LVNV usually reports INCORRECTLY on the credit reports and they refuse to document accounts after disputes. Every time my clients submit disputes, Resurgent passes the accounts on to another collector, they have to dispute again and the accounts are returned to Resurgent. Resurgent then writes that they just received the account and we have to start all over.  It’s like playing musical chair.

Resurgent sends letters that make NO sense at all and we might just start a blog for them.

State suspends licenses of affiliated debt-collection firms

By Jamie Smith Hopkins, The Baltimore Sun5:27 p.m. EDT, October 28, 2011

Maryland financial regulators said Friday that they have suspended the debt-collection licenses of two affiliated companies and ordered them to stop attempting to collect on consumer debts.

The state Department of Labor, Licensing and Regulation said it has “found grounds to allege” that LVNV Funding and Resurgent Capital Services violated several debt-collection laws. The companies have collectively filed more than 27,000 cases in Maryland courts over the past six years to seek judgments on old debts, including defaulted credit-card accounts.

A variety of companies buy consumer debts and then sue, often — the state contends — with little evidence to prove they have the right to collect. Maryland’s highest court voted in September to make clear that more documentation is required from debt buyers, rules that will go into effect Jan. 1.

The state labor department said Friday that LVNV and Resurgent Capital’s violations include filing “false, deceptive or deficient affidavits” in their court cases, misrepresenting the amount owed and collecting unauthorized attorney fees.

Luke Umstetter, senior corporate counsel for Resurgent Capital, said the company its affiliates — including LVNV — work hard “to comply with both the letter and spirit of all applicable laws and regulations.”

“Given our efforts to operate in a fair, ethical and sensitive manner, we are very disappointed with any allegations to the contrary and look forward to resolving this matter with the state of Maryland as expeditiously as possible,” he said.

The companies have a right to a hearing before the state decides whether to make the license suspension final.

In September LVNV settled a class-action lawsuit by agreeing to forgive about $10 million in debt it had tried to collect from 3,500 Maryland consumers. A key part of the suit was that the company got its collections license after filing thousands of cases here. LVNV did not admit any wrongdoing.

Obama should prohibit the collection of sold consumer accounts.

Consumer advocates want affidavits pulled in Md. debt-collection cases

Ohio class-action settlement has implications for Maryland consumers, attorneys say

October 03, 2011|By Jamie Smith Hopkins, The Baltimore Sun

The University of Maryland School of Law’s consumer-protection clinic is trying to get key documents stricken from potentially hundreds of debt-collection cases over an issue more commonly thought of as a foreclosure problem — robo-signing.

Midland Funding, which buys old consumer debts and sues to collect, filed affidavits signed by representatives who swore they had personal knowledge of the debts even though they did not, a federal court in Ohio found as part of an August class-action settlement.

Midland employees daily signed 200 to 400 of such “false and misleading” affidavits for years, according to an order by U.S. District Judge David A. Katz.

Though it insisted the facts in the affidavits were accurate, Midland agreed as part of the settlement to change its practices. But the University of Maryland consumer-protection clinic says the company and affiliate Midland Credit Management have more than 400 active cases in Maryland that rely on affidavits filed during the period covered by the class-action settlement — January 2005 through mid-March of this year.

Some of the cases have not been ruled on by a judge, while others are still active because Midland was awarded a judgment that hasn’t been fully paid off.

Midland’s parent, the publicly traded Encore Capital Group, said it would stand by its affidavits in Maryland. The company said it made its affidavit process “more robust” in late 2009 while the Ohio class-action suit was under way and — in response to a separate class-action settlement — agreed to drop 10,000 Maryland cases filed by Midland before mid-January 2010 because the firm did not have a state collections license until that point.

“We are confident that the affidavits submitted by our employees are prepared appropriately and properly identify consumer and account information,” Encore spokesman George Durham said.

Robo-signing came to national attention as a result of the long-running foreclosure crisis. But consumer attorneys say the lack of personal knowledge underlying the practice is also common in collection lawsuits brought by debt buyers, no matter how much time they take to prepare the paperwork.

Industry critics say the companies typically purchase scant information about the debts and are sometimes several purchasers removed from the credit-card company or other creditor that originally sold it.

“A fifth-generation purchaser of debt cannot possibly have personal knowledge of what happened when the account was created and what happened with each prior generation of debt buyer,” said Peter A. Holland, an attorney who runs the University of Maryland clinic.

Last week the clinic began filing motions in several Midland cases to get the affidavits stricken from the record in those lawsuits. The clinic also asked the District Court to take note of “fraudulent, robo-signed” affidavits in all of Midland’s 2005 through mid-March cases in Maryland.

