122 posts categorized "Debt Collection"

Plain Meaning Rolls On in Gorsuch's First [Credit Related] Opinion

posted by Jason Kilborn

It was not at all surprising that, for his first (traditionally unanimous) opinion, in Henson v. Santander, the new Justice Gorsuch took on the relatively simple and low-key issue of the definition of "debt collector" in the Fair Debt Collection Practices Act. It was also not surprising that he hewed quite closely to the approach of his predecessor in basing his decision on the "plain meaning" of the words in the statute, complete with grammatical analysis of past participles and participial adjectives (the example adduced, "burnt toast," might describe how the consumer protection industry will view this latest ruling). The FDCPA is as simple as it appears, the Court confirmed:  if you're collecting a (consumer) debt owed to someone else, then you're a debt collector; if you're collecting on a debt owed to you, for your own account, you're not a debt collector, even if, as in Santander's case, you bought the debt from the original creditor with the intention of collecting it for an arbitrage profit later. The notion that Congress did not foresee the debt buying industry and its explosive growth when it wrote the FDCPA in the 1960s, and it certainly would have wanted to constrain abusive collections practices by debt buyers as much as by debt collectors was ... wait for it ... a matter for the present Congress to clarify. You can almost see Scalia whispering in Gorsuch's (or his clerk's) ear as the opinion is drafted. Well, at least there's something to be said for predictability.

Midland Got It Right (Sort Of)

posted by Adam Levitin

The Supreme Court got it right in Midland Funding LLC v. Johnson, which holds that it is not a violation of the Fair Debt Collection Practices Act to file a proof of claim in a Chapter 13 bankruptcy based on a debt whose statute of limitations has expired.  

I suspect that I might be the only bankruptcy professor whose name doesn't start with the last two letters of the alphabet who isn't outraged by Midland (which gives a nice shout out to our former co-blogger Katie Porter's scholarship!), and I'm going to catch hell for writing this, but one of the great things about tenure is that I can say things like this.  So here goes.  I don't think Midland is a very persuasive opinion; it's not the reasoning I would adopt, but I think it gets the right answer, even if it is uncomfortable as a policy result (it's hard to defend an industry whose economics are dependent upon careless trustees and debtors). 

Continue reading "Midland Got It Right (Sort Of)" »

Book of the Year

posted by Katie Porter

EvicitedCoverCredit Slips readers are invited to share the best credit/finance book of this year. The book can be a monograph, fiction, textbook, anything. It doesn't have to be published this year; just that you found it this year.

My nomination is Evicted by Matthew Desmond. It's an ethnography of evictions in Milwaukee and compellingly describes the problems of financial distress. The book describes how tenants struggle to make rent, and the strategies used by landlords, with the help of the courts and sheriff's department, to collect if they cannot. The site for the book contains amazing photographs-- check it out.

While the book focuses on evictions for nonpayment of rent, the foreclosure crisis also wreaked havoc on millions of lower-income Americans who may never own a home. When the property owner was foreclosed upon, the tenants found themselves on the street. The scarce and uneven protections available led to the enactment of the Protecting Tenant at Foreclosure Act. That law expired two years ago, leaving at-will tenants in about half of states vulnerable to eviction immediately after foreclosure.

Evicted describes the heartache that comes with home loss: the strain on family relationships, the mental anguish, the physical illness, and other harms. These problems are all too familiar to those who study consumer bankruptcy, but Desmond's work is a powerful story of financial distress that ensnares families who cannot make ends meet.

Creative Avoidance of Potential FDCPA Liability

posted by Gary Neustadter

     On May 19, 2015, Clark County Collection Services, LLC ("CCCS"), a Nevada debt collector, obtained a default judgment in Nevada Justice Court against Patricia Arellano on an assigned medical claim of $371.89. Two months later, on July 27, 2015, Arellano filed a class action in federal district court in Nevada, against CCCS and its lawyers, alleging FDCPA violations associated with the state debt collection action.

     A week later, on August 4, 2015, CCCS and its lawyers responded with some creative lawyering. CCCS obtained a writ of execution from the Nevada Justice Court. The writ, stating an amount owing of about $825 (including fees, costs, and interest added to the principal amount of the judgment), commanded the sheriff to levy on the Arellano FDCPA cause of action pending in federal district court. Because Nevada law permits execution on a judgment debtor's pending cause of action against another, the sheriff levied the writ, posted notice of sale once each week, for three consecutive weeks, in the Nevada Legal News, and thereafter held a sale of the cause of action on November 19, 2015. CCCS, likely the only bidder at the sale, purchased the cause of action with a credit bid $250.

     On January 21, 2016, CCCS filed a motion to dismiss the federal district court action (or in the alternative for summary judgment) arguing, among other things, that by virtue of the execution sale it now owned the FDCPA claim against itself and that Arellano therefore lacked standing. The district court agreed and entered an order dismissing the action. Ms. Arellano has appealed to the Ninth Circuit and the case is pending. Her opening brief (Plaintiff-Appellant's Opening Brief, Arellano v. Clark County Collection Services, LLC, No. 16-15467 (9th Cir. July 29, 2016), ECF No. 9), argues that federal law preempts and therefore precludes this use of the Nevada enforcement procedure by a debt collector because, so used, the procedure undermines the deterrent and remedial purposes of the FDCPA. The brief also argues that an FDCPA claim is akin to a tort claim and that use of the Nevada enforcement procedure to purchase the claim amounts to the assignment of a tort claim that is prohibited by common law.

Continue reading "Creative Avoidance of Potential FDCPA Liability" »

John Oliver and Consumer Law YouTube Videos

posted by Dalié Jiménez

I'm trying something new this year. My consumer bankruptcy policy seminar students will read many great articles by many wonderful academics on this blog, as well as others, but this year, their "reading" will also include a great deal of YouTube.

90% of the videos are John Oliver segments from his excellent show on HBO, Last Week Tonight. They cover particular "products" (student loans, credit reports, debt buying, payday loans, auto loans, retirement plans and financial advisors) and middle class issues (minimum wage, wage gap, wealth gap, paid family leave).

I thought Credit Slips readers might enjoy seeing them all in one place. Here they are in no particular order. Let me know if I've missed any!

The New Reality of Small Debt Collection

posted by Jason Kilborn

Debt collectorsAbout 10 years ago, Rich Hynes wrote an intriguing paper on consumer debt collection, asking "where are all the garnishments?"  Today, Pro Publica's Paul Kiel is out with an answer: Nebraska and Missouri ... and in the future. Kiel's story challenges the longstanding conventional wisdom that debtors are unlikely to face lawsuits and collection action for small debts. That might have been true before the mid-2000s, when Hynes wrote his paper, and in Virginia and Illinois, which Hynes studied, but it's certainly not true after the financial crisis, Kiel reports, especially in certain high-volume-low-dollar-collection-heavy states. I can hardly do justice to Kiel's revealing data collection and analysis, but here are a few highlights to whet your appetite: (1) debt buyers are among the primary drivers of this trend, not collection agencies, and their industry has consolidated and matured recently, (2) the number of lawsuits against consumers on small debts has absolutely exploded starting in about 2006, the year Hynes's article was published (again, thanks almost entirely to debt buyers, "In 1996, there were around 500 court judgments in New Jersey from suits filed by debt buyers. By 2008, that number had reached 140,000."), (3) these buyers repeatedly clean out consumer bank accounts with garnishments seizing an average of only $350, "Plaintiffs in Missouri tried to garnish debtors’ bank accounts at least 59,000 times in 2012." There's more of interest in Kiel's report--a must-read for those (like myself) who have for years downplayed the threat of enforcement of small debts. It really depends where the debtor lives and whether the debt is acquired by a buyer. 

