.
Remember, anytime you get something from a debt collector, keep it. Save it. You may need it down the road. And, of course, talk to an attorney before you decide to pay a debt collector.
Most people have heard that they should be careful with the credit. However, when it comes to the dos and don'ts of credit, most people have no idea what to do. Here are some tips to help avoid mistakes with your credit:
1. Cancelling old credit cards. 15% of your credit score comes from the length of your credit history. If you want to reduce the number of credit cards you have, then you should cancel the newest ones first.
2. Staying current on some or most of your cards. 35% of your score is based on punctuality of your payment, with only payments that are more than thirty days late affecting your score. If you’re going to be late on any cards, make up that payment before it is thirty days late. Juggle the timing of your payments, but make sure no payment gets more than 30 days late.
3. Having too many open lines of credit. 10% of your score comes from the types of credit used. If you have a lot of sources of revolving credit, such as credit cards, you can be seen as a credit risk. Why? Because you have the potential of racking up a lot of debt very quickly. Don’t take those retail credit cards just to save 10% or 15% on the first purchase.
4. Maxing out your credit cards. 30% of your score comes from the ratio of your credit card debt and your credit limits. Therefore, if all of your cards are used to the credit limit, your credit score is suffering even if you are able to keep up with the payments. Stop buying more and start using the money to make extra payments and pay down your credit.
5. Avoiding loans and debts. In the eyes of your credit report, having no debt is basically having bad debt. If you do not want credit cards, you should still consider getting one card and making an occasional purchase with it. Pay it off when the bill comes. It is bad to not run up any debt.