Affidavits, the written equivalent of court testimony, are critical in debt-collection cases because many suits are decided without ever going to trial. If the consumer doesn’t defend himself, a judge decides the case based on filings — including the affidavit — by the company suing to collect.

Debt Buyer Cavalry Responds to State Action; Vows to Defend

Accounts receivable management firm Cavalry said late Friday that it is defending an action brought by the West Virginia attorney general over proper licensing in the state.

In a statement provided to insideARM.com, the company detailed the circumstances that led to the action and noted that it had filed a motion Friday to dissolve an injunction issued by a state court.

The statement in its entirety is below:

In June 2010, the West Virginia Attorney General brought an action seeking a temporary injunction against various Cavalry entities alleging that Cavalry violated the West Virginia Consumer Credit and Protection Act by failing to maintain proper licenses. Specifically, the action alleges that the Cavalry passive debt buyers, which have no employees or operations and simply own the purchased portfolios, should have been licensed at the time the portfolios were acquired.

Prior to the commencement of this action, Cavalry’s attorneys and others in the industry had interpreted the relevant statute as not requiring passive debt buyers to obtain licenses. This opinion was substantiated by the West Virginia State Tax Department’s own interpretation of the statute.

Cavalry’s servicing entity, Cavalry Portfolio Services, LLC, was found by the court to have been properly licensed and bonded at all relevant times.

On April 26, 2010, the Tax Department reversed its historical position and issued a letter stating that passive debt buyers need to become licensed. Shortly thereafter, in accordance with the new interpretation, the Cavalry passive debt buyers applied for licensure, and were granted collection agency licenses in October 2010.

The Attorney General’s legal theory is contrary to the historical advice of the Tax Department and seeks to hold Cavalry liable for acts that were widely accepted as lawful within the industry and by the government regulator itself at the time those acts were undertaken. Additionally, the Attorney General’s position is legally flawed, as he is attempting to take what is, at most, a potential violation of a revenue statute, and turn it into a violation of a state consumer protection law.

The court’s order is not a determination as to the merits of the Attorney General’s position. Under West Virginia law, the merits of a case cannot be considered by the court at the temporary injunction phase. Moreover, the burden of proof that the Attorney General had to meet at this stage was extremely low. To prevail on a temporary injunction, he must only make a “minimal evidentiary showing,” according to the West Virginia Supreme Court.

This order affects 743 judgments by limiting collection litigation and judgment enforcement with respect to West Virginia accounts acquired by the Cavalry passive debt buyers during the time they were unlicensed (i.e., prior to October 2010). The validity of the judgments themselves remains unaffected during the pendency of the action. Collection activity and credit reporting by Cavalry Portfolio Services, LLC is unaffected.

Cavalry continues to vigorously defend this action, and filed a motion to dissolve the injunction on October 28, 2011.

There has been similar litigation in Maryland.  Unlike Cavalry, Acarta was actively collecting as  it sent me a collection letter.

Apparently it is more profitable to hire felons than to run criminal background checks for new employees.  Obviously, felons make GREAT collectors!

In fact, criminals are so good at collecting, Allied Interstate decided to hire a felon KNOWING about her crimes!

In one instance, a debt collector applicant disclosed her criminal background to Allied Interstate, LLC during the application process. She had been previously convicted of financial card fraud and of being a lookout in a burglary. Allied Interstate, LLC hired her nonetheless and told the Commerce Department she had no criminal history.

Sadly, many states do NOT regulate collectors at all.  A notable exception is Minnesota. Here is the MN Department of Commerce press release with lots of details about the settlements:

MINNESOTA DEPARTMENT OF COMMERCE
For Immediate Release
October 6, 2011

Commerce Department takes action against eight collection agencies for alleged misconduct Department investigation uncovers troubling pattern of negligence, harassment, and identity theft

ST. PAUL, MN – “The meat is on the grill.” Those were the code words used by one debt collector at Plymouth-based Allied Interstate, LLC to tell a co-worker he had just stolen a debtor’s personal credit card information. It is one troubling example of what can happen when a collection agency fails to respect or comply with industry regulations.

Minnesota Department of Commerce Commissioner Mike Rothman today issued enforcement actions against eight separate collection agencies accused of violating Minnesota law. Consent orders made public Thursday allege those agencies unlawfully hired convicted felons, harassed consumers, forged signatures, failed to properly report instances of criminal identity theft, and doctored financial documents.