Debt collector image courtesy of Shutterstock

Further Debate About Debt Collection Reform and Credit Availability

posted by Jason Kilborn

The Center for Responsible Lending has produced a nice, new empirical paper reflecting on and refuting the notion that certain debt collection reforms restrict the flow of consumer credit. The analysis is careful and impressive, and the natural laboratory experiment they found is fun and intriguing. In a nutshell, North Carolina in 2009 and Maryland in 2012 imposed new restrictions on debt buyers suing consumer debtors on purchased accounts (both states now require actual documentation of the debts and their ownership to support such suits). On cue, in the period leading to these reforms, the credit lobby predicted gloom and doom in terms of restricted access to credit, especially to sub-prime borrowers, if such liberal nanny-laws were adopted. Several years later, the CRL decided to look back and test this. Comparing the change in the number and dollar volume of new credit lines in North Carolina and Maryland in the two years before and after each of the reforms (coincidentally, periods of general economic contraction and recovery, respectively), and comparing these differences with comparable data for selected peer states and the nation as a whole, did the reforms seem to have a noticeable effect of reduced access to credit in these states?  The simple answer, of course, is no (i.e., less contraction in North Carolina than elsewhere during a recession, and more expansion in Maryland than elsewhere during recovery). The more nuanced answer means the debate will rage on.

Continue reading "Further Debate About Debt Collection Reform and Credit Availability" »

Does the White House Stand for Consumer Protection or for Predatory Lending?

posted by Adam Levitin

Does the Obama White House truly stand for consumer financial protection, or will it support Wall Street when it thinks no one is looking?  That's the question that the Supreme Court served up today.  The Supreme Court is considering whether to hear an appeal in a critical consumer protection case called Midland Funding v. Madden. This is one of the most important consumer financial protection case the Supreme Court has considered in years. (See here for my previous post about it.)

The Court will only take the appeal if at least four Justices are in favor of hearing it.  Today the Supreme Court requested the opinion of the Solicitor General about whether to take the case.  That's a good indication that there's currently no more than three Justices who want to hear the appeal and another one or more who are unsure (it will take five to overturn the lower court decision in the case).  If four Justices wanted to hear the case, there'd be no reason to ping the Solicitor General. 

The request for the Solicitor General to weigh in on the case puts the White House in the position of having to decide whether it wants to stand up for consumer financial protection or to fight for Wall Street.

Continue reading "Does the White House Stand for Consumer Protection or for Predatory Lending?" »

Fabulous New Paper: Random Justice in Bankruptcy Trial Courts

posted by Jason Kilborn

JusticedieI just read a terrific new paper by Gary Neustadter of Santa Clara University Law School, called "Randomly Distributed Trial Court Justice: A Case Study and Siren from the Consumer Bankruptcy World." It presents a monumental empirical study of a debt buyer's litigation campaign to pursue essentially identical contract and fraud claims against hundreds of secondary mortgagors in state courts, federal District Courts, and federal Bankruptcy Courts. The paths and outcomes of these materially identical cases are so different in so many surprising (and often disturbing) ways, the paper offers a really stunning look behind the curtain of our often arbitrary trial-level justice system. And Neustadter's telling of the story is gripping--I read the paper and most of its footnotes from beginning to end in one sitting, unable to put it down. The revelations in this paper are a gold mine for civil proceduralists generally and bankruptcy practitioners in particular. It offers a cautionary tale and useful playbook for lawyers (and perhaps judges) in how to make many aspects of our system more effective. Get it while it's hot!

Justice die image courtesy of Shutterstock

Pro Publica: Extraordinary Struggles of African American Debtors

posted by Jason Kilborn

PoorAAmanI understand what it's like to live in a low-income family. I can only begin to try to understand the extraordinary struggles facing low-income families who also happen to be black. Pro Publica has just released a story and accompanying study that helps a bit to bridge this empathy gap.

Along the way, the story raises a frustrating point about our legal system that impacts all lower-income communities, but black folks in particular: Most legal protections against the kinds of rapacious collections activities described in the Pro Publica story require the debtor to affirmatively invoke the protections. For example, the story notes a collector explaining "if Byrd had filed a claim in court stating that the funds were exempt, the garnishment would have been terminated." Does the tragic irony escape this commentator? Byrd doesn't have enough money to pay the $29 sewer bill--do we really expect her to hire and pay for a lawyer to "file a claim in court stating that the funds were exempt"?! Similarly, the story describes default judgments being entered on time-barred debts because the debtors failed to invoke the statute of limitations--why in the world would a rational system allow time-barred debt to be revived against an impecunious debtor for failure to pay for counsel to raise this defense?! It's a self-fulfilling prophesy. The clever and unscrupulous inevitably prevail in a system where "The law doesn’t require anyone to tell debtors like Winfield of the [head-of-household 10% garnishment] exemption, and the burden is on them to claim it."

The story also cites and links to a study (and comments from study contributor and Slipster, Bob Lawless) on racial disparities in Chapter 13 practice. I've witnessed the emotional fervor that this study can whip up in a crowd of bankruptcy attorneys ... but the Pro Publica story ought to prompt us to return to the provocative question of whether, intentionally or not, directly or indirectly, our debt collection and debt relief systems are disparately impacting our black neighbors. Fixing problems that fall more heavily on these debtors would improve the system for everyone.

Image courtesy of Shutterstock

Big Win for CFPB on Debt Collection

posted by Dalié Jiménez

Yesterday, Judge Amy Totenberg of the Northern District of Georgia issued a very cogent 70-page opinion in the case of the CFPB v. Frederick Hanna & Associates, a large collection law firm with offices in Georgia, Florida, and South Carolina. The opinion denies Hanna's motion to dismiss in its entirety, and almost completely agrees with the CFPB's legal theory. In doing so, the opinion deals a serious blow to the collection law firm business model.

A brief recap of the case if you haven't been following. A year ago, the CFPB filed suit against the Hanna law firm essentially attacking the big collection law firm business model. Among other things, the CFPB alleged that the firm operated "less like a law firm than a factory" and that attorneys were not "meaningfully involved" in the collection lawsuits they filed. As an example, the CFPB alleged that one attorney in the Hanna firm signed about 138,000 lawsuits between 2009-10. That's 189 lawsuits per day, 7 days a week, 52 weeks a year.

