DANIEL MYERS FEATURED IN TRAVERSE CITY RECORD EAGLE STORY ON DEBT BUYERS
Attorney Daniel O. Myers was recently featured in a story about how Debt Buyers were filing more suits in Northern Michigan. The story, which ran in the Sunday, August 17, 2014 edition of the Traverse City Record Eagle, may be found here.
SEVENTH CIRCUIT DECISION AND FTC ACTION HIGHLIGHT NEED FOR CONSUMER WARINESS OF DEBT COLLECTORS
A recent action by the FTC and a decision out of the Seventh Circuit Court of Appeals highlight the need for consumers to be very wary of simply paying anyone who claims they are owed on an old debt.
First, the decision. In McMahon v. LVNV Funding., LLC, decided March 11, 2014, the Seventh Circuit held that a debt buyer’s dunning letters violated the Fair Debt Collection Practices Act because they could mislead a consumer into thinking the debt was enforceable in court when actually the time had run out to file a collection suit. The decision came in a consolidated appeal for two cases in Illinois. In both cases, the debts that were being collected on were well past Illinois’ statute of limitations – one was eight years old and another fourteen years old when the letters were sent. Neither letter alerted the recipient to the advanced age of the debt nor advised that making a partial payment could revive the statute of limitations. Both offered a chance to “settle” the debt for less than full face value.
The Court held that this kind of language was deceptive. While the Court stated it was not “automatically improper” to attempt to collect on a time-barred debt, a letter that would mislead an unsophisticated consumer into believing the debt was legally enforceable violates the Fair Debt Collection Practices Act. The Court focused on the word “settle” and the lack of disclosure that it as lawsuit could not be brought. Citing the definition of “settlement offer” and its connection to litigation, the Court held that this language, without more, implied that there was a potential legal claim that the consumer could only ignore at his peril. The Court noted that this differed from the rule in the the Third and Eighth Circuits, where the courts have held there must be an explicit threat of litigation, but reasoned that by failing to disclose that the debts were time barred and potentially misleading the unwary consumer, the letters misrepresented the legal status of the debt in violation of the FDCPA.
The case is significant for another reason, as well. Before deciding the case the Court invited the Federal Trade Commission and the Consumer Financial Protection Bureau to file a brief addressing the issues. Those agencies did so, arguing that collectors when collecting on time barred debts should inform consumers that the collector could not sue to collect and partial payment would revive the ability to sue on the balance. The Court relied heavily on this argument in its decision, and also cited some of the extensive studies undertaken by the agencies to document that debt buying industry, particularly the small amounts such buyers paid for time-barred debts. This deference to the FTC and the CPFB bodes well for consumers if other courts follow it – and in fact the Sixth Circuit recently invited the agencies to file a brief in a near identical case in that jurisdiction, one which includes Michigan.
Turning to the agency action, on March 13, 2014, the FTC announced that it had filed a lawsuit and obtained a temporary restraining order halting the operations and freezing the assets of a debt collecting operation out of Buffalo, New York, that it charged violated the Federal Trade Commission Act and the FDCPA. The FTC charged that the operation, which had been ongoing since 2010, would contact consumers and falsely represent that they were affiliated with the government and accuse the consumer of committing check fraud, and threatening them with arrest. The scheme used company names that suggested a government affiliation or national presence, such as Federal Recoveries, LLC, Federal Check Processing, Inc, Federal Processing Services, Inc., Nationwide Check Processing, and State Check Processing, Inc. and threatened consumers with lawsuits, arrest and imprisonment or seizure of assets – unless consumers paid a purported debt immediately. Over the course of its operation the scheme collected millions of dollars from unwary consumers.
These threats were repeated to consumers’ family members, friends, coworkers, and employers, and the operation revealed the consumers’ purported debts to these third parties as well. The FTC interviewed consumers who told the agency that the operation routinely refused to provide information about the debt, as required by federal law, or to investigate the debt’s legitimacy – even after some consumers explained that they did not owe the debt, the debt had been paid in full, or the that the operation did not have the authority to collect on the debt.
While the tactics used by the Buffalo operation and the debt collectors in the McMahon case are wildly different, the fundamental problem for the consumer who was confronted with their attempts to collect is the same: the consumer was faced with a demand for payment on a debt that he or she may not have recognized, or may not have realized was no longer legally enforceable. In both instances, unless the consumer was aware of his or her rights, they could find themselves paying money to settle a debt they did not need to pay.