“Our investigation discovered a handful of companies that disobeyed the law, and effectively let the wolves loose in the henhouse,” said Commissioner Rothman. “In numerous instances, credit card numbers, bank accounts, and personal financial information of vulnerable, financially stressed people were handed over to criminals. It should come as no surprise what happened next.”

An investigation of Allied Interstate, LLC uncovered a serious breakdown of vital consumer protections in the company’s operations. Through a broken system of inadequate background checks, deceit, and negligence, Allied Interstate hired numerous convicted felons as registered debt collectors. The company fired employees for harassing debtors over the phone, using profanity, forging documents, and other serious misconduct – but failed to inform the Commerce Department of these violations, as required by law.

Consent orders released today by the Department of Commerce reveal a pattern of similar misconduct at that business, and seven additional collection agencies doing business in Minnesota.

“Let me be clear: this pattern of disregard for important regulations will not be tolerated on my watch,” said Commissioner Rothman. “We will continue to vigilantly monitor the marketplace to protect Minnesota consumers, and work with healthy businesses to promote a strong and competitive Minnesota economy.”

Commissioner Rothman stressed that this problem is not unique to Minnesota, citing similar instances in Georgia, Texas, West Virginia, Maryland, Washington, DC, and New York. Rothman encouraged regulators in other states to join Minnesota in keeping an eye on the problem.

A summary of charges made public by the Commerce Department this week is attached, along with a list of consumer tips to help Minnesotans avoid falling victim to identity theft or debt collection misconduct.

SUMMARY OF CHARGES

The following summaries briefly describe the charges against eight collection agencies recently investigated by the Minnesota Department of Commerce. More detailed consent orders are attached and can be viewed online at www.commerce.state.mn.us.

Allied Interstate, LLC

Plymouth-based Allied Interstate, LLC has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing debt collectors with prior felony convictions; and 4) failing to report when its registered debt collectors were fired for failing background checks, swearing at debtors, theft of debtor’s financial information, or falsifying debtor records.

In one instance, a debt collector applicant disclosed her criminal background to Allied Interstate, LLC during the application process. She had been previously convicted of financial card fraud and of being a lookout in a burglary. Allied Interstate, LLC hired her nonetheless and told the Commerce Department she had no criminal history.

The Minnesota Department of Commerce has instructed Allied Interstate, LLC to comply with industry regulations and pay a $300,000 civil penalty.

Bureau of Collection Recovery, LLC

Eden Prairie-based Bureau of Collection Recovery, LLC has been charged with: 1) directing employees to change the dates of scheduled payments; 2) changing the dates of deposit for postdated payments; 3) failing to establish adequate screening procedures when hiring collector applicants; 4) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 5) employing collectors with felony criminal backgrounds; and 6) failing to notify the Commissioner of employee terminations for using profanity, third party disclosure violations, and harassing debtors.

In response to these charges, Bureau of Collection Recovery, LLC has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; 4) auditing employee records of terminated employees for the last five years; and 5) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

Bureau of Collection Recovery, LLC has also been ordered to pay a civil penalty of $150,000.

AllianceOne Receivables Management, Inc.

Eagan-based AllianceOne Receivables Management, Inc. has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; and 2) employing debt collectors with prior felony convictions.

In response to these charges, AllianceOne has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; and 4) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

AllianceOne has also been ordered to pay a civil penalty of $40,000.

Van Ru Credit Corporation

Illinois-based Van Ru Credit Corporation has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing three collectors with felony criminal backgrounds; and 4) failing to notify the Commissioner of at least 15 employee terminations for verbally abusing debtors, using profanity, and third party disclosure violations.

In response to these charges, Van Ru Credit Corporation has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; and 4) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

Van Ru Credit Corporation has also been ordered to pay a civil penalty of $65,000.

IC System, Inc.

Saint Paul-based IC System, Inc. has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing collectors with felony criminal backgrounds; 4) failing to notify the Commissioner of at least 10 employee terminations for using profanity, third party disclosure violations, and repeatedly calling debtors at their places of employment; and 5) allowing at least 23 debt collectors to work at locations that were not licensed.

In response to these charges, IC System, Inc. has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; 4) auditing employee records of terminated employees for the last five years; and 5) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

IC System, Inc. has also been ordered to pay a civil penalty of $65,000.

General Revenue Corporation

Ohio-based General Revenue Corporation has been charged with: 1) failing to establish adequate screening procedures when hiring individual collector applicants; 2) failing to properly screen numerous debt collector registrations before submitting license renewal requests to the Commissioner; 3) employing a collector with a felony criminal background; and 4) failing to notify the Commissioner of at least 40 employee terminations for using profanity, third party disclosure violations, and threatening an alleged debtor on MySpace.