The second CFPB claim was that in filing most of its lawsuits on behalf of debt buyers, the law firm "knew or should have known that many of the[] affidavits [they filed] were executed by persons who lacked personal knowledge of the facts." The Bureau sued under both the Fair Debt Collection Practices Act (FDCPA) and the Consumer Financial Protection Act (CFPA) for what it alleges were false or misleading and unfair acts and practices.

The opinion allows the Bureau to proceed on all of these claims. Specifically, Judge Totenberg (who incidentally, is Nina Totenberg's sister) found that the Bureau could regulate collection attorneys under the CFPA (the first time any court considered this issue), that the "meaningful involvement doctrine" extends to activities in litigation, and that the Hanna firm might be liable for filing affidavits given to it by its clients if the CFPB can prove its allegations.

The last two points are huge because it means that collection attorneys will have to spend some time reviewing the collection cases they file. (How much time and what constitutes enough "involvement" is up in the air). Nonetheless, this completely up-ends the business model of at least some collection law firms. As Joann Needleman has pointed out at InsideARM, an interlocutory appeal is unlikely to succeed here, so look for the CFPB to file more cases (or enter into consent decrees) with more law firms.

Madden v. Marine Midland Funding

posted by Adam Levitin

In a recent case called Madden v. Marine Midland Funding, the Second Circuit ruled that a loan owned by a debt collector violated New York's usury statute.  The loan had been originally made by a national bank and was subsequently sold to the debt collector when it was in default.  There's no question that the state usury law was preempted when the loan was held by the national bank.  The Supreme Court's (awful) Marquette National Bank v. First of Omaha Service Corp. decision from 1978 makes that very clear.  (The Court suddenly discovered in 1978 that over a century of legal understanding of the 1864 National Bank Act was somehow wrong and that banks had been leaving lots of money on the table.)  

The debt collector argued that because the loan had been made by a national bank, it carried preemption of state usury laws with it as a permanent, indelible feature.  "Applesauce!" proclaimed the Second Circuit:  National Bank Act preemption of state usury laws extends no further than National Bank Act regulation.  Preemption is part of a package with regulation, but once the loan passes beyond the hands of a National Bank, it loses its preemption protection and becomes subject to state usury laws.  (Some of you might recognize that this is an argument I made several years ago. Plaintiff's counsel sent me a very nice email to this effect.  You owe me a citation, 2d Circuit!).  

Continue reading "Madden v. Marine Midland Funding" »

Stale Debts in Bankruptcy

posted by Dalié Jiménez

Should liability under the Fair Debt Collection Practices Act (FDCPA) lie against a creditor who submits a proof of claim past the statute of limitations in a consumer bankruptcy case?

That is the question the Supreme Court declined to review recently in LVNV Funding, LLC v. Crawford. In Crawford, the Eleventh Circuit applied the "least sophisticated consumer" standard to find liability for the debt buyer when it submitted a proof of claim in 2008 for a debt that was out of statute as of 2004. Other courts have held differently. In fact, just last month, district courts in Indiana and Pennsylvania dismissed FDCPA suits against debt buyers under essentially the same facts as Crawford. Other courts, including the Second Circuit, have seemingly held that FDCPA liability can never lie in a bankruptcy case.

Putting the merits of applying the FDCPA in a bankruptcy case aside, it seems to me that in this specific instance potential liability under the Act could serve very useful functions: namely efficiency and cost savings.

Continue reading "Stale Debts in Bankruptcy" »

ABA Reminder to Prosecutors: Owing Money Is Not A Crime

posted by Bob Lawless

In November, the American Bar Association issued a formal opinion that it was unethical for prosecutors to allow debt collectors to use prosecutorial letterhead when no member of the prosecutor's staff reviews the file to determine if it is likely a crime has been committed. The most amazing thing about the opinion is that it had to be said at all.

I missed the story when it first came out, but Deepak Gupta was all over it at the Consumer Law & Policy Blog with a post and some screen shots of what these letters look like. Also, the ABA Journal has a story abou the ethics opinion.

Are Some Banks Using Credit Reports to Help Collect Discharged Debts?

posted by Dalié Jiménez

Last week, Adam pointed us to a NYT's story on "zombie debt" after bankruptcy. I did a bit more research into the story because I had a hard time understanding the problem from the article.

There are a few lawsuits that have been filed about this (I found ones against GE Capital/Synchrony, Bank of America/FIA Card Svcs, Citigroup, and Chase). The GE complaint alleges that the banks have a systematic practice of "selling and attempting to collect discharged debts and ... failing to update and correct credit information to credit reporting agencies to show that such debts are no longer due and owing because they have been discharged in bankruptcy." You can download the complaint in the GE case here.

More specifically, the allegations are that after a discharge, some creditors do not update their tradelines to a status of "in bankruptcy" and instead leave them as "charged-off." The credit report of a person in this situation would then say they have filed bankruptcy and obtained a discharge but you could not tell whether any individual debt has been discharged in that bankruptcy. The (non-binding) credit bureau reporting guidelines (METRO 2) specify that creditors should report accounts as "included in bankruptcy" once they receive a notice of discharge.

The complaint characterizes GE's argument as being that the FCRA does not require it to make this change, perhaps especially in particular after a debt has been sold and they no longer have an interest in it. (GE has not filed an answer yet, but it seems like this is one argument they might make from reading their other filings). That seems to me to be a wrong interpretation of the FCRA and the FTC's Furnisher Rule. It should also be a violation of the discharge injunction. As Judge Drain put it in an opinion denying a motion to compel arbitration:

One could argue that the reporting of a discharged debt as still outstanding when the credit report also shows that the debtor has been in bankruptcy is even a worse result, indicating to those who are considering providing credit in the future that the debtor has fallen into the category of the dishonest debtor who did not receive a discharge.

I am told that NPR's On Point will be doing a segment on this on Thursday at 10AM EST with one of the attorneys filing these cases. You can listen to the podcast here.

Note: post has been edited to correct the timing of the NPR program and to add the link to the podcast.

Zombie Debt and the Metaphysics of Discharge

posted by Adam Levitin

The NYT has a piece about credit reporting of so-called "zombie debt"--debt that has been discharged in bankruptcy.  Apparently the US Trustee Program is investigating various creditors in connection with this debt.

The reporting obscured a bit of very subtle bankruptcy metaphysics. The discharge of debt in bankruptcy does not void the debt. The debt is still owing. But it cannot be collected except if the debtor volunteers to repay it. The discharge is an injunction against the enforcement of the debt against the debtor as a personal liability. The discharge voids judgments on the debt, but not the debt (and it does not prevent the enforcement of liens).  In other words, the debt still exists post-discharge.  It just isn't enforceable.

That means that there is nothing per se inaccurate about the debt being reported to a credit reporting agency as owing, provided that the debt is also reported as discharged in bankruptcy. (Different story altogether under Fair Credit Reporting Act and Fair Debt Collection Practices Act if the discharge is not reported.)   

