Minnesota notifies debt collection agencies of potential punishment for failure to conduct background checks
February 1, 2011 by Todd Murray · 3 Comments
Back in December, I wrote about a Star Tribune story that detailed a number of problems with Minnesota’s debt collector licensing process. As noted in the story, many debt collection agencies weren’t conducting background checks of new collectors because they supposedly believed–erroneously it turns out–that the state was doing it for them.
This past week, the newly inaugurated Dayton administration informed eight of Minnesota’s largest debt collection firms that it’s “prepared to commence formal action” for failing to conduct criminal background checks of collectors. The eight firms that were notified were Allied Interstate Inc. of Plymouth, AllianceOne Receivables Management Inc. of Eagan, Bureau of Collection Recovery of Eden Prairie, I.C. System Inc. of St. Paul, Financial Recovery Services Inc. of Edina, NCO Financial Systems Inc. of Mendota Heights, Receivables Management Solutions Inc. of West St. Paul, and Van Ru Credit Corp. of Des Plaines, Ill.
Minn. prepares crackdown on debt collectors | Star Tribune | January 28, 2011
What you need to know about garnishment of joint accounts in Minnesota
December 30, 2010 by Todd Murray · Leave a Comment
The garnishment of joint bank accounts in Minnesota has generated considerable controversy–and litigation–over the last few years. Here’s what you need to know if your joint bank account has been garnished by a debt collector:
In the 2007 case of Enright v. Lehman, the Minnesota Supreme Court ruled that a creditor can only garnish money from a joint bank account that belongs to the judgment debtor. So, for example, imagine that two people, let’s call them Rocco and Ani, have a joint bank account. Rocco has a judgment against him and a debt collector garnishes the joint account. Under the Court’s ruling, the debt collector could only garnish money from the account that belonged to Rocco. The debt collector wouldn’t be able to garnish any money in the account that belonged to Ani.
Unfortunately, the Enright decision left a number of questions unanswered. First, and most importantly, could a debt collector ever garnish a joint account when not all the account holders were judgment debtors? And if so, who was responsible for establishing what money in the account belonged to the judgment debtor–the creditor or the debtor? In a 2010 decision, the Minnesota Supreme Court answered these questions, and the answers weren’t favorable to Minnesota consumers. The Court ruled that a creditor could garnish a joint account, but could only keep the money that belonged to the judgment debtor. The Court also ruled that all of the money in a joint account was presumed to belong to the judgment debtor unless he and the joint account holders showed otherwise.
But what about the non-judgment debtor account holder? Is it really fair to her to have her money frozen while the garnishment process plays out and the ownership of the money in the joint account is established? Most of you have heard of the concept of “due process”. What that generally means is that before the government can deprive a person of rights or property, the person has to be given notice and an opportunity to be heard on the issue. But when a debt collector garnishes a joint bank account, the non-judgment debtor account holder doesn’t get any notice about the garnishment. Only the judgment debtor gets such a notice, and the notice doesn’t come until after the money has been frozen. And although Minnesota law allows non-judgment debtor account holders to be involved in the Court process, the debt collector isn’t required to notify the non-judgment debtor of her right to do so. So is depriving the non-judgment debtor account holder of her money without any notice or opportunity to be heard a violation of her Consitutional right to due process? That’s the issue that will be before the Federal District Court of Minnesota this spring.
If the Court agrees that the current garnishment process violates the Constitution, it could have far-reaching implications on how debt collectors can collect money. Stay tuned.
Photo: http://www.flickr.com/photos/your_teacher/1040476355/
New Mexico now requires debt collectors to tell consumers that the statute of limitations has passed
December 21, 2010 by Todd Murray · Leave a Comment
A recently-passed New Mexico law requires debt collectors to tell consumers when the debt they are collecting is past the statute of limitations. The statute of limitations, of course, is the time limit for bringing in a lawsuit. In Minnesota, for example, most collection lawsuits must be brought within 6 years of the date the consumer defaulted on the account.
There is nothing to stop a debt collector from attempting to collect a debt that is past the statute of limitations, they just can’t resort to a lawsuit if their voluntary collection efforts fail. If they do, they’ve violated the Fair Debt Collection Practices Act and can be sued. But it’s not uncommon for debt collectors to imply, or outright mislead, people into believing that they can still be sued even though the debt collector knows the SOL has passed. They get away with this because many consumers either don’t know what the statute of limitations is, or don’t know how long it is in their state. With its new law, New Mexico became the first state to level the playing field created by this knowledge imbalance. It would be great if other states, including Minnesota, follow New Mexico’s lead.
