Capital One caught collecting over 15,000 accounts that were discharged in bankruptcy

January 3, 2012 by Todd Murray · Leave a Comment 

Bankruptcy is designed to be a last-resort option for people with serious financial problems. When someone files bankruptcy, her debts are discharged, which means that they are no longer legally owed. Apparently, however, Capital One didn’t get the memo on how bankruptcy works.

A auditor appointed by a bankruptcy court in Massachusetts found that Capital One pursued over 15,000 claims for debts that had been discharged in bankruptcy. Yup, our good friends at Capital One seem to have made a practice of trying to collect debts that they have no legal right to collect. Capital One, of course, denies any nefarious intent, but their actions speak much louder than their words. In fact, according to the WSJ article, the Chief Judge of the U.S. Bankruptcy Court in Mississippi has demanded that a representative from Capital One appear in court and provide proof that the company’s pattern of collecting discharged debts is a “legitimate error and not a conscious, malevolent effort to go out and collect a debt that’s been discharged.”

Capital One’s pursuit of discharged debts is not only a violation of the bankrutpcy code. It’s also a violation of the Fair Debt Collection Practices Act. Among other things, the FDCPA prohibits debt collection conduct that is unfair or untrue. Do you think it’s fair to pursue someone for a debt that isn’t legally owed? Me neither. And do you think that saying in a lawsuit that someone owes a debt when they don’t actually owe the debt is untrue? Yup, me too.

What’s in your wallet? Capital One’s greedy hands, apparently.

Debts Go Bad, Then It Gets Worse | The Wall Street Journal | December 23, 2011

If you live in Minnesota and Capital One–or any creditor–has attempted to collect a debt that was discharged in bankruptcy, please contact me to discuss the situation further. I offer a free case review for all FDCPA cases and if I agree to handle your case, you won’t have to pay me any money up front. My fees come from the money I recover from you if you win your case or accept a negotiated settlement.

6 tips if you must buy a vehicle from a buy-here pay-here dealership

November 3, 2011 by Todd Murray · Leave a Comment 

The L.A. Times is currently running an investigative series on so-called Buy-Here Pay-Here auto dealerships. The first installment describes the basic business model used by these businesses and identifies a number of the pitfalls of buying a vehicle from them.

A buy-here pay-here dealership is, as the name suggests, a dealership that finances the car loans itself, rather than using banks or finance companies. They market to people with low-income and bad credit that can’t qualify for conventional financing. In return for agreeing to finance borrowers that don’t have access to mainstream credit, the buy-here pay-here dealers drastically inflate the price of their vehicles, charge very high interest rates, agree to payment arrangements that they know you can’t honor, and aggressively repossess the vehicle once it’s in default, keeping all of the money that the borrower has already paid. And once the vehicle is repossessed, they sell it again. And again. Sometimes the same vehicle is repossessed and sold as many as eight times, creating another revenue stream for these business. The L.A. Times succinctly–and accurately–describes the business model as “sign, drive, default, repossess, and resell. The entire Times piece is a fascinating look into this booming industry and is definitely worth your time.

It would be too easy to advise everyone to steer clear of buy-here pay-here dealerships. After all, they do allow people without access to mainstream credit to buy a vehicle. And let’s face it, most people need a vehicle to get to and from work these days. But buying a car from them is very, very risky. Here are some tips if you’re considering buying a car from a buy-here pay-here lot:

Decide whether you really need to buy from them. Obviously, if you’re considering a buy-here pay-here dealership, you’ve decided that you need a vehicle and have been rejected by conventional lenders. But consider whether you would be better off taking the money that you’ve earmarked for a down payment to the buy-here pay-here dealer and instead using it to buy a used car outright from a private party. This would solve your transportation and financing problem, without taking on all of the risks of buying from a buy-here pay-here dealer.

Do your homework on the purchase price. Because the buy-here pay-here dealer knows that you’re desperate, they often inflate the list price well-over the vehicle’s Kelley Blue Book value. The Times story reports about one particular transaction where the purchase price was inflated to double the KBB price. Do your homework and make sure that you are getting a fair price.