As far as I can glean from the reporting, the problem seems to be less the continued reporting of the debt than creditors saying that they will only cease reporting it as owing if the debt is paid.  Is that a violation of the discharge injunction?  I'm not sure.  It is fine for a private party to require payment as a condition of future dealings:  "pay up if you want to do another deal with me." But that's not quite this situation. The purpose of continuing to report a discharged debt is not to invite a condition of future dealings.  Instead, its purpose (other than if continued reporting were the default) would seem to be to extract payment, which would be an "act to collect, recover, or offset any such debt as a personal liability of the debtor."  It'll be interesting to see more about how this plays out. 

New ADP Garnishment Report

posted by Jason Kilborn

A Adp-garnishment-report-1 valuable and groundbreaking source of data on wage garnishment has just been released by ADP, the nation's largest payroll services provider. I immediately recalled a great paper by Rich Hynes about the paucity of wage garnishments in Virginia and Illinois in the mid-2000s. According to ADP, things have changed since the recession, especially for blue-collar (manufacturing and transportation/utilities) workers in the Midwest making between $25,000 and $40,000 a year, of whom more than 10% suffered a garnishment in 2011-2013. About half of these garnishments were for child support, but the other half were for taxes, consumer debts, and bankruptcy cases (presumably wage orders entered for Chapter 13 plans). The report is available here in html and here in pdf and makes for very interesting reading.

Continue reading "New ADP Garnishment Report" »

A National Debt Registry?

posted by Adam Levitin

There's a fascinating long magazine piece in the NYTimes about consumer debt sales and collection. The piece ends by asking why we don't have a national debt registry, as if that were the solution to all debt collection problems.  Unfortunately, the author only asked the FTC about this issue (and acknowledges that it isn't in FTC jurisdiction), not the CFPB, and the author doesn't consider any of the problems with creating and implementing a debt registry.  (I'm guessing Dalie will have something to say about this...) As the case of MERS shows, it isn't so easy to create a well-functioning registry of property rights of any sort.  Let me illustrate a few challenges to creating a debt registry:  

Continue reading "A National Debt Registry?" »

Bad Paper: Chasing Debt from Wall Street to the Underworld

posted by Dalié Jiménez

That's the name of a new book by Jake Halpern coming out in October. The New York Times has an excerpt on their site. If the excerpt is anything like the book, it's going to be gripping.

What's even cooler is that someone actually created a video game based on the book. Or at least on the debt collector business part of the book. You can play as a debtor or a debt collector and see the story through. It's web-based image-and-text but really well done (just some minor innacuracies).

 

Small-Dollar Loans to Servicemembers, the Electronics Version (or an Easy Way to Get Around the Military Lending Act)

posted by Pamela Foohey

Yesterday the Consumer Financial Protection Bureau, along with 13 state attorneys general (including from my new home state of Indiana), announced a $92 million settlement and issued an enforcement action against Colfax Capital Corporation and Culver Capital, LLC, known as Rome Finance, for targeting military families (and other consumers) with predatory loans to buy electronics, such as computers and televisions.

Rome Finance would offer credit to consumers for the purchase of such electronics primarily at mall kiosks near military bases, promising instant financing and no money down. Rome Finance then jacked up the price of the electronics, thereby masking true finance charges and APRs, withheld information on bills about balances and payments, and violated various states' laws in collecting the debts. In some instances, service members would receive statements indicating that the APR on their loan was 16% when the APR really was over 100%. The scheme is a reminder of the endless variations that companies peddling alternative financing / high-cost credit may use, and how broad laws against predatory lending need to be in order to be effective.

Continue reading "Small-Dollar Loans to Servicemembers, the Electronics Version (or an Easy Way to Get Around the Military Lending Act)" »

Robbing Peter

posted by Katie Porter

How exactly do people make ends meet? While there are a few formal studies of "payment hierachies" courtesy of the big data organizations, there is little ethnographic work. A new contribution in this regard is "Robbing Peter to Pay Paul":  Economic and Cultural Explanations for How Lower-Income Families Manage Debt by Laura M. Tach and Sara Sternberg Greene. The authors interviewed 194 lower-income households, finding that debts generally receive less attention than regular monthly expenses where credit cannot substitute for meeting the need (e.g., paying rent). The best findings of the paper describe how households choose among debt coping strategies, which Tach and Greene categorize to include debt juggling such as rotating which debt to skip paying, rejecting responsibility/ignoring debt, using an EITC refund to make a large payment, and others. Tach and Greene sketch out an "Injustice Narrative" based on respondents' own understandings of why certain debts should be ignored or rejected. In their sample, these debts were frequently subprime credit cards or debts ballooned up with fees. By contrast, the authors present an "Economic Mobility Narrative," where debtors prioritized and paid consistently if they believed repayment was required to achieve a goal, like improving a credit score enough to qualify for a home loan. The overall perspective of the paper is that cost-effective approaches to debt repayment (highest interest rate first), or logical approaches (last in, first out), are less prominent than cultural narrative strategies that allow debtors to explain their payment--or lack thereof--using cultural sociological norms about mobility and justice.

The paper is a nice addition to the generalized reporting that focuses on middle class people--those with mortgages and credit cards. As Nick Timiraos recently reported in the WSJ, mortgages are once again the king of the bill heap. The article has some nice graphics that illustrate regional differences in payment hierarchies that appear to correlate with property values.

p.s. There was a rumor that I would never blog again. I started it. But it just didn't catch on, despite my dissemination efforts.  I'm back . . .

Working and Living in the Shadow of Economic Fragility

posted by Melissa Jacoby

OupbookCredit Slips readers, please note the publication of a new book edited by Marion Crain and Michael Sherraden. The New America Foundation is hosting an event on the book tomorrow, Wednesday, May 28, 2014 at 12:15 EST. Not in Washington, D.C.? The event will be webcast live

The book project developed out of a stimulating multi-disciplinary conference at Washington University in St. Louis. Participants had great interest in considering how bankruptcy scholarship fits within the larger universe of research on financial insecurity and inequality. My chapter with Mirya Holman synthesizes the literature on medical problems among bankruptcy filers and presents new results from the 2007 Consumer Bankruptcy Project on coping mechanisms for medical bills, looking more closely at the one in four respondents who reported accepting a payment plan from a medical provider. Not surprisingly, these filers are far more likely than most others to bring identifiable medical debt, and therefore their medical providers, into their bankruptcy cases. We examine how payment plan users employ strategies - including but not limited to fringe and informal borrowing - to manage financial distress before resorting to bankruptcy, and (quite briefly) speculate on the future of medical-related financial distress in an Affordable Care Act world.

UFTA now the UVTA

posted by Susan Block-Lieb

Am I the only one who didn't know that the National Conference of Commission on Uniform Law recently revised the Uniform Fraudulent Transfer Act in late 2013?

While revisions to the UFTA take a relatively light touch to the uniform act, the Commissioners were keen once more to change the name of these avoidance actions.  While the 1988 statute renamed and substantially revised the (much earlier) Uniform Fraudulent Conveyance Act to come up with the Uniform Fraudulent Transfer Act, this time the Commissioners renamed the Uniform Fraudulent Transfer Act as the Uniform Voidable Transfer Act.  I guess we were hurting folks' feelings by implying that their transactions were fraudulent, even though lawyers know that constructive fraudulent transfers are only "fraudulent" in their economic effect. 