You should be very cautious if you are contacted by a debt collector, even if you believe you may have a valid unpaid debt, and even if it is from a company you know you have done business with. Never admit you owe a debt or the amount sought if you are the least bit unsure. Always ask for a validation of the debt – i.e., a copy of the agreement under which they claim to have the right to collect, and proof that they are in fact the owner of the account. You are entitled to this information form a debt collector under federal law, but more importantly, if someone wants you to pay them money, they ought to be prepared to demonstrate it is in fact owed to them. Unless you are certain the amount of the debt the collector is saying you owe is accurate, you should also dispute the amount, and ask for a break down by principle, interest and any fees charged of the amount sought. You should do this in writing, and send your request by registered mail, return receipt requested.
A collector that threatens you with jail, is abusive, refuses to give you information regarding the debt, or refuses to give you information regarding the address you can send a validation request to is probably not a legitimate debt collector. Even if they have some of your personal information, like a social security number or an address, you should not give them any more information. Report the call to the FTC using their online form at www.ftccomplaintassistant.gov, and to your state consumer protection agency.
Finally, it is always a good idea to seek an attorney’s advice if you are facing a debt collection action. You may have defenses you were unaware of, or a counter claim under consumer protection acts or the Fair Debt Collection Practices Act. Often, these laws will allow you to seek attorney’s fees from the debt collector if you are successful in a lawsuit, and many consumer lawyers will take such cases on a contingent basis.
Daniel O. Myers is an attorney in Traverse City who specializes in financial litigation on behalf of consumers, including debt collection defense and claims against abusive debt collectors, both individually and in class actions. Mr. Myers has been appointed lead class counsel or class counsel in numerous state and national class actions representing consumers, obtaining settlements in excess of $100 million. He is a member of the National Association of Consumer Advocates.
If you are a consumer in Northern Michigan facing a lawsuit for debt collection, contact The Law Offices of Daniel O. Myers for a free initial consultation.
New Year a Good Time to Review Your Credit Report
Thanks to the Fair Credit Reporting Act, consumers are entitled to a free credit report each year from each of the “Big Three” credit reporting agencies. The New Year is a good time to pull one or all of those reports and ensure they are accurate. Go to www.annualcreditreport.com to request your reports. Watch out for look-alikes and phony “free” offers that come with costly add-ons or are phishing scams – AnnualCreditReport.com is the official site to get your free annual credit reports and the only site authorized by federal law. Once you get your report, review it carefully to ensure the information on it is accurate and complete. If you have questions about any entries, you can send an inquiry or dispute the entry. Information on how to do that, as well as lots of other helpful information about credit reports and scores, can be found at the Consumer Financial Protection Bureau’s website at www.consumerfinance.gov.
NORTHERN MICHIGAN CONSUMERS TARGETED BY DEBT BUYERS
The recovery from the 2008 financial crisis is finally starting to be apparent, but Northern Michigan consumers may still feel the hangover from the days of “irrational exuberance,” from debt buyers seeking to collect on long forgotten defaults.
Debt buyers are companies that purchase defaulted debt from the original creditors for pennies on the dollar, and then seek to recover the face value through collections. The industry is huge; a recent study by the Federal Trade Commission (FTC) found that nine of the largest national debt buyers purchased credit card debt with a face value of $43.4 billion in 2008. Often debt buyers use the courts as their collection method of choice, filing lawsuits for what they claim is owed them. For example, three of the largest debt buyers filed over 850 lawsuits last year in Michigan’s 86th District Court, and have already filed over 450 this year. In most collection cases, the consumer being sued never responds and a default judgment is entered for the full amount claimed, which, if collected, results in a substantial profit for the debt buyer.
Typically, however, the information a debt buyer has for any given account is limited. It may be only a line in a database with a name, address, phone number, account number, a balance, and a date of last payment or charge off date. Sometimes they will also have a social security number, but often they do not. Nor is there a break out of how the balance of the alleged debt was arrived at (i.e., what is principle, what is unpaid interest, what fees, and how the number was arrived at). More often than not, the debt buyer has only limited if any documents from the account, such as the original Agreement, statements, or correspondence. The contracts of sale for debts typically disclaim all warranties and representations regarding the accuracy and enforceability of the individual debts, essentially selling them “as is.”
Sometimes the debt buyer has an agreement with the company or person who sold the debt to get additional information; sometimes they do not, or the information does not exist. So when a debt buyer contacts a consumer, the consumer often will have no way of knowing who the debt purchaser is, or what the debt is they are supposedly liable for. The debt buyer may have the wrong person. Often, the amount of the actual debt is unverifiable. Additionally, a debt may be legally unenforceable because of the lapse of the statute of limitations. And in the turmoil of the financial crisis, many records were lost or mishandled, making what records do exist unreliable. What this boils down to is that the debt buyer is banking on consumers not showing up to contest the claim.