New Rule Requires that Collectors Disclose that a Debt is Time-Barred | Credit Slips | December 17, 2010
Photo: http://www.flickr.com/photos/faithx5/2549730409/
Investigation reveals troubling problems with Minnesota’s debt collector licensing process
December 16, 2010 by Todd Murray · Leave a Comment
The results of a Minneapolis Star Tribune investigation suggests that Minnesota’s procedure for registering debt collectors is broken. Under Minnesota law, individual debt collectors are required to register with the state and obtain a license. And if a person has been convicted of “fraud or any felony,” they are supposed to be prohibited from obtaining a license and working as a debt collector. The reasoning behind this law is fairly obvious: debt collectors have easy access to hundreds, or even thousands, of social security numbers and bank and credit card account numbers, which makes stealing someone’s identity a pretty tempting, and easy, thing to do.
But the Star Tribune’s investigation revealed that since 2005, the state has registered 111 people as debt collectors that should have been barred because of prior fraud or felony offenses. The Star Trib also found that approximately 75% of people that applied for a debt collection license lied about their criminal background. Although many of these people’s crimes would not have barred them from working in collections, it’s still very troubling that the state’s failure to conduct routine background checks before issuing a license is encouraging chronic lying on the license applications. Perhaps even more troubling is the fact that many collection agencies don’t conduct criminal background checks before hiring, apparently because they incorrectly believe that the state is doing it for them.
The story details a number of anecdotes about collectors being licensed that had previously been convicted of widespread financial fraud and violent crimes such as assault, battery, and even rape. It should be no surprise when these convicted felons, after getting jobs in collections, resort to harassing and abusing debtors.
So what is the solution here? Allocating more state money and resources for comprehensive background checks is an unrealistic option with the massive state budget deficit. One suggestion, made by state Senator Ron Latz, DFL-St. Louis Park, is to allow consumers to file state lawsuits and seek damages when collection firms hire criminals who harass them. “The only language that corporations speak is financial,” Latz said. “Either they pay for their negligence, or nothing changes.”
Criminals land jobs as debt collectors | Star Tribune | December 14, 2010
photo: http://www.flickr.com/photos/dyanna/3036833911/
Financial tips from personal finance guru Ruth Hader
December 7, 2010 by Todd Murray · Leave a Comment
Well-known personal finance consultant Ruth Hader was on Kerry Miller’s Mid-Morning program on Minnesota Public Radio last week. The hour-long discussion was packed with a lot of great personal financial tips. Here are a few, as summarized by MPR’s website (you can listen to the entire episode here):
1) What’s considered a good credit score is creeping up. The high-600s used to be considered good, but now you need to be in the 720-760 range.
2) The two most important factors in achieving a good credit score are on-time payment of bills and the relationship between your credit use and credit limits. The more headroom the better.
3) Eighty percent of credit reports have errors, according to some reports. You need to visit AnnualCreditReport.com to check for errors. First, make sure all your personal information is correct — spelling of your name, accuracy of address, etc. Then, check your actual financial records for errors. If you find errors in your personal info, contact the credit reporting bureau. For errors in your financial records, contact the creditor first. If you get no satisfaction, you can add the disputed information to your credit report.
4) One way to build good credit: Take out a small loan from a bank or credit union but don’t spend the money. Make regular payments from that pool of money.
5) Think of the credit report as a picture of you being passed around. How can you make it look better? Change the things over which you have control. You can’t change the system, so how do you work within it?
6) It’s better to have two cards or stay well under the limit on one card, then to just have one card that’s close to being maxed out.
7) Credit card balance transfers can be a good way to help pay off debt if you’re not just moving debt around. Playing a debt shell game doesn’t look good to credit bureaus. Consolidate to lower rates but then begin chipping away at the balance.
In particular, I think it’s very important to periodically review your credit report and have any errors corrected. Although many of the credit bureaus offer expensive “fraud alerts” and the like, you can save the money and easily stay on top of your credit report yourself. Go to AnnualCreditReport.com for a free copy of your credit report from all three of the major credit reporting bureaus. Some people prefer to get all three at once because each one can contain slightly different information. Other people like to pull the 3 at different times over the course of a year as the report changes. Whatever you do, make sure to take advantage of the free reports to ensure that your credit report gives the best possible picture of your finances for lenders.
Photo: http://www.flickr.com/photos/alancleaver/2638883650/sizes/l/in/photostream/
Find out now if I can help you:
