Bank of America to Get Hit With Punitive Damages for Actions of Debt Collector

January 30, 2012 By Leave a Comment

Sometimes a small story portends humongous changes.

According to the Wall Street Journal, sometime this year Bank of America will be slapped with punitive damages in a collection dispute. What is interesting is that the collector in question isn’t an employee of Bank of America, but instead West Asset Management, a firm who purchased the delinquent debt from Bank of America.

West Asset Management has been sued for harassing and using “psychological warfare” to collect a credit card debt from a widow, owed by her deceased husband.

If the verdict comes down as expected this opens up a legal Pandora’s box for banks, who will become exposed to massive punitive damages on the heels of the thousands of annual lawsuits for debt collector abuse and misdeeds.

This could be the wake up call banks need to insist that the firms they sell their delinquent debt to, operate in an ethical, or if that’s too much, at minimum, a legal manner.

Filed Under: Credit, Debt Collection

Missouri Supreme Court Tells Debt Buyers “We’re Not Taking Your Word For It” Anymore

January 18, 2012 By Leave a Comment

On January 17th the Missouri Supreme Court issued an important ruling that extricated their state court system from being used as an extension of debt buyers collections department.

This decision requires debt owners (often a debt buyer who’s purchased the delinquent debt from a bank) to prove both that they own the account and how they calculated what was owed before a case can be tried. This is quite different from the “take our word for it” (or our internal record keepers word) that is the current, legally accepted norm.

From now on, in Missouri, debt buyers can’t just use the courts to bludgeon a payment or bankruptcy settlement for the debts they claim to own. First hand witnesses from the original lender (and all owners in the “food chain”) plus original documentation will need to be provided before a legal case can proceed.  Given the shoddy record keeping and “robo-signing” that is rampant in the industry, this should greatly curtail the “sue ‘em all and let God sort them out” methodology debt-buyers have used to affect lucrative settlements for decades.

 

Let’s hope this precedent is soon be replicated throughout the country.

Filed Under: Debt Collection, Government

Newsweek Debt Collector Expose Very Revealing

January 17, 2012 By Leave a Comment

In the current issue of Newsweek, author Gary Rivlin (@grivlin) does a superb job peeling back the curtain and allowing the world to see what really happens behind the scenes in many debt collection operations.

His primary source, Alexis Moore, shares her disturbing first hand account of life as a “desperate for a paycheck”, debt collector. She remarked that “every day I was on the job, I was asked to break the law.” This is because her supervisors overtly forced her to break laws (and rules of decent human civility), if she wanted to keep her job.

Some may argue that she should have just quit. Likely those that would have Alexis tell her boss to “take this job and shove it” have never been a paycheck away from homelessness.

That’s one of the cruel ironies of debt collection abuse. Those doing the abusing are often in desperate situations themselves – financially, or with health issues like drug addiction. Because of their precarious personal situations, they are easily manipulated to do the bidding of deceitful operators.

Some examples of collection practice abuses shared in Mr. Rivlin’s riveting Newsweek story include:

  • When someone would hang up, calling back immediately –  time after time – until the person answered.
  • Informing 3rd parties (this is illegal) such as parents, relatives and neighbors about the money owed and enlisting their support in collections
  • Asking neighbors to pin notes on the debtors door, telling them the collector called and that they owe the money
  • Threaten foreigners with deportation
  • Use vulgarities, like the “F” word, to threaten and intimidate

Unfortunately, the solution is more complex than “there oughta be a law.” There are already plenty of laws, they’re just not policed anywhere near well enough. The real solution is on the supply side. Get banks stop selling their delinquent debt to collection firms who use lawsuits, and other coercive measures to collect, and this abuse of our neediest citizens will stop almost overnight.

Filed Under: Bartmann, Debt Collection, Government

Public Employees Being Used to Collect on Private Debt in Illinois

January 12, 2012 By Leave a Comment

Yesterday I was invited to testify at an Illinois public hearing on Debtors’ Prisons, which were banned by law, but have insidiously surfaced as debt collection firms use state troopers, security bonds and the penitentiary system  to extract payment.