Long live the UVTA!

Debt Collection Complaints and Regulation: Last Chance to Comment on ANPR

posted by Dalié Jiménez

Today is your last chance to comment on the CFPB's Advanced Notice of Proposed Rulemaking on Regulation F, regarding debt collection.  I had the pleasure of working with Pat McCoy on a joint comment to the ANPR.  Our comment addresses documentation and information requirements for collectors, chain of title issues, and debt repositories.

After reading two reports released yesterday I'm even more convinced that these are among the most critical issues.  The FTC announced their top 2013 complaints (debt collection still the top industry complained about) and US PIRG released a report on the more than 11,000 complaints the CFPB received on debt collection over a six month period.  The PIRG report in particular highlights just how important the integrity of the information and documentation passed from collector to collector is (and how badly this is working right now).  Most consumers were complaining that the debt was not theirs (25%), they were not given enough information to verify the debt (13%), or that the debt had already been paid (11%).  

This is exactly the underlying issue that we address in our ANPR comment: something is very wrong when a debt buyer only gets a spreadsheet with some information about the debt, gets no documents in connection with the debt, signs a contract where the seller doesn't stand behind the information sold (and sometimes specifically says amounts or interest may be wrong), and then attempts to collect on that debt. I've argued that this violates the FDCPA.  In our comment we try to propose some ways to fix this problem going forward.

I urge Credit Slips readers to send in your comments before the 11:59pm deadline.

CapitalOne Contract Not Just Creepy But Illegal?

posted by Dalié Jiménez

Shutterstock_144867838CapOne's taken a lot of flack today over its apparent desire to check what's in your wallet by visiting you at home and at work.  The LA Times story got even bigger when it made it to Twitter and  great (and lots of bad, see previous sentence) puns started rolling in.

The company answer seems to be that language from a security agreement for snowmobiles got "mixed in" with the credit card language (and no one over there is reading their 6-page contracts). They are now "considering creating two separate agreements given this language doesn’t apply to our general cardholder base."  

I wonder if that means that they'll also revisit the part of the credit card agreements that takes a security interest in anything you buy from Best Buy, Big Lots, Jordan's Furniture, Neiman Marcus/Bergdorf Goodman, or Saks?  (I should note, your clothes are only in danger if you have a Saks "retail" card; if your card is a Platinum or World card not only is your interest rate likely lower but it seems your stuff is also safe).

Continue reading "CapitalOne Contract Not Just Creepy But Illegal?" »

Debt Collection Industry Poised for Changes

posted by Dalié Jiménez

Like Pamela, I’m very delighted to join Credit Slips. As Bob mentioned in his kind introduction, I spent a year as a policy fellow at the Consumer Financial Protection Bureau. One of the most things I got to work on while I was there were the rules defining "large market participants" in the debt collection and credit reporting markets. After issuing final rules, the CFPB began to supervise these non-bank entities; marking the first time any federal regulator had the authority to do so. 

Recently, the Bureau published an Advanced Notice of Proposed Rulemaking on debt collection (comments are due by February 28). The ANPR marks the first time that a regulator will interpret the Fair Debt Collection Practices Act, a statute that has barely changed since its enactment in 1977. What's more, because of its UDAAP authority; the CFPB will be able to write rules defining unfair, deceptive, and abusive practices that apply to both collectors and creditors. I've written elsewhere about how the systemic problems in the collections ecosystem begin at the creditor, so this is exciting news. What might be surprising though is that the collections industry seems to share in this excitement.

Continue reading "Debt Collection Industry Poised for Changes" »

Securitization, Foreclosure, and the Uncertainty of Mortgage Title

posted by Adam Levitin

I've got a new article out in the Duke Law Journal entitled The Paper Chase:  Securitization, Foreclosure, and the Uncertainty of Mortgage Title.  The article is about the confusion securitization has caused in foreclosure cases because of the shift in legal methods for mortgage transfer and title that accompanied securitization. 

The Paper Chase is not exactly a short article, but if you're the type that's into reading about UCC Article 3 vs. Article 9 transfer methods for notes and MERS, then this piece is for you. There's a lot of technical stuff in the article, but there's also a discussion of the political economy of mortgage title and transfer law, and some thoughts on how to fix the legal mess we currently have.  Abstract is below the break:

Continue reading "Securitization, Foreclosure, and the Uncertainty of Mortgage Title" »

New State Exemption Survey

posted by Alan White

Federal bankruptcy law defers to the states on a critical issue: what is the basic minimum income and property that debtors need not surrender to creditors.  Four states protect 100% of workers' wages, while 21 states allow creditors to garnish debtors' wages down to 50% of the poverty level for a family of 4, according to a new report from the National Consumer Law Center.   Similarly only 9 states protect a used car of  average value from seizure, and state home exemptions are still all over the map.  Even the exemptions that exist are often evaded by the $100 billion debt buyer industry, whose collection suits are dominating civil court dockets around the country. 

This comprehensive and timely survey will be an essential tool not only for bankruptcy research, but also for anyone who cares about economic inequality and the plight of the working poor.

Good News About Credit Card Debt Sales

posted by Nathalie Martin

American Banker reporters Maria Aspan and Jeff Horwitz have been sharing cutting edge news about the debt collection and debt buyer world for some time. The news they share this week is good news indeed. They report that JPMorgan Chase is pulling back even more in its credit card collections-related activities, by stopping most bad loan sales to outside debt buyers. Chase had been receiving criticism for the way in which it pursued defaulting customers, which included many procedural shortcuts, mass robo-signing, and so on. As a result, Chase stopped suing its own customers and began selling off even recent bad debts to third parties. Now, just in time to avert new OCC suggested best practices for selling bad debts, Chase says it will no longer sell the bad debt either.  This leaves me scratching my head over here. Exactly what will happen to the bad debts now? 

Continue reading "Good News About Credit Card Debt Sales " »

Foreclosing On The Life Story In Your Head

posted by Melissa Jacoby

BrainsIn the fictional worlds of Charles Yu, George Saunders, or Etgar Keret, a person's accumulated life stories and thoughts when she files for bankruptcy might be withdrawn, like blood, then filtered for marketability. In such a world, a debtor might be required to spin her tale for the sole benefit of creditors, or forever silenced. Planning to give a five-minute anecdote about your childhood at The Moth? Don't even think about it.

Casey Anthony's bankruptcy was filed in January 2013 as a no-asset Chapter 7, with nearly  $800,000 in debt - not counting scores of claims with amounts identified as "unknown." Ms. Anthony's income and expense schedules list, literally and rather remarkably, zeroes all the way down. At the 341 meeting of creditors in March, Ms. Anthony asserted that friends and strangers take care of her needs. Presumably, this arrangement is not sustainable. Will she seek to support herself in the future by talking about her past? 

