• Consumer Protection Law and Advocacy — Chicago, IL

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Have You Been Sued By A Debt Buyer?

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Debt buyers purchase debts from other companies and then try and collect on them, often by filing lawsuits in small claims court.  If you have been sued by a debt buyer, do not ignore court papers or assume you have no defense.  Too often, consumers seek legal help after a judgment has already been entered against them and when it may be too late.  Even though you may not recognize who is suing you, you still need to appear in court.  You can ask the court for proof that you owe what they say you owe and demand to know who actually “owns” the alleged debt and how the amount alleged due was calculated.

The Consumer Financial Protection Bureau (“CFPB”) has stepped up its efforts to reign in debt buyer lawsuits, to help ensure fairness for consumers on questionable debt portfolio purchases.  For example, in CFPB actions filed against debt buyer industry giants Encore Capital Group, Inc. and Portfolio Recovery Associates:

The CFPB found that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes. The companies also filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves.

Although they pay only pennies on the dollar for the debt, debt buyers may attempt to collect the full amount claimed by the original lender so it is especially important to hold them to their proofs and ensure the debt is properly documented, within the statute of limitations, and legally valid.

Don’t ignore collection letters either.  Save them because these letters may show discrepancies in the amount you allegedly owe and can cause a court to question the balance being sought later on by the debt buyer.  And remember — don’t make a small payment on a debt you are not sure about.  Investigate or seek legal help first.  If you make a payment, you may re-trigger the statute of limitations and lengthen the amount of time a debt buyer can take to sue you.


Identity Theft Tips and Resources

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Identity theft continues to be one of the most frequent complaints made to the Illinois Attorney General.  Today, Attorney General Lisa Madigan announced that 2,636 identity theft complaints were received in 2015 alone. http://www.illinoisattorneygeneral.gov/pressroom/2016_03/20160307.html.  Beyond merely filing a complaint, consumers need to know how to deal with identity theft should their information be compromised.

Tip No. 1: Visit https://www.identitytheft.gov/.  In January, the FTC announced a “one-stop website” where consumers can log in and obtain a personalized plan of action.

Tip No. 2: Put a fraud alert on your credit bureau report and file a police report.  Keep copies of everything.  Down the road, if you end up receiving collection letters or a debt collection lawsuit on a fraudulent account, having this information handy may provide an immediate collection defense.

Tip No. 3: Don’t ignore data breach notices.  If you receive a letter indicating your information may have been compromised, check all credit card and bank accounts and pull a copy of your credit report at https://www.annualcreditreport.com/index.action.  Make sure you recognize all charges and accounts and update your calendar to remind you to check these accounts every month for at least one year after you receive a data breach notice. Contact a lawyer to see if legal action may be pending as a result of the data breach.

Tip No. 4: Don’t rely on the telephone to lodge a dispute.  If you end up seeing fraudulent activity on one of your accounts, confirm your disputes in writing.  Send them by fax or certified mail so you have confirmation your written dispute was received.

Tip No. 5: Don’t throw anything away.  Keep all letters, reports, and proofs that your disputes were processed and resolved. You may need them should the fraudulent information re-appear.

Most of all, try not to panic.  If you follow the steps above or contact a trusted legal advisor for help, you can hopefully reverse any damage and protect your information for the future.

Citibank Ordered to Pay Nearly $8 Million in Civil Penalties

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Today, the Consumer Financial Protection Bureau (CFPB) ordered Citibank to pay nearly $8 million in civil penalties relating to its debt conduct.  Citibank has also been ordered to refund approximately $11 million to consumers and stop collections on an additional $34 million.  The CFPB’s February 23, 2016 press release can be found at http://www.consumerfinance.gov/newsroom/cfpb-orders-citibank-to-provide-relief-to-consumers-for-illegal-debt-sales-and-collection-practices/.

In one case, Citibank was charged with selling credit card debt to debt buyers with inflated interest rates and for failing to forward payments made to Citibank after the sales.  In the second case, Citibank and two of its collection law firms allegedly used falsified court documents in order to obtain judgments.