In response to these charges, General Revenue Corporation has taken corrective action, including: 1) establishing new procedures to strengthen their screening process; 2) submitting that screening process to the Commissioner for review; 3) subjecting all current debt collectors to that screening process; 4) auditing employee records of terminated employees for the last five years; and 5) establishing auditing procedures and agency policies to ensure that criminal convictions of its debt collectors are promptly reviewed and acted upon.

General Revenue Corporation has also been ordered to pay a civil penalty of $50,000.

Nationwide Recovery Systems, LTD LP

Texas-based Nationwide Recovery Systems, LTD LP has been charged with commingling trust account funds collected for creditors with the agency’s operating fund, thereby engaging in an act or practice that demonstrated the firm was untrustworthy, financially irresponsible, or otherwise incompetent.

The Minnesota Department of Commerce ordered Nationwide Recovery Systems, LTD LP to: 1) hire an independent auditor to conduct a review of all aspects of its financial and accounting operations; and 2) provide the auditor full access to its financial information and other necessary documentation.

Nationwide has complied with the Commissioner’s request. After the audit was completed, the company applied to renew their license. The Commissioner approved a temporary collection agency license in order to allow new owners to take over the business. Nationwide provided the Commissioner with its business plan to ensure its financial solvency, which incorporated changes to that business plan as required by the Commissioner, including termination and replacement of the agency’s management.

Nationwide was ordered to pay a civil penalty of $250,000, which was stayed pending their continued two-year compliance with the Commissioner’s order.

Commercial Recovery Corporation (CRC)

Blaine-based Commercial Recovery Corporation (CRC) has been charged with: 1) failing to pay vendors, including CP Office Products (Circle Pines, MN); 2) failing to collect thousands of dollars from alleged debtors and failing to remit those payments to clients, including Brown & Bigelow (St. Paul, MN) and ADvantage Tape (Edina, MN); 3) holding a negative balance on one or more of its trust accounts; 4) providing false information to the Commissioner; 5) failing to pay rent in the amount of $99,700; 6) failing to retrieve sensitive records from the company’s landlord following eviction; and 7) defaulting on a Promissory Note due to CRC’s bank in the amount of $278,809.

The Department of Commerce is pursuing disciplinary action and sanctions against CRC, including retroactive revocation of the company’s collection agency license, and civil penalties of up to $10,000 per violation.

TIPS FOR MINNESOTA CONSUMERS

In light of these developments, Commissioner Rothman encourages Minnesota consumers to know their rights and protect themselves from identity theft. “If you think you are a victim of one of these scams, hang up the phone and call the Minnesota Department of Commerce. We are here to help and we can answer your questions,” Rothman said.

The Department of Commerce offers these helpful tips to help Minnesotans avoid becoming victims of debt collection scams:

1. Call us first. Do not send money to a “debt collector” you think may be perpetrating a fraud – call the Department of Commerce to see if the person is, in fact, a licensed debt collector.

2. Protect your identity. Do not give away or verify any of your personal financial information.

3. Protect your money. Ask your bank to put an “alert” on your account (often these scammers have a consumer’s bank account information before they begin harassing them).

4. Avoid phony calls. Be wary if the debt cannot be verified or if no documentation is received. At that point, ask the callers to stop contacting you and register with the National Do Not Call Registry at www.DoNotCall.gov or 888-382-1222.

5. Contest errors. If no debt is confirmed, contact any involved parties to clear up inaccuracies on your credit report, such as: the debt collector; the creditor or company claiming unresolved accounts; and the major credit bureaus. Write a detailed letter and include supporting documents to prove your case. The Federal Trade Commission provides additional resources for reporting errors.

6. Know your rights. Review the federal Fair Debt Collection Practices Act (FDCPA), which sets standards for collection agencies and prohibits abusive tactics. The FDCPA is enforced by the FTC and violations should be reported. Debt collectors:

a. May not make false or deceptive claims.

b. Are not allowed to make idle threats, express or implied, or use abusive or profane language.

c. Should not discuss consumers’ accounts with unauthorized third parties.

d. May not inaccurately report credit information or pressure consumers to pay debts they do not owe.

e. Must investigate the validity of a dispute over a debt.

The Minnesota Department of Commerce Consumer Help Line can be reached by phone at (651) 296-2488 or (800) 657-3602. Complaints can also be sent by email to consumer.protection@state.mn.us or by mail to Minnesota Department of Commerce, 85 7th Place East, Suite 500, Saint Paul, MN 55101.