To their credit, state officials have identified the problem and are working to put an end to this egregious and un-American practice.

You can read about my testimony and what is happening to real live citizens of Illinois in this article and in this tv news report.

Prepare to be outraged. 

Filed Under: Bartmann, Debt Collection, Government

Public Hearing on Illinois “Debtor” Prisons

January 10, 2012 By Leave a Comment

Before the holidays I shared this disturbing story of Illinois citizens being jailed for unpaid debts.

In most states the wheels of justice move at “government speed,” taking far too long to get wrongs, like this one, righted. This is not the case in Illinois.

In fact, tomorrow, I have accepted an invitation from The Illinois Department of Financial and Professional Regulation to testify at a public hearing on “debtors’ prisons.”  They are holding this hearing to work towards finding a solution to the practice of incarcerating debtors who fail to appear in court or who have violated a court order.

It’s encouraging to see public officials like Illinois Attorney General, Lisa Madigan, (@LisaMadigan2010) who are willing to bring unfortunate and embarrassing situations like this to the public’s attention. It would be much easier to ignore and sweep under the rug. It’s obvious  that her reputation as one of the most pro-consumer Attorney Generals in the U.S. is well earned.

Filed Under: Debt, Debt Collection, Government

How Bankers Can Protect Consumers Better Than Legislation Ever Could

January 5, 2012 By 3 Comments

 

Bankers have become popular whipping posts of the media and consumers in our post financial collapse world.

While some of the outrage is well earned, a good portion is the result of sharks they have allowed to take over their financial services pond.

Case in point – debt collection firms.

Because banks sell their severely delinquent debt to debt collection firms for pennies on the dollar, they have gotten in bed with companies who standard operating procedure is to make these bank customers live’s a living hell. Their torment includes: harassing phone calls, unethical tricks, intimidation and lawsuits.

While some attorney generals across the country are working hard crack down — notably Lori Swanson (MN), Roy Cooper (NC),  Greg Abbot (TX), Lisa Madigan (IL), Martha Coakley (MA) and Darrell McGraw (WV) — banks could single-handedly put an end to the abuse without a single piece of legislation needing to be passed.

How? By agreeing to only sell their delinquent debt to firms who have agreed to abide by the honorable debt collector pledge. The key elements of the pledge include:

1. To never attempt any collection effort on any credit card debt that is beyond the statute of limitation.

2. To never file a lawsuit for collection of credit card debt.

3. To never charge interest on a credit card debt that was charged off by the original issuer.

4. To never attempt to contact the consumer regarding credit card debt by telephone more than two times in any one 24-hour period.

5. To never resell credit card accounts to anyone who has not signed this Pledge.

To date 216 debt collection firms have signed this pledged and agreed to abide by it’s principles. If banks used their clout to pressure debt collectors to do the right thing, consumers would find their lives changed practically overnight… No legislation necessary.

Filed Under: Bartmann, Credit, Debt Collection

Presidential Courage on Display – Obama Puts People Over Politics with CFPB Director Recess Appointment

January 4, 2012 By Leave a Comment

 

I’m impressed with President Obama.

Truth be told, I had privately doubted his mettle. In what is surely going to be a political hot potato for the upcoming campaign, he has managed to completely change my mind today  by announcing the recess appointment of Richard Cordray as the director of the Consumer Financial Protection Bureau (CFPB). My doubts have been erased.

To understand the murky ground he’s treading with this move read this breaking article from BusinessWeek.

This decision opens another political “front” he, Harry Reid and his colleagues in the Senate will need to defend. This they certainly don’t need or want, with control of the Senate very much in jeopardy. But there are times when REAL people are REALLY hurting and action needs to be taken, political consequences be damned.

This was one of those times.