Review the interest rate carefully. The Times story tells the story of one person who thought she purchased a car with an APR of 12%, when it actually was 20.3%. Make sure that the APR is actually what the contract says it is. There are a number of online APR calculators that you can use to verify the dealer’s numbers.

Be sure that you can afford the monthly payment. The Times story reports that 1 in 4 buy-here pay-here customers defaults on their loan. And there is ample evidence that the dealer may deliberately agree to a payment plan that they know you can’t afford because they know that they can just repossess your vehicle and sell it again to someone else. So be conservative in your estimates of how much you can afford each month and be sure to plan for emergencies when doing your budget.

Don’t believe what they tell you about re-financing or trading up. As the Times story details, these are often lies to pressure you into the purchase. If something doesn’t feel right to you, walk away.

Don’t expect them to work with you if you fall behind on payments. Their business model is heavily premised on repossessing cars in default and reselling them. So they aren’t going to be interested in working with you if you fall on hard times. They’re just going to repossess and sell the vehicle again. The Times story reports that many buy-here pay-here dealers outfit their vehicles with GPS devices and remote-controlled ignition blockers to allow for easy repossession. Those that don’t often resort to deceptive or very aggressive repossession tactics. In my experience, some of the most dangerous repossession encounters that I’ve heard about were ordered by buy-here pay-here lenders.

A vicious cycle in the used-car business | Los Angeles Times | October 30, 2011

5 tips for negotiating a settlement with a debt collector

October 27, 2011 by Todd Murray · Leave a Comment 

1.  If possible, negotiate a lump sum settlement. The best way to get a good deal from a debt collector is to offer a lump sum settlement. Debt collectors usually have blanket authority to settle debts for between 40% and 80% of the full balance if you pay the settlement in a one-time payment. If you’re unable to afford a lump sum payment, the debt collector usually has the authority to agree to smaller monthly payments, often over a couple of years. But in exchange for the flexibility of a low monthly payment, you’re probably going to have to pay the full account balance.

2.  The last day of a month is the best day to get a great deal. Debt collectors have monthly goals that they must meet and there are significant consequences if they don’t meet those goals. If a collector is short of their goal on the last day of the month, they may be willing to accept a lower settlement amount than they normally would. To take advantage of this, however, you’ll probably have to make the settlement payment that day. So plan accordingly.

3.  Insist that the debt collector confirms any agreement in writing, before sending them any money. Once you’ve reached a verbal agreement with the collector, ask them to send you confirmation of the agreement in writing before turning over your money. Read the agreement carefully to be sure that it actually contains the terms that you agreed to. Any reputable debt collector will be willing to confirm a payment arrangement in writing, so be wary of one who won’t.

4.  Keep a record of your payment. If you’re paying with a personal check, get a copy of the canceled check from your bank. If you’re paying with a money order or cashier’s check, make a copy of the check and either note the date that you mailed it or, better yet, use certified mail. If you pay in cash or make the payment in person, be sure to get a receipt. Along with the collector’s written confirmation, your proof of payment may be needed in the future to prove that you settled the account.

5.  Be sure to get the proper follow-up documents. The appropriate follow-up documents vary depending on what point in the legal process you are when you settle the debt:

  • If you settle the debt before you get sued, the collector’s written confirmation of the agreement, plus your proof of payment, should be sufficient.
  • If you settle the account after you’ve been sued, but before a judgment is entered, the collector should send you (and the court if the case has been filed) a dismissal WITH prejudice. A dismissal with prejudice means that the claim is fully resolved and can’t be brought against you again. Don’t accept a dismissal without prejudice if you’ve settled the account in full because there’s a possibility that you could get sued again for the same claim.
  • If you settle the account after you’ve been sued and after a judgment has been entered, the collector should send you and the court a satisfaction of judgment. And if your wages were being garnished at the time you settled the account, the debt collector should quash the garnishment.