“Citibank sent inaccurate information to buyers when it sold off credit card debt and it also used law firms that altered court documents,” said CFPB Director Richard Cordray. “Today’s action provides redress to consumers who were victimized by slipshod practices as part of our ongoing work to fight abuses in the debt collection market.”

You may be impacted by these orders if:

(1) Your Citibank credit card account was sold to a debt buyer between February 2010 and June 2013;

(2) You made a payment towards your Citibank credit card account around the time your account was charged off;

(3) Faloni & Associates, LLC or Solomon & Solomon, P.C. handled your account.

Fair Credit Reporting & Consumer Law - Bardo Law PC

Take Stock of Your Credit Report

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Take stock of your credit report now because, while it’s still freezing here in the Windy City, as the weather gets warmer, it becomes one of the most popular times to buy a home or rent a new apartment.  Errors on your credit report could impact your ability to buy or rent and you don’t want to be surprised when you submit an application.  Credit information, even if it’s wrong or outdated, affects whether you can get a loan, or how much that loan will cost, so you need to ensure your credit file is accurate and up-to-date.

In fact, consumers should periodically check their credit reports even if no major purchase or life change is on the horizon because it is estimated as many as 1 in 5 people have errors on their reports.  The Fair Credit Reporting Act requires that you be given one free report per year to keep yourself informed and keep errors at bay.  You can get these free reports from each of the major bureaus at https://www.annualcreditreport.com/index.action.  Once you review the information in your credit report, and see something that is not accurate, you have the right to dispute that information either electronically or by mail.  If you draft a dispute letter to the credit reporting bureaus, make sure to include documentation to support your dispute and be sure to send your letters via certified mail, so you have a trackable receipt.

Don’t forget that you are also eligible to receive a free report if you are denied a loan, a job or insurance based on information contained in your credit report but you must request it within 60 days after the denial.

The Consumer Financial Protection Bureau published its 2016 helpful hints on credit report issues, available at  http://www.consumerfinance.gov/blog/category/credit-report/.  Check out this information and, if you are unable to fix an error on your report on your own, contact an attorney for assistance in determining whether your rights have been violated.

Human Rights Watch Report – “Rubber Stamp Justice”

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Hundreds of thousands of consumers each year are sued by debt buyers and often, judgments in favor of the debt buyer receive a “rubber stamp.”  Because consumers aren’t aware of their rights, aren’t properly served, can’t afford to hire an attorney or perhaps have just given up, they don’t appear in court and end up with a judgment against them by default.  Now, this phenomenon is getting some much needed attention.  On January 20, Human Rights Watch published “Rubber Stamp Justice; US Courts, Debt Buying Corporations, and the Poor.” https://www.hrw.org/report/2016/01/20/rubber-stamp-justice/us-courts-debt-buying-corporations-and-poor

The article is a must read and explains that debt buyers are purchasing vast portfolios of bad debts from lenders who already charged them off.  Debt buyers purchase these debts for pennies on the dollar but sue consumers for the full amount of the debt plus interest.

Leading debt buyers rank among the heaviest individual users of state court systems across the US, and various legal actions and research, including that of Human Rights Watch, have identified repeated patterns of error and lack of legal compliance in their lawsuits. These problems are often discovered long after the debt buyers have already won court judgments against alleged debtors, a situation that arises because of the inability of alleged debtors to mount an effective defense even when they are on the right side of the law. Debt buyer lawsuits typically play out before the courts with a stark inequality of arms, pitting unrepresented defendants against seasoned collections attorneys.

While this does not mean that “debt buyers and other creditors should not be able to enforce their claims in court, … it does mean that courts have clear and compelling reasons to handle debt buyer litigation with a particular degree of vigilance.”  Because debt buyer lawsuits are often generated and filed by automated processes, they should be more thoughtfully examined by the courts being asked to render judgment.