After receiving his first statement, he first paid $25 and then the remaining $224 so that he would pay the balance in full and not pay any interest.  Both payments were scheduled at the HSBC Orchard website.

The $224 payment cleared his bank account on 9/27/11.   Today he wanted to use his card and he found out that he had only $77 available and there was a $223 “pending charge.”

WHAT???  He hadn’t used the card since paying it in full.

He finally figured out that the pending charge was a HOLD on his payment.

Apparently they cleared $1.

I suppose there’s nothing he can do but wait.

I wonder what would happen if the account went over the limit due to those extensive holds.  Would they charge an over limit fee?

So be aware and don’t expect to be able to actually USE these cards.

Collection Agency Loses FDCPA Case Appeal; “The Truth Can be Misleading:” Judges

The United States Court of Appeals for the Ninth Circuit ruled against an ARM firm Friday in their appeal over a class action suit that alleged violations of the Fair Debt Collection Practices Act (FDCPA) in the language of their collection letter.

In the case, Johnny Gonzales, et al., v. Arrow Financial Services, the plaintiff argued that a letter sent by Arrow offering settlement of a health club debt misled the debtor into believing the firm would report the debt to a credit reporting agency.

In 2002, Arrow purchased a portfolio of old debts owed to health clubs. The firm sent collection letters to 40,000 California residents in 2004 attempting to collect. The letters offered settlements of 50 percent of the total debt and a line that became central to the suit: “if we are reporting the account, the appropriate credit bureaus will be notified that this account has been settled.” Gonzales sued under the FDCPA because he learned that the debt was too old to report.

Arrow’s defense hinged on the use of the word “if.”

The company argued that it was not threatening to report the debt, but merely stating what would happen if it did. It also noted that the statement was entirely accurate. But the appeals court did not buy that logic, writing, “We emphasize that a literally true statement can still be misleading.”

The court upheld a lower court ruling in favor of the class. The original award of $225,500 to the 40,000 class members appears to have been upheld as well.

But one judge on the three-judge panel dissented, writing that the $225,500 award was duplicative in nature and threatened the liability restrictions of the FDCPA.

The court opinion: GonzalesvArrow-9th-circuit-appeal-9-23-11

I have a  similar issue with a attorney James R. Vaughan quoting a true statement about “validation”:

[V]erification of a debt requires nothing more than the debt collector confirming in writing that the amount being demanded is what the creditor is claiming is owed.” Clark v. Capital Credit & Collection Servs., 460 F.3d 1162, 1174 (9th Cir.2006); citing, Chaudhry v. Gallerizzo, 174 F.3d 394, 406 (4th Cir.1999), and, FDCPA §809, Validation of debts, 15 U.S.C. §1692g.

I really don’t believe that this type of language is appropriate in response to a consumer’s dispute.  More important, that’s what attorney Vaughan sent to me after he filed suit for debt buyer Acarta LLC and I requested documentation such as the statements and contract.  He did attach statements, but it seems to me that he is saying that this is all they need to do to prevail in court.

Is this how he will get a judgment against me?

Obama Proposal Loosens Restrictions on Cell Phone Calls for Debt Collection

Buried in President Obama’s deficit reduction plan unveiled Monday was a provision that would allow cell phone calls for the purpose of debt collection. But the brief proposal seemed to cover only debt owed to, or guaranteed by, the Federal Government.

On Page 28 of “The President’s Plan for Economic Growth and Deficit Reduction,” there is a very brief paragraph that states:

Allow agencies to contact delinquent debtors via their cellular phones. The Administration also proposes to amend the Communications Act of 1934 to facilitate collection of debts owed to or guaranteed by the Federal Government, by facilitating contact of delinquent debtors who are most readily reached on their cell phones. This provision is expected to provide substantial increases in collections, particularly as an increasing share of households no longer have landlines and rely instead on cell phones.

There were no additional details given, but a spokesman for the Office of Management and Budget did tell the Huffington Post, “This proposal merely reflects the fact that more and more people rely solely on a mobile phone for their voice communications, and allows debt collectors to call them on these numbers.”

The proposal was included in a section of proposals under the broad heading “Step up collection of debts owed to the Federal Government.” Other proposals in the section include increasing IRS levy authority for Federal contractor payments and offsetting Federal tax refunds to collect State income taxes from debtors who currently reside in other States.

The prohibition on calling cell phones, specifically with auto-dialers, has been a cause of concern for the debt collection industry for years.

