CL&P Blog

HufPo Report: Suit Charges Debt Collector Told Disabled Vet He Should Have Died

Here.  An excerpt from what the collector supposedly said:

"F--- you! Pay us your money! You can't afford an attorney. You owe us. I hope your wife divorces your a--. If you would have served our country better you would not be a disabled veteran living off social security while the rest of us honest Americans work our a-- off. Too bad; you should have died."

Paper on Forum Shopping in Debt Collection

Judith L. Fox of Notre Dame has written How Forum Determines Substance in Judicial Debt Collection, 31 Banking and Financial Services Rev. 11 (August 2012). Here's the abstract:

In an email to the Small Claims Task Force, a committee appointed by the Indiana Supreme Court to investigate allegations of abuse in the Marion County Small Claims Court, an Indiana attorney claimed that collection attorneys were forum shopping in Indiana small claims court. In its subsequent report, the task force confirmed that some forum shopping is occurring in Marion County Small claims courts. This study takes that allegation a step further and looks beyond the small claims courts of Marion County to examine the forum shopping practices of collection attorneys throughout Indiana. The evidence suggests that collection firms do forum shop between courts in individual judicial districts. This article takes a closer look at forum shopping by exploring the possible motivations for the forum shopping and its implications for consumers.

Times Report: Debt Collectors Harness Prosecutors

by Jeff Sovern

Today's Times has a story headlined "In Prosecutors, Debt Collectors Find a Partner."  An excerpt:

The letters are sent by the thousands to people across the country who have written bad checks, threatening them with jail if they do not pay. They bear the seal and signature of the local district attorney’s office. But there is a catch: the letters are from debt-collection companies, which the prosecutors allow to use their letterhead. In return, the companies try to collect not only the unpaid check, but also high fees from debtors for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.

* * *

Consumer lawyers have challenged the debt collectors in courts across the United States, claiming that they lack the authority to threaten prosecution or to ask for fees for classes when no district attorney has reviewed the facts of the cases. The district attorneys are essentially renting out their stationery, the lawyers say, allowing the companies to give the impression that failure to respond could lead to charges, when it rarely does.       

Two comments: first while the Fair Debt Collection Practices Act, in § 1692p, provides that under certain circumstances operators of check diversion programs are not automatically debt collectors, the exception applies only if the company "does not exercise independent prosecutorial discretion" and if the prosecutor determines that "probably cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate. . . ."  If no prosecutor is involved, it seems unlikely that those criteria are satisfied, meaning that the company operating the program can qualify as a debt collector and would be subject to the FDCPA's requirements. Section 1692e of the FDCPA bars the use of false or misleading representations, which includes the "false representation or implication that the consumer committeed any crime" and falsely representing a document as issued by state officials.

Second, the sequence of events makes me wonder what the debt collectors are paying the District Attorneys for.  The DAs don't seem to conduct the class, the fee for which generates the payment for the DA.  Nor are the DAs making the determination of who should take the class. 

Articles in Today's Times on Dischargeability of Student Loan Debt.

Here is a report on the pain involved in satisfying the "undue hardship" standard for discharging student loans in bankruptcy and here is a story about the case Scott Michelman blogged about earlier this week addressing debt collector liability for misleading borrowers about the dischargeability of student loans.

Times Report on Problems in Collecting Credit Card Debt and Column on Refinancing Mortgages

The debt collection report is here. An excerpt:

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

As they work through a glut of bad loans, companies like American Express, Citigroup and Discover Financial are going to court to recoup their money. But many of the lawsuits rely on erroneous documents, incomplete records and generic testimony from witnesses, according to judges who oversee the cases.

Lenders, the judges said, are churning out lawsuits without regard for accuracy, and improperly collecting debts from consumers. The concerns echo a recent abuse in the foreclosure system, a practice known as robo-signing in which banks produced similar documents for different homeowners and did not review them.

“I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt,” said Noach Dear, a civil court judge in Brooklyn, who said he presided over as many as 100 such cases a day.

Meanwhile, on the opinion pages, Nobel laureat Joseph Stiglitz and frequently-quoted economist Mark Zandi published The One Housing Solution Left: Mass Mortgage Refinancing.