The bankruptcy trustee wants to auction off something that probably has never been expressly sold in a bankruptcy case (it certainly wasn't listed as an asset in the schedules): exclusive rights in perpetuity to the commercialization of Ms. Anthony's life story, including "her version of the facts, her thoughts and impressions of whatever nature, in so far as these pertain to her childhood, the disappearance and death of her daughter . . . her subsequent arrest . . . and withdrawal from society. . . ." (see the lengthy paragraph 3 in here). How much debt would be satisfied by such a sale? 

Continue reading "Foreclosing On The Life Story In Your Head" »

Direct Deposit and Social Security: Not so Nice for Those who Owe: Part II

posted by Nathalie Martin

So just a bit more information on garnishing social security and other public benefits.   Basically 42 U.S.C. § 407(a) has always precluded creditors (other than the IRS for taxes or those holding child support claims) from garnishing social security benefits (SSA) or other public benefits. As I found out when my cousin got into trouble with a credit card company, however, the banks were under no obligation to determine if the funds in a bank account that contained funds from more than one source were non-garnishable (forgive me for making up words). NCLC’s Margot Saunders and others spearheaded the implementation of 31 C.F.R. 212.6, which provides in part:

Continue reading "Direct Deposit and Social Security: Not so Nice for Those who Owe: Part II" »

Direct Deposit and Social Security: Not so Nice for Those who Owe

posted by Nathalie Martin

Jonathan Ginsberg posted an interesting article on the National Association of Chapter 13 trustees web site this weekend, that will be relevant to many of our readers as well. Social security is now requiring all beneficiaries to set up direct deposit, which means the resulted funds could become available to executing creditors if there are any funds from any other source in the account as well. You might recall my blog about this some time back, which contains cites to some of the relevant law.

As my previous blog explains, Federal law provides that Social Security payments are exempt from garnishment from civil creditors. If, for example, a credit card lender sues you and obtains a judgment, that creditor cannot ask Social Security to withhold funds from your government check. While these protections do not apply with equal force to the IRS collecting a tax debt or a creditor collecting child support, all other creditors are not to touch social security funds under any circumstances.

Continue reading "Direct Deposit and Social Security: Not so Nice for Those who Owe" »

Sixth Circuit Throws Out Debt-Buyer Settlement

posted by Nathalie Martin
The National Consumer Law Center’s e-blast this morning contained some very good news for consumers.  The 6th Circuit has just thrown out a nationwide settlement involving Midland, a robo-signing debt buyer, and over a million consumers.  This will allow other class and individual actions to proceed against Midland. The suit was thrown out for faulty notice to class members, who were not told in the settlement notice that they’d lose their individual fraud claims against Midland.  You may have heard about this case before, as it is the one in which an Ohio District Court held that “robo-signing” affidavits in debt-collection actions violate the FDCPA because the allegation of personal knowledge is false and misleading.  Midland employees had beensigning between 200 and 400 computer-generated affidavits per day for use in debt collection actions, without personal knowledge of the accounts. The unwound settlement would have paid consumers about $17 each.

Two very Important FTC Studies, One on Credit Reports and One on Debt Buyers

posted by Nathalie Martin

A recent FTC study of errors in credit reports is getting a lot of press. According to the most recent in a number of studies of the accuracy of credit reports, about 5% of U.S. consumers have an error on their credit report that is serious enough to increase their cost of credit. Although the credit industry is arguing that this is a small percentage (and I agree that this is a lot smaller than I expected), the head of the FTC does not consider it small. "These are eye-opening numbers for American consumers," said Howard Shelanski, director of the FTC's Bureau of Economics. "The results of this first-of-its-kind study make it clear that consumers should check their credit reports regularly. If they don't, they are potentially putting their pocketbooks at risk." The industry quickly noted that the errors in the other 95% do not affect people’s credit.

Continue reading "Two very Important FTC Studies, One on Credit Reports and One on Debt Buyers" »

An Empirical Overview of Modern Sovereign Debt Litigation

posted by Mark Weidemaier

In December, I attended a terrific conference examining historical parallels to the European debt crisis. I was there to talk about the early-20th century antecedents of modern collective action clauses, the magic contractual potion - or is it snake oil? - that will banish holdout litigants from the kingdom forever more. There were some really great papers, including this one (Sovereign Defaults in Court: The Rise of Creditor Litigation 1976-2010, by Julian Schumacher, Christoph Trebesch, and Henrik Enderlein), which may interest many Credit Slips readers.

One of my interests involves how changes in sovereign immunity law influence bond contracts, and I have written about that relationship here. Schumacher et al. address a related but quite distinct subject: the determinants of sovereign debt litigation. Why are some restructurings followed by a flood of lawsuits when others produce few or none? Are poorer countries more likely to be targeted? Does the size of the haircut matter? They have assembled a comprehensive dataset, which includes essentially all lawsuits filed in London and New York since the advent of the modern era of sovereign immunity (which they date to the 1976 enactment of the Foreign Sovereign Immunities Act in the US). My synopsis of their findings after the jump.

Continue reading "An Empirical Overview of Modern Sovereign Debt Litigation" »

Putting the E(lliot) in Sovereign Debt Enforcement...

posted by Mark Weidemaier

Until a month or so ago, you could have asked almost any economist or political scientist whether sovereign borrowers worry about legal enforcement, and, by way of answer, you would gotten a technical version of "Huh?" Academics disagree about why sovereigns repay loans, but almost no one thinks they do so to avoid being sued. So although bond investors are technically entitled to sue sovereign borrowers, there is no evidence that these formal legal entitlements actually impact the likelihood of repayment. That's why NML v. Argentina has captured so much attention. Hedge funds like Elliott Associates (and NML Capital, a related fund) are finally at the cusp of creating potent remedies for jilted bond investors.

If this effort succeeds, it will mark a revolution in the sovereign debt markets, one that will give sovereign borrowers reason to fear legal enforcement. And at first glance, one would think investors would welcome such a development. In a private loan, lenders typically want strong legal enforcement rights - the better to ensure they get their money back. Surprisingly, however, this hasn't always been true in the sovereign debt context. In this recent paper, I track how sovereign bonds evolved in response to the momentous changes in the US law of sovereign immunity that happened in the 20th century. Between 1952 and 1976, foreign sovereigns gradually became subject to the jurisdiction of US courts and eventually to coercive methods of judgment enforcement (i.e., asset seizure). Investors had these rights, however, only if the bond contract granted them, and almost no bond contract did. To the contrary, throughout most of the 1970s and 1980s, bonds issued under New York law provided only symbolic enforcement rights - basically, allowing investors to sue the borrower but not to enforce the judgment. What's more, investors didn't seem to be willing to pay more for the new enforcement rights they did receive. Basically, a major doctrinal revolution occurred, but investors didn't seem to notice.

As for NML v. Argentina - well, investors seem to have noticed. Later this week, I'm heading to a conference in Geneva, where a group of lawyers, economists, and political scientists will talk about past debt crises and the lessons they offer for the present one. I expect that NML v. Argentina will capture a fair amount of academic interest. After many years of discounting the relevance of legal enforcement, academics may have to start taking it seriously too.