“The President’s proposal is consistent with where we’ve been on the use of cell phones to communicate with consumers,” said Mark Schiffman, spokesman for debt collection industry trade group ACA International. “We certainly support this direction as it aligns with what we’ve been advocating for as it relates to the TCPA.”

It costs me 10 cents / minute for every call I receive on my cell phone and I don’t want ANYONE to call my cell unless I asked them to.

Maybe more important than the cost of calls is that many people carry cell phones for emergencies and NOBODY needs to be harassed by collectors while driving a car, at the supermarket or anywhere else outside their home.

I wish I could reach the at least 100 million Americans who should immediately STOP paying all credit cards and student loans.  VOTE with your MONEY!

The US Department of Education,  Sallie Mae and other student loan lenders deliberately inflict damages on student loan borrowers who MAKE EVERY PAYMENT ON TIME.

Incorrect Student Loan Reporting Lowers FICO Scores

The entire credit system is designed to exploit the working people and to redistribute assets from the people to the corporations.

Most people should spend what little extra money they have to stock up on food, fix their house and get the car in shape.  And of course plant a garden!

So many collection attorneys just don’t know when to quit collecting.

They think they are above the law and correctly assume that MOST consumers don’t have the money to retain a COMPETENT attorney.  Chances of getting a  COMPETENT attorney to take a case on contingency and actually litigate it are very much like winning the lottery.

MOST consumer attorneys strive to settle cases EARLY and primarily for their legal fees (thousands of dollars) while the consumer might get deletion from the credit report and a debt buyer might give up its claim against the consumer.

Most consumer attorneys are cream skimming, looking for slam dunk cases that can be settled quickly for minimal work.

Just last week I received an email about a similar garnishment situation:

Cohen and Slamowitz are garnishing my paycheck for an account that they said was established in 1999. The problem with this is that I was 9 years old in 1999. I contacted them and they said that they have my social security number on file, but the birth date is for 1971. They also said that they need 2 months to investigate, but in the interim, they will continue the garnishment. They have already taken 500.00 from my account, and they said that the total due is 10,000. I really don’t trust that they will investigate in that they are already getting the money. Please help because I don’t know what to do.

I wrote back that I would LOVE to help and that she needs to advise them in WRITING and demand the REFUND.  I also offered to draft the letters or to contact them directly and also to draft regulatory complaints, but I haven’t heard back.  I sure hope she DOCUMENTS everything.

Of course consumers in similar situations should file complaints with the attorney’s Bar Association, their state attorney general, the FTC and ideally,  publicize how vile collection attorneys STEAL from people who owe nothing.

Cohen & Slamowitz continues garnishing while KNOWING that they are stealing from an innocent person!

Lucinda Yazzie was very lucky to have her EMPLOYER assist her and her employer actually notified Farrell & Sandlin that they attempted to garnish the wrong person.  Lucinda had an independent 3rd party as WITNESS and she could DOCUMENT in court what happened. Here is an article with details about the suit:

Jury Awards Plaintiff $1.26 million in FDCPA Violation Lawsuit

A federal jury in New Mexico has awarded a plaintiff $1.26 million in a case that accused a collection law firm of twice attempting to garnish her wages for a debt she did not owe, according to an article in the Albuquerque Journal.

Rob Treinen, the attorney for plaintiff Lucinda Yazzie, told the paper that the jury handed down their ruling on Friday against The Law Offices of Farrell & Sandlin and Target National Bank, who was named as a co-defendant in the suit.

This is a very interesting case that sends a strong message about litigation and skip tracing processes in the ARM industry.

The case stretches back to December 2006 when Target National Bank assigned the past due credit card account of Yazzie to Farrell & Sandlin. When Yazzie was initially contacted, she insisted that she had never had a Target credit card and that there was another person in her area with the same name. Yazzie said that she frequently got calls from other creditors attempting to find the other person.

But the law firm filed a suit in April 2007 anyway and got a garnishment order. When they presented the order to Yazzie’s employer, the business insisted that they had the wrong person. The garnishment writ was then dropped.

The process played out again two years later when Farrell & Sandlin won another garnishment order for the same account. This time, Yazzie’s employer not only formally denied the request, but followed up with phone calls, leading to a hearing where both Yazzies were due to show up as well as the collection law firm, which did not appear. The second garnishment order stayed in force until Yazzie filed her own suit against the law firm in March 2010, claiming violations of the FDCPA and other consumer statutes.

