Debt buyer Encore Capital Corp. takes pride in its ability to make money even at a time when Americans are experiencing the worst economic conditions in decades. In fact, according to information released by the company in October 2009, net income at the publicly-traded company was $9 million in the third quarter of 2009 alone, compared to $3 million in the same quarter last year.

That’s right, you’re talking about a 300% increase in net income. Investors cheered the news, sending Encore’s shares up over 15 percent in early trading.

Revenues in the quarter grew 21 percent year-over-year to $80.4 million. Revenue from receivables portfolios was up 22.2 percent to $76.4 million while revenue from servicing fees, principally bankruptcy serving through its Ascension Capital unit, and other sources was relatively flat.

How much money did Encore suck out of the pockets of hardworking Americans just struggling like heck to get by? $125.7 million in the third quarter alone. Legal collections accounted for $55.6 million, up 11.6 percent from the third quarter last year. When I say, “legal collections,” I mean money that Encore got from consumers after they sued in court.

By the way … in case you didn’t know this, most debt buyers don’t get much if anything in the way of actual proof that a consumer is legally liable for payment of a debt. They get computer records and, though they can purchase the back-up information such as credit card applications in a separate transaction, rarely if ever do so.

So out of the $55.6 million of Encore’s income from “legal collections,” how many of those consumers could have paid $0 if only they’d hired a consumer protection lawyer to defend the credit card lawsuit? One can only suspect a fair amount.

The unemployment rate in New York is zooming every-upwards.  The state government is tightening the belt.  Employees lucky enough to hold onto their jobs are finding themselves confronted with the choice of taking a salary cut or possibly losing their job altogether.

Bankruptcy filings in New York City are at alarming numbers, and the rate of people filing for bankruptcy in New York doesn’t seem to be slowing down anytime soon.

But there’s a bright spot, according to the Wall Street Journal – apartment landlords are playing a desperate game of Lets Make A Deal.  According to the article:

In New York City, landlords are paying broker fees. Typically in New York, which has traditionally been a tight rental market, tenants have to pay fees as high as 15% of a year’s rent. But so far this year, Equity Residential has paid about $1.5 million in such commissions.

Just in case the link doesn’t work, click here for a PDF of the article from the WSJ site.

Photo courtesy of eviltomthai.

Now that you have some idea of what debt collectors are allowed to do in their attempts to collect from you, it’s important to know what they can NOT do – that is, those actions that are violations of your consumer rights. After all, you have to know your rights in order to protect them.

Generally, debt collectors cannot:

• Try to collect a debt that they know cannot be legally collected (such as a debt that was discharged in bankruptcy, or one that was paid off)
• Call you at hours that are inconvenient – generally outside of the 8:00am to 9:00pm range, but could also be within those time ranges if the debt collector knows that you work at night or have odd waking and sleeping patterns
• Call you at work if you have told the debt collector that you’re not allowed to receive such calls at work
• Contact you in any way once you tell the debt collector to stop contacting you
• Contact you directly if the debt collector knows you are being represented by a lawyer
• Contact your friends, family members, neighbors or anyone else except for the purpose of correcting or confirming your contact information. Even then, the debt collector may NOT identify himself as a debt collector or tell the person that you owe a debt. Also, the debt collector may NOT call the person more than once
• Make harassing, threatening, or misleading statements in order to trick you into making payments. Examples of illegal statements are:
  • Threatening to have you arrested or jailed
  • Threatening to take your SSI or other protected income
  • Threatening to take your household furniture
  • Threatening to cause physical injury to you or your property
  • Threatening to send false information about you to the credit reporting agencies
  • Using obscene or profane language
  • Threatening to tell all of your friends and relatives and neighbors that you owe money
  • Using terms such as “deadbeat”

NEXT: How Can I Get Debt Collectors To Stop Contacting Me?

Debt collectors can take steps to do their job – that is, collecting a past due debt – but there are limits. Generally, a debt collector is allowed to:

• Contact you by phone, in writing, and in person
• Call you on the telephone at times that are not inconvenient – generally, between 8:00am and 9:00pm.
• Call you at work unless they have reason to believe that your employer doesn’t allow you to receive non-work related calls
• Contact any person for the limited purpose of correcting or confirming your contact information. However, the debt collector may NOT identify himself as a debt collector or tell the person that you owe a debt. Also, the debt collector may NOT call the person more than once.
• Contact you more than once a day, but not so many times as to be considered annoying, abusive, or harassing
• Report your account status to credit reporting agencies, so long as the information is accurate

When you owe money, there are things that debt collectors can and cannot do to collect from you. Unfortunately, many debt collectors step over the line and abuse consumers in the hope that they can collect money out of fear.