Things a debt collector won’t tell you

October 17, 2011 by Todd Murray · Leave a Comment 

Reader’s Digest posted an article last week titled 13 Things a Debt Collector Won’t Tell You. It’s a fascinating peek inside the world of debt collection and it gives some insight into how debt collectors are trained. Here are some of the most revealing, along with my comments:

  • Debt collectors are trained that all consumers are compulsive liars. Let’s face it, collecting debt is an unpleasant job, especially if you have a conscience. It’s much easier to aggressively push for payment when your training demonizes all consumers as irresponsible liars.
  • Debt collectors don’t care about why you can’t pay because they’ve heard every hard-luck story there is. There’s nothing to be gained from explaining to the collector why you fell behind on paying your bills. Collectors with a conscience don’t last long, so chances are that the collector you’re dealing with doesn’t have one.
  • Collectors are trained to get as much personal information as possible. Never tell a collector where you work or where you bank. If you’re unable to settle the account, the collector will use this information to garnish your bank account and wages.
  • The more money the collector brings in, the bigger his bonus. Most collectors are paid a very small salary, plus a commission on the money that they collect. Collectors know that their ability to make ends meet is largely contingent upon how much money they can squeeze out of you. And collectors that consistently fail to meet their monthly collection goals routinely get fired. It’s no surprise, then, that this immense pressure causes collectors resort to ruthless and illegal collection tactics.

Click through to the article to see the entire list.

If you’re dealing with debt collectors, make sure to download and use my free debt collection call log so that you can document all of the debt collectors’ communications. And if a debt collector does anything that you think was unfair; untrue; or harassing or abusive, please contact me to discuss the situation further. I offer a free case review for all FDCPA cases and if I agree to handle your case, you won’t have to pay me any money up front. My fees come from the money I recover from you if you win your case or accept a negotiated settlement.

Five reasons to sue a debt collector that violates the FDCPA

August 9, 2011 by Todd Murray · Leave a Comment 

1. Up to $1,000 in statutory damages. If you bring a successful FDCPA case, the court will award you up to $1,000 in statutory damages. These damages are provided by law as a penalty against a debt collector that violated the FDCPA and you don’t have to prove that you suffered any actual harm to be awarded statutory damages. Although there are rare cases where a court awards a consumer less than $1,000, in most cases the consumer is awarded the full $1,000.

2. Provable actual damages. If a debt collector’s abuse has caused you to cry or lose sleep or if the collector’s harassment has affected your relationship with your loved ones or your performance at work, you may be able to recover actual damages. Not every consumer will suffer actual damages due to a collector’s conduct, but if you can successfully prove that you’ve suffered tangible harm, you’re entitled to compensation for that suffering.

3. A free attorney. Probably the most important remedy under the FDCPA is the fee-shifting provision. This means that if you win your case, the collector has to pay your attorney fees. Because of this, most consumer attorneys take FDCPA cases on a full contingency fee, which means that you don’t have to give your lawyer any money up front. Your attorney gets paid by the debt collector or gets a percentage of any out-of-court settlement.

4. Your litigation costs are covered. Litigation can be expensive. The costs for filing fees, service fees, deposition transcripts, etc. can quickly add up. But if you win your FDCPA case, the debt collector has to pay all of your court costs.

5. Hold the debt collector accountable. When the FDCPA was enacted, Congress gave each individual consumer the right to sue a debt collector for violating the Act. The idea was that consumers and their attorneys would act as “private attorney generals” by holding debt collectors that violate the FDCPA accountable for their conduct through private lawsuits. Debt collectors love to lecture consumers about taking “personal responsibility” for paying their bills. An FDCPA lawsuit is a chance to turn this argument right back around at the debt collector and force them to take responsibility for their illegal debt collection tactics.

If you’re dealing with debt collectors, make sure to download and use my free debt collection call log so that you can document all of the debt collectors’ communications. And if a debt collector does anything that you think was unfair; untrue; or harassing or abusive, please contact me to discuss the situation further. I offer a free case review for all FDCPA cases and if I agree to handle your case, you won’t have to pay me any money up front. My fees come from the money I recover from you if you win your case or accept a negotiated settlement.