During the legal process, it was discovered that Target Bank had indeed supplied Farrell & Sandlin with the correct name, address and Social Security number of the true debtor, not the Lucinda Yazzie named in their garnishment actions. But a former employee of the law firm shortly after receiving the account changed the SSN in the company’s system to that of the Yazzie named in the suit. The firm claimed that this went against company policy and entered a bona fide error defense, which was rejected.

The jury awarded Yazzie $161,000 in actual damages for emotional distress and $1.1 million in punitive damages. Although Target’s attempts to be dismissed from the lawsuit were unsuccessful, the judge noted that the company did not err in the assignment of the account. It is not known what Target’s liability is in the case.

A message with Farrell & Sandlin left by the Albuquerque Journal was not returned Friday. Likewise, insideARM.com’s attempts to contact the firm over the weekend were not successful. The ruling is not yet available for review, so I would suspect the ARM industry will be reading it carefully when it is out there. An important caveat to remember: all of the above information is coming from one source, the plaintiff’s attorney (in addition to some earlier filings that were obtained by insideARM.com).

This is by far the highest FDCPA verdict I’ve ever seen and I’m sure they will appeal or settle for a MUCH lower amount.  It’s also unclear from the article how the jury could award punitive damages as the FDCPA does not allow for punitive damages. Maybe there was a STATE law claim.

I’ll follow this suit and I’ll try to get some of the court documents.  Stay tuned …

As so often, bankruptcy lawyers spew loads of FALSE information about credit reporting and credit scores and this article by Andy Miofsky, Illinois Bankruptcy Attorney, is especially offensive.

Contrary to attorney Miofsky’s claim, reaffirmation will NOT necessarily result in the reporting of the account as positive.

I documented in 2002 that FICO scores rate the reporting of the reaffirmation as a HIGHLY DEROGATORY remark.   

It is possible that myFICO’s formula changed, but I have seen no evidence of any change.

From attorney Andy Miofsky’s post at the Bankruptcy Law Network:

In practice, mortgage companies dangle the prospect of reporting future good payment history to credit bureaus as a way for bankruptcy debtors to improve the credit score.

It may be true that bankers claim that the future positive reporting will improve the credit scores, but when was the last time a banker spoke the truth?

FACT:

A discharged AND paid as agreed mortgage can be reported in various ways:

• with a $0 balance and “included in bankruptcy.”
• with the current balance and the factual payment record.

Problem:  The Ch. 7 or “included in bankruptcy” AND the current positive payment record would seriously lower the scores because the FICO formulas rate the negative Ch. 7 or “included in bankruptcy” notation as a CURRENT derogatory remark, just like the “reaffirmed” notation.

In this case, the account should be disputed.   I would request that the account be reported without the Ch. 7 remark and as paid as agreed to get maximum FICO points for the open and positive mortgage account.  If the lender refuses to do so and CONTINUES to report the balance, it’s time for a lawsuit.   After all, they can’t report the balance if it was discharged!

I have not had any clients that reaffirmed a mortgage in quite a few years.  There is really no reason to and reaffirmation can PERMANENTLY (as long as you owe on the mortgage) DESTROY your FICO scores.

Attorney Miofsky:

The more accurate part of the reporting argument is that the borrower should not want mortgage payments reported to the lender, because:

1.  The debt to income ratio is minimized by not reaffirming the mortgage;

FACT:  There is no “debt to income ratio” related to credit reporting.

A correctly reported paid as agreed mortgage without derogatory notations will almost always improve FICO scores.  A mortgage several years older than the bk and reported as paid as agreed might give you 30 – 50 FICO score points — depending on what other open old positive accounts you have.

Open account HISTORY is an important FICO score factor.

So if you want to reaffirm your 15 year old always paid as agreed mortgage to ensure that you keep the good payment history (and possibly 50 or more extra FICO score points), you MUST get in writing that the lender will NOT report the reaffirmation or any other derogatory remark to the credit bureaus.

The same applies to car loans.  I recently read that a court decided that lenders CAN repossess vehicles even while the payments are CURRENT!  So if you reaffirm the car loan, be sure to get in writing that the lender will NOT report the reaffirmation.

2.  The likelihood a borrower actually makes mortgage payments on time is small;

Not in MY experience.  Of course my clients who are concerned with their credit and able to pay me must be able to pay their mortgages.  I see NO reason whatsoever why people shouldn’t be able to make a “reasonable” mortgage payment on time after they discharge their unsecured debt.   After all, interest rates are incredibly low and MANY people get loan modifications resulting in payments lower than comparable rents.

INSTEAD of reaffirming, many home owners should seek MODIFICATIONS!