You should be very cautious if you are contacted by a debt collector, even if you believe you may have a valid unpaid debt, and even if it is from a company you know you have done business with. Never admit you owe a debt or the amount sought if you are the least bit unsure. Always ask for a validation of the debt –you are entitled to this information from a debt collector under federal law, but more importantly, if someone wants you to pay them money, they ought to be prepared to demonstrate it is in fact owed to them. Unless you are certain the amount of the debt the collector is saying you owe is accurate, you should also dispute the amount, and ask for a break down by principle, interest and any fees charged of the amount sought. You should do this in writing, and send your request by registered mail, return receipt requested.
If your first contact with the debt buyer is when you are served a complaint, don’t panic and don’t ignore it! Under the Rules of court you only have twenty one days to file an answer to the complaint after you receive it, and the collector is counting on you missing that deadline. While you can do this yourself using the forms provided by the court, it is always a good idea to seek an attorney’s advice if possible. The National Association of Consumer Advocates maintains a list of members, many of whom specialize in debt collection defense and claims against debt collectors for violating consumer protection acts or the Fair Debt Collection Practices Act. Often, these laws will allow you to seek attorney’s fees from the debt collector if you are successful in a lawsuit, and many consumer lawyers will take such cases on a contingent basis. Remember, the debt collector has an attorney – if you can level the playing field, you are well on your way to winning.
Finally, check your credit report regularly using the free credit report available to you through www.annualcreditreport.com (and don’t be taken in by “free” sites that try to sell you additional products you don’t need). Many debt buyers try to “re-age” debts by reporting them as new obligations when they are bought or misreporting the date of delinquency, which would make the debt stay on your credit report longer. This is a blatant violation of the Fair Credit Reporting Act, but it happens frequently anyway. If you have an attorney representing you, make sure he or she knows of any incorrect entry on your credit report by a debt collector, and make sure you take steps to get it corrected. Information on how to dispute incorrect entries on you report can be found on the FTC’s website at http://www.consumer.ftc.gov/.
Daniel O. Myers is an attorney in Traverse City who specializes in financial litigation on behalf of consumers, including debt collection defense and claims against abusive debt collectors, both individually and in class actions. Mr. Myers has been appointed lead class counsel or class counsel in numerous state and national class actions representing consumers, obtaining settlements in excess of $100 million. He is a member of the National Association of Consumer Advocates and the American Association of Justice.
If you are a consumer in Northern Michigan facing a lawsuit for debt collection, contact The Law Offices of Daniel O. Myers for a free initial consultation.
Debt Buyers try to collect over a million disputed debts a year – and that’s the low ball number
A recent report on the debt buying industry published by the Federal Trade Commission found that when the debt buyers tried to collect the debts themselves, consumers disputed the debts 3.2 percent of the time. Sounds like a small percentage, right? But that translates to over a million debts disputed every year, and it doesn’t count debts the debt buyers farm out for collection to third party outfits. When you are contacted by a debt collector, it’s always a good idea to seek an attorney’s advice. You may have defenses you were unaware of, or a counter claim under consumer protection acts or the Fair Debt Collection Practices Act. Often, these laws will allow you to seek attorney’s fees from the debt collector if you are successful in a lawsuit, and many consumer lawyers will take such cases on a contingent basis. If you have a question about your legal rights, contact the Law Offices of Daniel O. Myers for a free initial consultation.
The Law Offices of Daniel O. Myers Investigating Possible Mis-Application of Credit Card Payments
If you pay your credit card bill through an online “bill pay” program, you may have been hit with unexpected late fees and interest, or had problems with getting your payments applied promptly. The Law Offices of Daniel O. Myers is investigating whether that is due to credit card issuers classifying those payments as “non-conforming,” which would allow them to wait up to five days before posting your payment to the account. If you think you might have been a victim of this practice, call us at 929-0500.
In Re: Wachovia Corp. "Pick-A-Payment" Mortgage Marketing and Sales Practices Litigation
This lawsuit involves multiple cases filed in seven states and consolidated before Judge Fogel of the District Court for the Northern District of California. Among other claims, the cases sought relief for violation of the Truth in Lending Act and various state consumer protection acts in the sale and marketing of the Pick-a-Payment mortgage loan product. The Pick-a-Payment mortgage loan permitted the borrower to select and make a minimum payment amount for a limited time and subject to certain conditions. When a payment was insufficient to pay the interest owed, unpaid interest was added to the loan balance and the outstanding loan balance increased (“negative amortization”). Mr. Myers has been extensively involved in the litigation, and filed several of the cases ultimately consolidated before Judge Fogel.
After almost three years of litigation and lengthy arms-length negotiations, a proposed settlement was reached and brought before the Court for approval in December, 2010. A Final Fairness Hearing was held on Friday, April 20, 2011. On May 17, 2011 the Court granted final approval of the class action settlement. All appeals have been resolved and the Settlement is now Final. The Effective Date of Settlement is September 7, 2011. Payments will be mailed to eligible Class Members within thirty days of the Effective Date. Additional information can be found at www.pickapaysettlement.com.