Many consumers believe that there’s nothing they can do when a debt collector harasses them by phone or mail. And that’s exactly what the debt collectors want you to believe.

But the dirty little secret they’ve been hiding is that debt collection abuse is illegal – period.

Debt collectors are governed by the Fair Debt Collection Practices Act, a federal law that is designed to protect you from debt collection harassment. If a debt collector breaks the law, you have the right to sue them and collect money damages. Not only that, but a debt collector must pay your lawyer’s fees if you sue and win a case under the Fair Debt Collection Practices Act.

NEXT – What Can Debt Collectors Legally Do?

The Truth-In-Lending Act is designed to promote the informed use of consumer credit by requiring disclosures. TILA does not regulate the interest or amount of charges tacked onto a transaction – it merely requires that those charges be properly disclosed to the consumer.

The disclosure requirements are designed to allow consumers to compare credit terms easily.
Why TILA Is Important To Your Foreclosure Case . . .

If the mortgage company failed to comply with TILA it may be held liable for monetary damages, as well as your legal fees. In addition, a failure to comply with TILA may lead to rescission of your mortgage.

A mortgage company that fails to comply with TILA’s requirements for high-cost mortgage loans may be held liable to the consumer for all finance charges and fees paid by the consumer. Any subsequent assignee is subject to all claims and defenses that the consumer could assert against the creditor, unless the assignee demonstrates that it could not reasonably have determined that the loan was subject to section.

Your credit report is like your biography. It shows where you live, where you’ve lived in the past, when you were born, who you’ve worked for, how well you pay your bills, and a host of other things.

Your credit report is available to creditors, insurers, employers, and other businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

Businesses and people make the decision of whether to deal with you based on what they read in your credit report. And if they don’t like what they see, they won’t deal with you. Period.

So if your credit report is inaccurate, you need to take action immediately to protect your rights.

READ THIS ARTICLE: How to get your credit report for free.

Your rights to a fair and accurate credit report are governed by the Fair Credit Reporting Act. New York State also has its own version of the law. Under these powerful laws, information that is inaccurate or incomplete must be corrected – but only if you take the proper steps.

Step One – Dispute The Inaccuracy

If you think something is inaccurate on your credit report, you must dispute the error in writing. Though not required by law, you should send the letter by certified mail and keep a copy of the letter (and the certified mail receipt) to prove that you sent it.

Your dispute should be as thorough and detailed as possible, written clearly so that the credit reporting agency can read and understand the problem. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts and explain why you dispute the information, and request that it be removed or corrected.

Step Two – Wait For The Results

Consumer reporting companies must investigate all disputes and forward all the relevant data you provide about the inaccuracy to the company that provided the information. After the information provider receives notice of a dispute from the consumer reporting company, it must investigate and report the results back to the consumer reporting company.

When the investigation is complete (it will usually take 30 days), the consumer reporting company must give you the results in writing and a free copy of your report if the dispute results in a change.

Step Three – Enforce Your Rights

If an investigation doesn’t resolve your dispute with the consumer reporting company, you have the right to sue for damages, legal fees and court costs. Consumers in New York can contact me for a free, no-obligation telephone consultation to review your situation and learn more about how I can help.

Each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — is required to provide you with a free copy of your credit report, at your request, once every 12 months.

To order your free annual credit report just take one of these three simple steps:

• Log on to www.annualcreditreport.com
• Call 1-877-322-8228, or
• Complete the Annual Credit Report Request Form and mail it to: Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

In order to get your free annual credit report you will need to provide:

• your name
• your address
• Social Security number
• date of birth
• all previous addresses within the past two years

You’re also entitled to a free report if a company takes adverse action against you, such as denying your application for credit, insurance, or employment, based on information in your report. You must ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the consumer reporting company.

You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.

Otherwise, a consumer reporting company may charge you up to $10.50 for another copy of your report within a 12-month period. To buy a copy of your report, contact:

Experian-1-888-397-3742
www.experian.com

TransUnion-1-800-916-8800
www.transunion.com

Equifax-1-800-685-1111
www.equifax.com

The rising rate of foreclosures means that thousands of homeowners will unfortunately find themselves in a foreclosure court at some point in 2009.  Some will lose their homes and be forced to move.  Others will be able to stop the foreclosure by negotiating a mortgage workout or by filing bankruptcy.  But some will face a seemingly never-ending ordeal that has no foreseeable outcome one way or another.