A “good” bk attorney would assist the borrowers with the modification PRIOR to filing if the debts to be discharged are necessary to qualify for maximum benefits of the modification.  It really depends on the individuals’ income and debts — sometimes they don’t qualify until AFTER the discharge because they have to be able to make the payments.  A competent bankruptcy attorney should analyze the financials, make the appropriate recommendations and time the bankruptcy filing and possibly reaffirmations to MAXIMIZE BENEFITS to the home owner.

The question is often whether they should keep the house and get a modification — NOT whether they should reaffirm.  If the house is overmortgaged and they can’t get a principal reduction, they should “probably” walk away after living rent free in the house for a year or more, as so many people do.  Many lenders will also offer incentives such as $6,000 or more for home owners to sign a deed in lieu.

3.  The borrower can make the payment late, miss a payment here or there, catch up payment, pay whatever late fees accrue, all without risking a negative tradeline on the credit report.

If people can’t make the payments on time AFTER the discharge and mortgage modification, they need to look into more affordable housing. 

More important, they are probably not able to re-establish credit, their credit sucks and credit scores are entirely irrelevant.

A credit score is based on secret data manipulation. While the exact formula is not publicly known, a major factor involves the total amount of unpaid debt in relation to a person’s income.  Low debt and high income is better than not.  After bankruptcy the mortgage debt is discharged unless the debt is reaffirmed.  By not reaffirming, a person effectively lowers the total amount of outstanding debt, thus lowering the ratio of debt to income.

It is public knowledge that INCOME is NOT part of any credit score.

All you have to do is look at ANY credit report and you’ll notice that income is NOT reported anywhere.  DUH!

It’s bad enough that most consumer lawyers don’t have a clue about credit, but it is unconscionable to write articles about credit reporting and credit scores when you have absolutely NO knowledge about these subjects.

Many of my clients know more about FICO scores BEFORE we get started than this guy.

Minnesota sues debt collector for robo-signing

By Jonathan Stempel

NEW YORK | Thu May 19, 2011 2:04pm EDT

(Reuters) – Minnesota sued Encore Capital Group Inc, one of the largest U.S. debt collectors, for allegedly using fraudulent “robo-signed” affidavits in collection cases, a practice that critics say also infects home foreclosures.

Thursday’s lawsuit against Encore’s Midland Funding LLC and Midland Credit Management Inc units follows a ruling by an Ohio federal judge that Minnesota’s case would not interfere with a $5.2 million class-action settlement of similar claims.

“Midland has perverted the justice system by filing robo-signed affidavits in court and hounding citizens for debt they don’t owe,” Minnesota Attorney General Lori Swanson said.

Encore Chief Executive Brandon Black in an emailed statement said the company changed its affidavit process in 2009, believes its practices are “legally sound,” and will work with Swanson to resolve the matter. He added that “because 95 percent of consumers ignore letters sent by the company, the legal channel is often the only remaining option.”

Based in San Diego, Encore often buys debt from credit card companies. Through year-end, it had invested about $1.76 billion to buy 33 million accounts with a face value of $54.7 billion, or about 3 cents on the dollar.

In her lawsuit filed in a Hennepin County, Minnesota, court, Swanson said Midland workers testified under oath to having signed up to 400 affidavits a day without reading them.

She also said the Midland units “often force individual citizens to prove they do not owe money instead of themselves substantiating that the citizens actually owe the money.”

The lawsuit seeks a halt to improper practices, and fines of $25,000 per violation and for contempt of court.

In the federal case, U.S. District Judge David Katz in Toledo, Ohio had previously issued an order that put some litigation relating to robo-signing claims on hold.

But in his ruling Wednesday, he said that order could not cover sovereign entities, and thus “cannot be read to encompass the state of Minnesota.”

All 50 states are investigating robo-signing and other improper practices by banks in the mortgage industry.

In afternoon trading, Encore shares were up 54 cents, or 1.8 percent, at $31.00 on the Nasdaq.

The Minnesota state case is Swanson v. Midland Funding LLC, Hennepin County District Court. The Ohio federal case is Brent v. Midland Funding LLC, U.S. District Court, Northern District of Ohio, No. 08-01434.

(Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn and Gerald E. McCormick)

I applaud AG Swanson for being one of the very few AGs who actually do their job.  Most courts have turned into collection agencies, entering judgments against consumers without any admissible evidence whatsoever.

Most judges wouldn’t recognize justice if it hit them in the face and they have nothing but contempt for consumers who cannot afford to pay attorneys to defend them.