If you have been sued by a debt buyer, don’t ignore the paperwork.  Call an attorney to assist you with a defense or visit the Clerk’s office of your local court.  There are often courthouse help desks that can provide legal assistance or counseling.

New Mortgage Disclosures coming to help Americans

Chicago Protects Foreclosed Property Renters

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An important Chicago ordinance protects foreclosed property renters.  The Keep Chicago Renting Ordinance (“KCRO”) requires foreclosed property purchasers to:

(1) Provide notice of any change in ownership to all occupants of a foreclosed property within specific time limits;

(2) Give occupants accurate contact information for the new ownership; and

(3) Tell tenants where to pay rent and how to request repairs.

Until this notice is sent, the new landlord cannot collect rent.  Further, any existing leases must generally be honored and the new landlord cannot demand that the tenant renew or relocate until the end of that lease.

Most importantly, the KCRO requires the new owner of a foreclosed rental property to either: (1) offer qualified tenants a renewal or extension of their lease (capping rent increases at 2%); or (2) pay the tenants a $10,600 relocation fee.  As the City of Chicago notes:

The KCRO is designed to address challenges facing renters and the communities where foreclosures take place.  The first goal is to increase protection for renters in Chicago and stabilize rental housing by keeping foreclosed renters in their homes.   It requires banks to either allow renters in good standing and who pay their rent to stay in their homes; or requires that they pay tenants relocation funds of $10,600 to leave the building to enable an easier transition from their housing. The fee also standardizes the “cash for keys” process.

A detailed synopsis of the Ordinance can be found at http://lcbh.org/resources/overview-keep-chicago-renting-ordinance.  It’s important for you to know if the property you are renting is subject to a foreclosure, you have rights and cannot be forced to vacate your home immediately.

Chase Bank Credit Card Judgments in Question

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Chase Bank credit card judgments are in question after a July 8, 2015 consent order.  The Consumer Financial Protection Bureau (“CFPB”) ordered Chase to permanently halt collections on more than 528,000 accounts and consumer credit card judgments.  The July 8, 2015 Consent Order stated:

  • Chase filed lawsuits and obtained judgments against consumers using deceptive affidavits and other documents that were prepared without following required procedures because, for example, they were at times signing without personal knowledge of the signer, a practice commonly referred to as “robo-signing.”
  • Chase made certain errors calculating pre- and post-judgment fees and interest when filing debt collection lawsuits, which resulted in judgments against consumers for incorrect amounts.
  • Chase obtained judgments against consumers using documents that were falsely sworn and that at times contained inaccurate amounts, which may affect consumers’ ability to obtain credit, employment, housing, and insurance.
  • Chase’s practices misled consumers and courts.

Chase is now required to stop all efforts to enforce, collect, sell or otherwise transfer any judgment entered in a case pending between January 1, 2009 and June 30, 2014.

If Chase entered a judgment against you or a Chase credit card debt from 2009-2014 appears on your credit report, you may have the right to stop further collection conduct.  First, make sure you check your credit report to see if the debt is listed as unpaid on your report. Then, be sure to visit http://files.consumerfinance.gov/f/201507_cfpb_consent-order-chase-bank-usa-na-and-chase-bankcard-services-inc.pdf for more information on the CFPB’s order.

Wrongful Repossessions - Bardo Law PC

What Happens After Your Car Is Repossessed?

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There is a lot of misinformation about car repossessions.  Many consumers believe if they voluntarily turn over their vehicles when they are having trouble making their payments, they won’t have to pay off the balance on their car loans.  Consumers need to understand that returning a car “voluntarily” will likely still be reported as a “repossession” to the credit reporting bureaus.  The finance company will sell the car after you turn it in and hold you liable for the difference between the sale price and the amount of the contract.  This is especially important to consider if you have a high interest rate loan on a used car.  If the used car doesn’t fetch a good price at sale, the outstanding unpaid balance could be quite large, and you could end up being sued in court to pay the difference.

