Colbert on Consumer Financial Protection Agency

August 5, 2010 by Todd Murray · Leave a Comment 

“Banks are consumers, they consume our life savings.”

The Colbert Report Mon – Thurs 11:30pm / 10:30c
Consumer Protection Agency – Barney Frank
Colbert Report Full Episodes 2010 Election Fox News

Highlights of the financial reform bill

July 20, 2010 by Todd Murray · Leave a Comment 

If you’re like me, you don’t have the time or desire to read the entire 2,300 pages of the recently passed financial reform bill. Never fear, the Huffington Post has you covered with an informative summary (with pictures!). Here’s the link:

The Highlights of the Financial Reform Bill (Photos) | Huffington Post | July 16, 2010

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).

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)

New report on debt buyer lawsuits

June 14, 2010 by Todd Murray · Leave a Comment 

Last month, a team of organizations that provide legal help to low-income people issued a report on debt buyer lawsuits in New York City. The study draws on a sample of debt buyer lawsuits brought by 26 different debt buyers from 2006 to 2008. The study refers to this as the “Court Sample”.  The study also draws some data from a sample of callers to New York City’s Neighborhood Economic Development Advocacy Project. The study refers to this as the “Client Sample”.  Here are some of the study’s key findings:

  • Debt buyers won more than 90% of the lawsuits they filed, most of them by default judgment.
  • Not a single person in the Court Sample was represented by a lawyer. Overall, only 1% of people sued by debt buyers were represented by an attorney.
  • Only 10% of the people sued by debt buyers answered the lawsuit.
  • At least 71% of the people in the Client Sample were either not served with the lawsuit or were served improperly.

The first three findings don’t surprise me in the least. It’s long been known that debt buyers have a difficult time obtaining evidence for their case from the original creditor. They get away with filing so many lawsuits only because most of the people that the debt buyers sue can’t afford to hire a lawyer and don’t know enough to answer the lawsuit. So they win the case by default, not because they have strong evidence. And while I suspected that there were frequent issues with bad service in debt buyer cases, I’m a little shocked by how high the rate in this study actually is.

Based on its findings, the study makes the following recommendations:

  • Prohibit debt buyers from filing suits without evidence.
  • Ensure judicial review of default judgments
  • Increase legal representation for people sued by debt buyers.
  • Aggressively monitor and regulate process servers.

These are all excellent suggestions. Here in Minnesota, the state legislature is currently working on a bill that would require debt buyers to provide certain documents proving their claim before the court grants them a default judgment. But because of state budget shortfalls, it’s unlikely that Minnesota will see judicial review of default judgments or increased state funding for legal representation for low-income people any time soon. I strongly believe that someone needs to introduce a bill that calls for greater oversight and tougher regulations for Minnesota process servers. One of the fundamental tenets of our judicial system is proper notice to all of the parties, and based on the findings in this study, many people that are sued by debt buyers don’t received proper notice. It remains to be seen whether this is deliberate or sloppy, but I have my suspicions.

Debt Deception: How Debt Buyers Abuse the Legal System to Prey on Low-Income New Yorkers (PDF) | May 2010

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.