Without a director, the CFPB was a toothless agency, unable to regulate (read: protect) the non-bank financial institutions that the neediest among us depend on as their financial lifeline.

And, it wouldn’t shock me, if Senator Reid wasn’t either behind this move, or was Obama’s enthusiastic compatriot.

Legal battles over the legitimacy of this appointment will no doubt ensue. But, at least while the slow wheels of justice grind on, Mr. Cordray will be hard at work, doing a job he is eminently qualified to perform.

Well done Mr. President.

Filed Under: Bartmann, Debt Collection, Government

EXPOSED – A Collection Trick That LEGALLY Revives Expired Debts

January 3, 2012 By Leave a Comment

Sophisticated debt collectors are exploiting a legal loophole that allows them to extract payments, interest and penalties on consumer debt that had previously expired, due to state statute of limitations.

Here’s how the trick works:

  1. The debt collection firm forms a partnership with a bank, giving it access to the banks licensing agreement with credit card issuers like Mastercard.
  2. Debt collector offers new credit cards to consumers with expired debt that they are no longer legally obligated to pay on.
  3. In the fine print of the credit card, it explains that the payments are, in part, to be applied to the previously expired debt.
  4. Then, if the consumer makes even one small payment on their “new” credit card, they legally become obligated to at least some portion of the old debt they were no longer legally responsible for, prior to the credit card.
  5. This restarts the statute of limitations on the debt all over again (a process called “re-aging”) and allow debt collectors to use the legal system to sue consumers in order to collect.

This practice is documented in a well researched article by Jessica Silver-Greenberg of the Wall Street Journal.

No doubt debt collectors will hide behind the plausible excuse that they are providing a valuable service extending credit to sub-prime borrowers who might not otherwise have access to credit. Before the Nobel committee rewards them for their humanitarian efforts, I’d check and see if they’d be willing to provide this service with the old, expired debt out of the equation.

I’m not holding my breath.

Filed Under: Bartmann, Debt Collection

“This is how the industry does it” – Not Good Enough for PA Judge

December 29, 2011 By Leave a Comment

This week a Pennsylvania court threw out a case against Ms. Larry Smith because the debt collector, who had purchased the delinquent debt from Citibank, could not prove the validity of the electronic records it used as evidence of the debt.

While electronic records are admissible evidence, this case establishes that the collector must be able to show how these records were created, stored, protected from viruses and hackers, as well as chain of custody.

This decision will serve as a useful legal precedent and rob unethical debt collectors of one of their favorite tactics, “sue & hope.” Meaning they sue thousands and hope the individuals won’t show up to defend themselves (most don’t.) This typically results in a default judgment in favor of the debt collector.

It’s a sad commentary when the VP of Commonwealth Financial Solutions (the debt collector) repeatedly defended their actions by saying “this is how the industry does it.”

Actually he’s 100% correct…and that’s precisely the problem!

Fortunately the 3 judge panel saw through this and rejected this silly argument outright.

Filed Under: Credit, Debt Collection

USA TODAY Reports “First Time Senate Blocks Appointment to Shut Down Agency”

December 28, 2011 By 1 Comment

Today, the USA TODAY gave indepth details about how a political strategy blocked a president’s appointment in an effort to effectively shut down a full fledged government agency. In this case, it was President Obama’s appointment of the deserving Richard Cordray and the Consumer Financial Protection Bureau (CFPB).

 

Read the full story here: http://usat.ly/s7S6Vb

 

The irony runs deep as the Dodd-Frank bill (which legislated the creation of the CFPB) was passed in the Senate by a filibuster proof 60-39 vote. What was a good idea during a time of white-hot public scrutiny of financial misdeeds, is apparently not such a great idea when there is an opportunity to make the opposition look bad in an election year.

For more information on this topic and upcoming events surrounding the CFPB and the appointment of its leader, check back on our blog and make sure to follow us on Facebook and Twitter.

Filed Under: Bartmann, Debt Collection, Government
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