FTC heeds Franken’s call for review of debtors being thrown in jail
July 19, 2010 by Todd Murray · Leave a Comment
Last week, Minnesota Senator Al Franken issued a press release calling for a review of the practices and procedures that are causing increasing numbers of consumers to be thrown in jail in debt collection cases. Here’s the press release:
WASHINGTON, D.C. [07/15/10] – U.S. Sen. Al Franken (D-Minn.) called on Federal Trade Commission Chairman Jon Leibowitz to take immediate action to address possible illegal activities by debt collection firms in Minnesota and across the country.
“Right now, Minnesotans are struggling to make ends meet. The last thing they need is to become victims of debt collection abuse,” said Sen. Franken. “Recent reports raise serious questions about whether our current laws go far enough to protect consumers, and I want to make sure Minnesotans aren’t at risk of being harassed or improperly jailed.”
Recently the Minneapolis Star Tribune published two articles detailing the disturbing practices of some debt collection agencies in Minnesota. The article cites a sharp rise in the use of arrest warrants against debtors, resulting in an increasing number of Minnesotans finding themselves behind bars for old or minor debts. The paper attributes the rise in arrests to the growing debt-buying industry that profits from buying people’s debts and the poor economy. Agencies can then use the court system to collect debts, as bail is frequently set at the amount the debtor owes.The Star Tribune also discovered that Minnesotans are more frequently finding themselves pursued by debt collection agencies for debts that they don’t actually owe or debts that they already paid.
Sen. Franken’s letter to Chairman Leibowitz can be read here.
You can read the Star Tribune’s articles, “In Jail for Being in Debt,” and “Phantom Debts, Real Anguish” on their website.
In response to Franken’s letter, the Federal Trade Commission has agreed to take a harder look at the process for potential abuse.
“We’re trying to identify what the practices are, under what conditions people who may have consumer debt collection claims against them may be jailed, and whether such practices are in conformity with federal law,” said Julie Bush, a staff attorney in the FTC’s division of financial practices. She said the inquiry was not a formal investigation.
Bravo to Chris Serres at the StarTribune, who’s excellent article has been the catalyst for political action (or at least lip service about political action).
Mass-produced collection lawsuits overwhelming New York courts
July 14, 2010 by Todd Murray · Leave a Comment
When I saw the headline for this recent New York Times story, I assumed it was just another story about the massive increase in debt collection lawsuits in a down economy. There have been dozens of similar stories in numerous media outlets over the last couple of years. But the article does contain a startling revelation:
As millions of Americans have fallen behind on paying their bills, debt collection law firms have been clogging courtrooms with lawsuits seeking repayment. Few have been as prolific as Cohen & Slamowitz, a Woodbury, N.Y., firm that has specialized in debt collection for nearly two decades. The firm has been filing roughly 80,000 lawsuits a year. With just 14 lawyers on staff, that works out to more than 5,700 cases per lawyer.
These figures are astounding for a couple of reasons. First, the collection industry–which consists of hundreds of law firms, including many that file a similar number of lawsuits as Cohen & Slamowitz–repeatedly accuses consumer lawyers of being overly litigious. The Times’ data exposes the obvious hypocrisy of this accusation.
And then there’s this: if you take the Times’ math a little further, each of the 14 lawyers at Cohen & Slamowitz are filing just under 500 lawsuits each month. And I’m willing to bet that Mr. Cohen and Mr. Slamowitz, as the founding partners of the firm, are not doing the mundane work of signing debt collection lawsuits. The senior partners at the collection law firm I used to work at certainly didn’t. So the 500 lawsuits per-lawyer-per-month estimate is probably an understatement.
Why is this such a big deal? First, mass-producing so many lawsuits will inevitably result in mistakes–such as suing the wrong person or demanding the wrong amount of money. Second, and perhaps more importantly, both the FDCPA and most states’ rules of civil procedure seem to require that lawyers ensure that the lawsuits they are filing are accurate and based on competent evidence. The FDCPA calls this “meaningful review”. Based on the absurdly high number of lawsuits they’re filing each month, it’s hard to imagine a Cohen & Slamowitz lawyer doing very much meaningful review.