Debt Collection Goes Hollywood with Brad Pitt as Director

posted by Nathalie Martin

At long last, debt collection goes Hollywood! Brad Pitt's productio company Plan B and HBO are developing what looks like a new TV series called "Paper," a drama inspired by Jake Halpern's essay "Pay Up" featured in the New Yorker. "Paper" features a gangster trying to clean up his life and support his children as a single parent through a professional debt collector’s job. He finds, however, that life in the debt collection business can be just as lethal as the biz he's struggling to leave behind. I am excited for the TV series, which I picture to be a bit like  a combination of Breaking Bad and the Wire, without the drugs or the frontier or backwater towns. 

In Pay Up, the dad involved collected on aging payday loans, the kind of debt almost no one pays on. The project is classified as “in development,” with no production schedule set. Currently, there are at least two producers and one writer attached, so we should see this series or at least ads for it in about a year.

You've sunk my battleship! And seized my carrier...

posted by Mark Weidemaier

There is a widely-held view that sovereign bonds don't contain the optimal terms but are slow to incorporate better ones. Right or wrong, that view has prompted many government-sponsored initiatives to reform bond contracts, such as the current plan to mandate the use of standardized collective action clauses in all euro area government bonds. These reform initiatives often fail, and the view persists that sovereign bond contracts could use some improvement.

Why do I mention this? My last post discussed how the sovereign immunity waiver in its bonds got Argentina into trouble, allowing jilted bondholders to convince a court in Ghana to help them seize an Argentine navy ship. Perhaps this was consistent with what Argentina agreed to in the bond, but the country predictably objected when the seizure occurred. The ensuing diplomatic kerfuffle highlights why enforcing jurisdictions (like Ghana, in this case) might be better off forbidding their courts to help private creditors seize a foreign country's military assets.

Below the jump, you'll find two figures showing how sovereign bonds have addressed the subject of sovereign immunity over the past two decades. As you'll see, Argentina is no outlier; plenty of bonds include waivers that are just as broadly-written.

Continue reading "You've sunk my battleship! And seized my carrier..." »

"A rifle doesn't scare me. But we expected the Argentines to act professionally..."

posted by Mark Weidemaier

In my last post, I said that the US Court of Appeals for the Second Circuit had interpreted the pari passu clause in Argentina's bonds as a promise to forego a century's worth of restructuring practices. The district judge still needs to clarify the injunction enforcing that promise. While we wait for that very large shoe to drop, I want to talk about the other major enforcement ruckus involving Argentina and ... NML Capital. This one already has people reaching for their weapons.

The Libertad, an Argentine naval vessel, remains in port in Ghana after a court there ordered its seizure and potential sale to satisfy a judgment held by NML Capital. Military property is typically immune from this kind of thing, but the court held that Argentina had waived its immunity in the bond. The case is odd, for reasons I'll explain here. But this post also lays some groundwork for future posts, which will share some evidence about general market practices with respect to immunity waivers.

Continue reading ""A rifle doesn't scare me. But we expected the Argentines to act professionally..."" »

MyConsumerTips.info

posted by Amy Schmitz
I have been working for a few years in developing and creating a consumer outreach website at MyConsumerTips.info.  The site is purely non-profit and has no sponsors or advertisers. It aims to simply provide consumers with “consumer tips” that change each day, independent summaries regarding debt-related and other consumer rights, quizzes and polls regarding such issues, and other consumer protection resources. It is user-friendly and interactive. This is part of my larger “Consumer Empowerment”service and experiential learning projects, and outreach endeavors.

Unfortunately, it is tough to gain traction for such non-profit sites without paying for promotions through Google or others. Also, there so many sites that purport to provide consumer resources that individuals suffer information overload and are not sure what to trust.

Hopefully, MyConsumerTips.info will deservedly gain trust, do some good and expand in ways that benefit consumers!  Check it out.

Learn How to Defeat Debt Collection cases Involving Junk-Debt-Buyers and Other Robo-Signers

posted by Nathalie Martin

Professor Peter Holland (U Maryland Law) has written a fantastic paper explaining in great detail how to defend against a debt-buyer-lawsuit, and possibly recover for Fair Debt Collection Practices Violations as well. Jessica Silver-Greenberg has followed on with an interesting New York Times article  in which one Brooklyn judge estimates that “roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.”
 
Many of these suits are brought by companies who buy long lists of aged debt, some of which is time barred, some of which has been discharged in bankruptcy, and some of which already has been settled or collected upon. The buyers typically pay pennies on the dollar for lists of these debts, and have no receipts or proof that the debts are still due.  In fact they know little to nothing about the debt, which is typically sold as is with no representations that the debts are still due.

Continue reading "Learn How to Defeat Debt Collection cases Involving Junk-Debt-Buyers and Other Robo-Signers" »

A Question Answered

posted by Bob Lawless

Back in April, I posted about Minnesota Attorney General Lori Swanson investigating allegations that Accretive Health Care aggressively collected debts from hospital patients. These allegations included claims that Accreive was obtaining payments from people in emergency rooms and from their hospital bedsides. Yesterday, Accretive settled these claims, agreeing to pay $2.49 million and to withdraw from the state of Minnesota for a period of six years (although it can come back after two years with the attorney general's permission). New York Times coverage is here.

Over coffee this morning with a friend, I threw out the same question from my original post. How does an organization get itself to the place where it collectively comes to think such strong-arm collection tactics on hospital patients are a good idea, let alone morally defensible? A profile of Accretive's CEO, Mary Tolan, in Crain's Chicago Business contains this gem:

"My objective is just to be a happy, confident capitalist," says the devotee of Ayn Rand's and Milton Friedman's free-market gospel, which she applies with a combative, survival-of-the fittest management style.

At least I have my answer.

Continue reading "A Question Answered" »

When Serving Jail Time for Unpaid Debts Becomes a Debt Spiral

posted by Nathalie Martin

Tell me.  Are we allowed to do anything we like to those with the least power and money in our society? Are there no limits? We know that in some states, private actors have been permitted to charge 500-1,000% for loans, but what about public actors? Can you think of any debtor-credit practices that rise to the level of human right violations? This is question Chrystin Ondersma (Rutgers Newark School of Law) and I have been asking ourselves in connection with a project on which we are working.

Earlier this month, the New York Times ran a story that chronicled several people jailed for minor infractions (such as unpaid speeding tickets or other driving violations), and then charged huge prison costs after serving jail time resulting indirectly from these unpaid debts. For example, one woman was fined $179 for speeding, failed to show up at court (she says the ticket bore the wrong date), after which her license was revoked. When she was pulled over for driving without a license, her fees totaled over $1,500. Unable to pay, she was handed over to a private probation company and jailed, racking up an additional fee for every day behind bars. She’s been locked up three times for that one driving offense, serving 40 days, and now owes nearly $3,000. Another guy featured spent a total of 24 months in jail and owes $10,000 for what started out as very small dollar minor infractions. Read the article for more of the same.