So what can you do?  First, pay close attention to your mail.  The finance company is required to send you important paperwork regarding any post-repossession sale and your rights to reinstate the contract.  If you don’t get this paperwork, you may have a good defense to a potential lawsuit down the road.  If you do receive it, make sure you verify that the sale price was reasonable by checking out Kelley Blue Book values at http://www.kbb.com/.  Also, be sure you aren’t being charged inflated storage or repossession costs (especially if you turned the car in yourself).

Consider looking for your own buyer as well.  If you can find someone willing to pay a fair price, it may reduce or eliminate the balance on your loan account.

Finally, keep in mind that if you turn over your car to a repossession agent, make sure to get that agent’s contact information and business card.  In Illinois, repossessions must be reported to the Illinois Commerce Commission and all agents must be properly licensed.  See https://www.icc.illinois.gov/collateralrecovery/ for a copy of the applicable regulations.

Repossessions don’t have to be a nightmare – but don’t be caught unaware of their consequences.

Debt Collection Mill Faces $3.1 Million Dollar Penalty

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Debt collection mill Frederick J. Hanna & Associates faces major practice changes and a $3.1 million dollar civil penalty.  On December 28, 2015, the Consumer Financial Protection Bureau (“CFPB”) filed a proposed consent order in federal court.  If approved, Frederick J. Hanna & Associates (a Georgia-based law firm) and its three principal partners will be barred from further illegal debt collection practices.  The CFPB charged Hanna with filing deceptive court papers and relying on faulty evidence to win debt collection lawsuits.  Hanna would file suit and hope the consumer wouldn’t show up to defend the case.  For a while, this was a winning strategy for collecting on old debts it couldn’t prove were owed.

“The Hanna firm relied on deception and faulty evidence to coerce consumers into paying debts that often could not be verified or may not be owed,” said CFPB Director Richard Cordray. “Debt collectors that use the court system for purposes of intimidation should reconsider how their practices are harming consumers.”

According to the CFPB complaint, Hanna filed more than 350,000 collection suits from 2009 through 2013 and relied on an automated system to churn out complaints.  Some of the consumers Hanna sued didn’t owe the debt or had already received a bankruptcy discharge.  Now, Hanna will be prohibited from filing or threatening lawsuits unless attorneys have reviewed specific documentation related to the consumer’s debt.

For more information, visit http://www.consumerfinance.gov/newsroom/cfpb-takes-action-to-stop-illegal-debt-collection-lawsuit-mill/.


Traps of 0% Interest Credit Cards

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0% interest credit cards are tempting but be sure to check out the fine print.  Just last week, the New York Times published a piece on 0% interest credit cards to warn consumers about some of their tricks and traps.

The cards, offered by many major retailers, promote the purchase of expensive items — like flat-screen televisions, furniture, jewelry or other expensive goods — with no interest owed during a defined period, typically from six to 12 months. The cards can help consumers pay for larger purchases over time.

But there’s a catch. If the purchase isn’t paid in full at the end of the promotional period, the buyer is charged interest retroactively, often at a very high rate. Sometimes, the interest is charged on the entire purchase price, even if the consumer has made partial payments toward principal.

The Times’ piece cites the National Consumer Law Center’s report on deferred interest credit cards, authored by consumer advocate Chi Chi Wu.  In the Report, found at https://www.nclc.org/images/pdf/pr-reports/report-deferred-interest.pdf, Ms. Wu explains that “no interest” or “0% interest” cards carry a “debt time bomb” at the end.  “Consumers who don’t pay off the entire balance before the promotional period ends will be charged interest retroactively back to the date that they bought the item, even on amounts that have been paid off.  For example, if a consumer buys a $2,500 living room set on January 2, 2016 using a one-year 24% deferred interest plan, then pays off all but $100 by January 2, 2017, the lender will retroactively charge nearly $400 interest on the entire $2,500 dating back one year.”

While 0% interest cards can no doubt be useful, consumers need to be educated on the serious consequences of not paying off the entire balance by the end of the promotional period.  So check out the disclosure statements and make sure you understand you may not really be getting a “no interest” deal.