Although the Times’ story features one New York judge that has held the debt collectors to the existing standard of meaningful review, the majority of courts seem willing to look the other way. So it’s unlikely that we’ll see a reduction in mass-produced lawsuits anytime soon.
If you live in Minnesota and have been sued by a debt collector, feel free to download and use my free Answer form and instructions. And if you would prefer to have an attorney defend you against a debt collection lawsuit, feel free to contact me.
Automated Debt-Collection Lawsuits Engulf Courts | New York Times | July 12, 2010
Consumer complaints about debt collection harassment on the rise. Again.
July 12, 2010 by Todd Murray · Leave a Comment
According to a recent CNNMoney.com story, consumer complaints about debt collector harassment soared 50% to 67,550 in 2009 and are on pace to grow another 13% in 2010. And complaints of debt collectors threatening or actually using violence more than doubled in 2009, to 2,517. The reason for these increases in these aggressive collection tactics seems pretty obvious. With unemployment at a record high, debt collectors simply can’t squeeze as much money from consumers as they used to. So they’ve resorted to more aggressive–and often illegal–collection tactics.
Although, if you believe the debt collectors, it’s not their fault. According a Mark Schiffman, a collection industry spokesman, the rise is consumer complaints should be blamed on…wait for it…consumers! In the story, Schiffman attempts to deflect blame from the collection industry by noting that “there’s a growing industry of consumer attorneys and savvy consumers who have learned that they can sue a debt collector fairly easily and collect very easily.” So according to Schiffman, it’s not that debt collectors are harassing more people, they’re just getting called on it more often by “savvy” consumers and their lawyers.
To learn more about your rights under the Fair Debt Collection Practices Act, consider downloading my free guide FDCPA Basics. And if you’ve been harassed or abused by a debt collector and want to stand up for your rights, feel free to contact me for a free case review.
Debt Collectors Get Nasty | CNNMoney.com | July 10, 2010
Banks now need your permission to enroll you in overdraft protection
July 2, 2010 by Todd Murray · Leave a Comment
Starting today, banks have to get your permission to enroll you in an overdraft protection program. This is one of the many consumer-friendly provisions of the CARD Act passed earlier this year.
As many of you know already, an overdraft protection program links your checking account to your savings account, so when you overdraw your checking account, the money is automatically transferred from your savings account to cover the overdraft. Of course, banks charge a fee to do this, usually around $40, even if you only overdraw your account by a few dollars. This is one reason why some commentators have referred to overdraft protection as the “$40 cup of coffee.” Before the enactment of the CARD Act, banks didn’t have to get your permission to enroll you in this program. Now they do. So if you’re asked if you want to enroll in the overdraft protection program, consider whether you’re willing to pay $40 for a cup of coffee before saying yes. Or better yet, keep your checkbook balanced.
Banks Must Now Ask You To Opt In To Debit Card Overdraft Plans | The Consumerist | July 2, 2010
(photo: 2Tales)
Star Tribune story on debt buyer lawsuits
June 30, 2010 by Todd Murray · Leave a Comment
The Star Tribune just ran an in-depth story about the surge in debt buyer collection lawsuits. The article does a great job of highlighting the major problem with debt buyers’ lawsuits: their lack of information and evidence to prove that the consumer actually owes the debt. As the story explains, the problems created by this lack of information are magnified when combined with debt buyers’ aggressive litigation practices and the guilty-until-proven-innocent attitude that they treat consumers with.
To me, the important thing for people to take from this story is to understand that the debt buyer industry is built on the premise that consumers will not answer their lawsuits, which results in thousands of default judgments for them. By obtaining the overwhelming majority of their judgments by default, debt buyers can get away with not having sufficient–or any–evidence that the consumer owes the money. But as the story shows, if the consumer fights back, many debt buyers will either walk away from the case or get roundly defeated in court.
If you live in Minnesota and have been sued by a debt buyer, feel free to download and use my free Answer form and instructions. And if you would prefer to have an attorney defend you against a debt buyer lawsuit, feel free to contact me.
Phantom debts, real anguish | Star Tribune | June 30, 2010