Continue reading "When Serving Jail Time for Unpaid Debts Becomes a Debt Spiral" »

News Flash: It is Illegal for Debt Collectors to Stalk Debtors on Facebook or Threaten to Kill Their Dogs

posted by Nathalie Martin

Do any of you read creditcards.com? It is a great source of info on various topics, not just credit cards. Today’s story featured three debt collection horror tales, as well as a state of the nation of nasty collection efforts. According to the story, in 2011, the FTC received 180,000 complaints about debt collectors, an increase of over 40,000 from 2010. In one case, a debt collector filed a lawsuit against a California debt collector, hired by a funeral home, who threatened to dig up the body of the debtor's daughter -- and also to shoot her dog. Here is a run-down of three other featured stories. 

In the first one entitled “terrorized by text,” Jessica Burke fell behind on her car payments. She called the financing company, and they agreed to give her extra time to pay. But the next day, she got a call from a man using a fake name who threatened to sue. He got her address and other private information from her cell phone company (say what?) by impersonating her father and asking to be added to her account. He called and texted and called and texted, after some time of which she called the police, who ordered the collector to stop contacting her. But the texts continued for weeks, coming from a disguised number and implying that he was watching her. In one, he called her "Porky Pig" and a "200-pound slob" and added, "I got picture messages of you today." Late one night, she says, he texted her, claiming he was outside her house.She says: "It was

Continue reading "News Flash: It is Illegal for Debt Collectors to Stalk Debtors on Facebook or Threaten to Kill Their Dogs " »

Storage Wars and the Credit Practices Rule

posted by Bob Lawless

A few times I have caught Storage Wars, a television show on A&E. When storage units customers do not pay their fees, the contents are auctioned off by the storage unit company. The show follows professional treasure hunters who bid at these auctions. The catch is that the treasure hunters are purchasing the unit without full knowledge of the unit's contents. With all the drama of finding out what was behind door number three on Let's Make a Deal, viewers get to watch these treasure hunters paw through the storage unit's contents and try to profit by finding items of real value. Every now and then, an item of tremendous value might be uncovered. A few days ago, I started wondering how this was legal.

Continue reading "Storage Wars and the Credit Practices Rule" »

Affidavits Are Not a Substitute for Evidence of Debt Ownership

posted by Bob Lawless

The Tennessee Court of Appeals has issued a decision that highlights the problems facing credit card debt collectors in a post-robosigning world (see here and here). The decision reaffirms what should be a simple principle in a debt-collection lawsuit. The burden is on the debt collector to show it owns the debt and to show the consumer is liable for the amount the debt collector asserts. The debt collector's say-so is not enough.

In LVNV Funding, the consumer had opened a Sears Gold Mastercard account in 1985 and was being sued for a balance that was a little more than $15,000. He had not used the account since 2001 and thought it had been settled in 2005.

One might first think Sears was the plaintiff. It was not. Sears had sold the account to Citibank, but Citibank was not the plaintiff either as it had sold the account to Sherman Financial Group. The plaintiff was LVNV Funding, a subsidiary of Sherman Financial to which the account had been assigned.

Continue reading "Affidavits Are Not a Substitute for Evidence of Debt Ownership" »

Accretive's Bedside Manner for Debt Collection

posted by Bob Lawless

The end of last week got a little busy for many of the Credit Slips bloggers and none of us talked about the story last Wednesday by Jessica Silver-Greenberg at the New York Times regarding aggressive debt collection practices by Accretive at hospitals. The allegations came to light in a report by Minnesota attorney general, Lori Swanson. Among the most appalling claims was that Accretive posted employees in emergency rooms, demanding payment before treatment was administered. Forget the legal side of this. How does a person or an organization get to a place where these sorts of tactics seem like the right thing to do? (In fairness, it should be noted that Accretive has denied the claims made by Attorney General Swanson.)

My colleague, John Colombo, has a post up at the Nonprofit Law Prof Blog discussing the tax-exempt status issues for nonprofit hospitals that deploy aggressive debt collection practices such as those alleged to have been done by Accretive. John's work raises a bigger question: should we still give nonprofit hospitals a tax exemption if they are not doing charitable work in a different sense of the word?

An Idea to Limit Body Attachments

posted by Bob Lawless

As many Credit Slips readers will know, so-called "body attachments" allow a creditor to haul a judgment debtor into state court if the debtor fails to respond to court summonses to answer questions about the debtor's financial affairs. It is a highly coercive tactic and was originally intended as a last resort against a recalcitrant debtor. Today, it is an overused tactic that intimidates debtors who often understand only that they have been arrested because they have an unpaid debt.

Continue reading "An Idea to Limit Body Attachments" »

Deepthroat: Debt Collector Edition

posted by Adam Levitin

The American Banker has been running an important series on credit card debt collection (here, here, and here) that Joe Nocera highlighted in his NY Times column today. The story that they're telling, however, is only part of the picture. To fully understand the debt collection industry, it's necessary to take Deepthroat's advice, and "follow the money." 

I haven't gone very far down this rabbit hole, but it's clear to me that there's another important angle to this story, namely, who is funding the debt collectors. 

Continue reading "Deepthroat: Debt Collector Edition" »

American Banker on Credit Card Debt Collections

posted by Bob Lawless

Jeff Horwitz at the American Banker has been doing some great reporting on abusive debt collection practices in the credit card industry. Joe Nocera's column took up the subject today. Robo-signing and other abuses have been a problem for a while with credit card debt collections, and Horwitz and Nocera do a public service by drawing attention to the problems. The situation cries out for congressional hearings and for regulatory investigation. It is great to see the Consumer Financial Protection Bureau make debt collection practices one of its top priorities.

Horwitz's articles at the American Banker include:

Maria Aspen at American Banker separately reported how the sloppy sales of delinquent credit card accounts and shoddy debt collection practices were a nightmare for one Maryland woman.

Contributors

Current Guests

Follow Us On Twitter

Like Us on Facebook

  • Like Us on Facebook

    By "Liking" us on Facebook, you will receive excerpts of our posts in your Facebook news feed. (If you change your mind, you can undo it later.) Note that this is different than "Liking" our Facebook page, although a "Like" in either place will get you Credit Slips post on your Facebook news feed.

News Feed

Categories

Bankr-L

  • As a public service, the University of Illinois College of Law operates Bankr-L, an e-mail list on which bankruptcy professionals can exchange information. Bankr-L is administered by one of the Credit Slips bloggers, Professor Robert M. Lawless of the University of Illinois. Although Bankr-L is a free service, membership is limited only to persons with a professional connection to the bankruptcy field (e.g., lawyer, accountant, academic, judge). To request a subscription on Bankr-L, click here to visit the page for the list and then click on the link for "Subscribe." After completing the information there, please also send an e-mail to Professor Lawless (rlawless@illinois.edu) with a short description of your professional connection to bankruptcy. A link to a URL with a professional bio or other identifying information would be great.

OTHER STUFF

Powered by TypePad