Once a homeowner falls behind on the mortgage payments, he or she may try to refinance the mortgage in hopes of obtaining a more manageable monthly payment.  However, falling behind on a mortgage will negatively affect a homeowner’s credit rating, making obtaining a new loan exceedingly difficult.  If refinancing fails, the homeowner may approach the lender in hopes of renegotiating the terms of the mortgage.  But the credit crunch has made many lender reluctant to extend second chances to homeowners.  If all else fails, some will be able to stop a foreclosure by filing chapter 13 bankruptcy.  Chapter 13 bankruptcy will allow a homeowner to stay in their home, but this type of bankruptcy requires the ability to repay certain debts.  Depending on a borrower’s income, he or she may not qualify.

As government and private agencies push for reforms and workout options for beleaguered homeowners, the outcome of a foreclosure case will become murky.  Temporary moratoriums on foreclosures may help some find alternatives that will allow them to keep their homes.  For others, the moratoriums will only postpone the inevitable.

If you think that you are likely to face foreclosure sometime in the coming year, don’t let it go on with no end in sight.  The best way to face a pending foreclosure is to make sure you are aware of your options.  If you are behind on your mortgage payments, contact a foreclosure defense lawyer before it is too late.  Even if you have tried to renegotiate your mortgage on your own, an attorney may have more success.

Photo courtesy of echolot / badabum.

A short sale is when a lender agrees to accept less than the full amount due on a mortgage when a property is sold. The lender will sometimes accept the short sale to avoid the time and expense of a foreclosure.

About 18% of home sales are actually short sales, according to the National Association of Realtors. But it can be extremely difficult to get these deals done because they require the approval of not only the buyer and the seller, but also the mortgage-servicing company.

Before deciding that this is the route to take, remember that this is not a road without bumps. In fact:

• It can take weeks or months to get mortgage companies to respond to an offer.
• Mortgage servicers may balk at the purchase price.
• Homeowners may have more than one loan on the property, slowing the process.

But I Want To Sell My House Today – Not In Four Months!

If your home is going into foreclosure, you don’t have the luxury of a lot of time to get the deal done. If it’s going to work it needs to work fast – and short sales just don’t work that way.

The most frequent frustration is the fact that servicers take an average of 41⁄2 weeks to provide an answer on a potential short sale, with some taking two months or more to respond.

Deals can fall apart because the mortgage company rejects the price that has been agreed upon by the buyer and seller. Long delays in getting an answer from the mortgage servicer are another obstacle.

Gathering all the information needed to evaluate a short-sale offer can take time – a lot of time. The loan servicer must first determine whether the homeowner really can’t continue meeting the loan payments, then get an appraisal or broker’s opinion of the home’s value.

Mortgage servicers also try to ensure that the proposed sale is an “arm’s length” transaction between two parties rather than, say, a sale to a relative on sweet terms. They must also determine whether the buyer has sufficient funds or the ability to get a loan. If all those hurdles are cleared, the servicer may still need to get approval from the investor that owns the loan.

The success rate for short-sale offers is very low – in fact, some industry figures estimate that 20% of short-sale offers in the area lead to completed sales, compared with 85% for more traditional sales.

More Than One Mortgage Means More Problems

There are additional complications if you have a mortgage and a home-equity loan. In that case, both parties must approve the deal – which is difficult if the sales price may not even be enough to cover the mortgage balance.

Your mortgage company may approve the deal, only to have it fall apart when it hits the home equity lender. With a foreclosure looming, the last thing you need is to have the short sale option disappear at the last minute.

Mortgage Companies Hate Short Sales

Some servicers don’t approve short sales because they want borrowers to look into alternatives to keep the home – and ensure that the mortgage gets paid. The servicer will do anything possible to keep you in the home rather than taking a loss. Many would prefer to see you in a Chapter 13 bankruptcy because at least they will get paid through the court Plan.

Short Sales = Credit Problems, Tax Problems

Also, the IRS may come after the borrowers for income taxes on the amount of the shortfall. If the shortfall was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount.

In addition, a short sale will wreck your credit the same way as a foreclosure. The only difference is that in a foreclosure situation you are going to have the chance to fight the mortgage company – in a short sale, you’re rolling over and giving them everything they want.