Debt Collection Video

Here or click on the embedded video below. (HT: Gina Calabrese)

 

Debt Collection Attorney Listing: Attorney Who Can Sign Name is Good Enough

From Craig's List.  The third paragraph is particularly interesting.

We are a collection agency/debt buyer. What we are looking for is a part time attorney to work for us as our corporate counsel, on our payroll, about 5 to 6 hours a week. This is a short term employment arrangement, no longer than 90 to 120 days.

Your job will be to sign pleadings, praecipe for entry of appearances, praecipe for writ of execution, and garnishment orders. Our paralegal will prepare all paperwork for your signature. This is very standard stuff for us.

If you are an attorney looking for challenging legal work, this is not for you. WE DO NOT NEED F LEE BAILEY- we are fee shopping. If you passed your boards with a D+, and you can sign your name, you possess all the credentials required for this job. If this opportunity interests you, please feel free to reply to this email with a brief description of who you are, when you got your law license, and what you will be needing from us in the way of compensation.

I hope that any attorney who works for them will tell them that an attorney who does no more than sign his or her name to documents someone else prepared would violate the federal Fair Debt Collection Practices Act.  That statute, as interpreted by numerous cases, requires attorneys to engage in a "meaningful review" of the file before signing documents in a debt collection matter.  Meaningful review entails exercising independent professional judgment.  Sounds like if the employer doesn't hire a competent attorney, it will soon need an attorney to defend a law suit. (HT: Gina Calabrese)

UPDATE: A commenter raises the question of whether the listing might be for a job outside the US, meaning that the FDCPA would not apply.  In fact, the listing states the location to be "Pittsburgh west."

The Recorder: Theft of Lawyers' Identities Leads to Debt Collection Scams, Problems for Lawyers and Consumers

Here.  An excerpt:

A common scheme involves debt collection. Someone using the name of a lawyer will call or send letters to victims warning them to pay up or face criminal charges. There may or may not be a real debt. But some recipients will pay without questioning. Others get angry and track down the "attorney's" name on the bar's website. That's often the first time a lawyer learns someone has swiped his or her identity.

* * *

But the bar has no authority over non-lawyers. And warnings to scam artists usually just lead to the suspect disappearing for awhile only to pop up later with a new name and scheme, said [senior trial counsel in the California State Bar's office of intake] Horton-Billard.

(hat tip: Arundhati Satkalmi)

Peter Holland on Junk-Debt-Buyer Lawsuits

Peter A. Holland of Maryland has written Defending Junk-Debt-Buyer Lawsuits, 46 Clearinghouse Review No. 1-2 (May/June 2012). Here is the abstract:

Junk debt buyer lawsuits have overwhelmed the courts all across the United States. These lawsuits wreak havoc on consumers and their families. Often overlooked is the fact that judgments against consumers which are based on junk debt are part of a zero sum game, where every bogus judgment deprives a legitimate creditor of the chance to get paid from scarce resources. Thus, the legitimate creditor to whom money is owed is materially harmed by the junk debt buyer who extracts money based on an illegitimate claim, or who causes someone to declare bankruptcy. Providing representation to this otherwise unrepresented population will not only help individual consumers. It could improve the entire U.S. economy, by preserving precious resources to pay what is legitimately owed, and avoiding paying for what is not. This article surveys the landscape of the junk debt buyer industry and provides advice for consumer advocates engaged in the battle against unscrupulous junk debt buyers.

How Much Do Student Loan Debt Collectors Make?

by Jeff Sovern

Quite a bit, according to Bloomberg BusinessWeek. The article reports:

Joshua Mandelman made $454,000 in a single year as a student-loan debt collector -- more than twice the pay of the U.S. secretary of education.

His boss, Richard Boyle, chief executive officer of Educational Credit Management Corp., received $1.1 million in 2010, including commuting expenses from his ranch in New Mexico. Five other managers each took home more than $400,000.

* * * Four other [ECMC] debt collectors took home between $301,000 and $389,000 in 2010.

ECMC is a non-profit.  Who knew the non-profit sector paid so well?