• Consumer Protection Law and Advocacy — Chicago, IL

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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.

Be Wary of Recurring Auto Debits

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Consumers should be cautious when authorizing recurring auto debits.  Nearly every company — from your most aggressive bill collector to your local gym — now ask that consumers permit automatic monthly withdrawals from their checking accounts.  While this may be convenient and “eco-friendly,” it can lead to problems.  Be aware that a federal law called the Electronic Funds Transfer Act grants you rights when you agree to auto debits.  For example, the Act requires that the terms of your agreement be provided to you when you sign up or before the first auto debit occurs.  You must also be given notice of your right to stop the auto debits and the steps for doing so.

To ensure consumers are aware of these rights, the Consumer Financial Protection Bureau (“CFPB”) recently released a bulletin alerting companies that they must obtain authorization before automatically debiting a consumer’s account.  The CFPB also published a series of letters consumers can use to cancel any recurring auto debit, available at http://www.consumerfinance.gov/blog/you-have-protections-when-it-comes-to-automatic-debit-payments-from-your-account/.   According to the CFPB’s November 23, 2015 press release:

The CFPB is concerned that some companies may be failing to meet the legal requirements for obtaining authorizations from consumers for recurring auto debits. Also, through its supervisory work, the CFPB observed that one or more companies provided consumers with a notice of the terms for preauthorized auto debits that failed to disclose critical information, such as the amount and timing of the payments the consumer agreed to. If consumers are not given clear information on the terms of auto debits, they may not be able to manage payments or ensure their account balance is large enough to avoid being hit with overdraft or non-sufficient fund fees. In some cases, consumers have also reported companies not obtaining proper authorization to auto debit an account.

Don’t feel pressured to agree to monthly auto debits and if you do agree, keep close track of your monthly bank statements.  Verify the correct amounts are being debited and don’t hesitate to ask for written confirmation of your agreement.  Auto debits should be convenient, not a source of anxiety or confusion.

Avoiding Automotive Repair Shop Fraud and Excessive Charges

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Automotive repair shop fraud is a consistent consumer protection concern. Many repair shops continue to ignore key protections here in Illinois. The Automotive Repair Act requires repair facilities to make specific disclosures to consumers before repair work begins.  When you bring your car in, you must be given a written estimate that explains:

  • the amount to be charged for parts, labor, and diagnostic tests
  • a parts description and disclosure of whether the parts will be new or used
  • a disclosure as to whether repairs are required or suggested
  • the date, odometer reading, and length of time needed to repair the vehicle (if it will take more than one day)
  • an explanation of how labor costs will be calculated

The written repair estimate may be provided in 1 of 2 forms:

  • An itemized estimate for parts and labor, which cannot be exceeded by more than 10%; or
  • A non-itemized estimate of total price, which cannot be exceeded at all.

If you don’t authorize the repair, the shop can’t charge you for it.  If a repair is taking too long, you can take your vehicle back so long as:

  • You pay for labor that was actually performed
  • You pay for parts that were actually installed
  • You pay for parts that were ordered specifically for you if they can’t be returned
  • You pay for any storage charges disclosed to you before repairs commenced

All these consumer rights must be posted in a visible location.

Use your best judgment in selecting a repair facility. Check online reviews prior to leaving your vehicle anywhere and verify the type and number of complaints against the facility with your local Better Business Bureau at https://www.bbb.org/.

Avoid Gift Card Traps This Holiday Season

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The holidays are upon us and that means gift card season!  Federal and state laws protect gift card recipients but be cautious when purchasing.  Some gift cards and gift certificates contain high activation fees, dormancy charges, and expiration dates.

In Illinois, gift certificates must be valid for at least 5 years from date of issuance.  Post-purchase fees are strictly prohibited and the face value of the gift certificate may not be reduced for non-use or untimely redemption.

Be aware that Illinois’ gift card rules don’t apply to bank-issued gift cards or pre-paid debit cards (Visa, American Express, etc.)  Federal law governs those cards.  Under the Credit Card Act of 2009, if the gift card isn’t used in a twelve-month period, a monthly inactivity fee may be charged, but only if disclosed clearly and upfront.  And while expiration dates 5 years or more in the future are permitted, they can only be assessed if the expiration date terms are clearly and conspicuously stated.

ConsumersUnion® has a list of states and their card laws, available at http://consumersunion.org/research/state-gift-card-consumer-protection-laws-2013-update/.  Be sure to check your state’s specific laws for more information.

In the meantime, read the fine print and make sure any expiration dates or inactivity fees are disclosed.  This will help make sure your gift recipient can use and enjoy the card.

Fair Credit Reporting & Consumer Law - Bardo Law PC

Consumer Law Q&A – Employment Credit Checks and the FCRA

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During the holiday season, many people apply for part-time and seasonal jobs.  Your employment application may be rejected because of poor credit – but employers must follow the law before doing so.  Unfortunately, employment credit checks are permitted under the Fair Credit Reporting Act (“FCRA”).  The FCRA allows employers to request credit reports on job applicants and existing employees.  However, employers must comply with three requirements:

  • Notify the applicant prior to running a credit report;
  • Advise the applicant that he/she may be rejected from employment based in whole or in part on information contained within the credit report; and
  • Provide a copy of the credit report and a written summary of the applicant’s dispute rights.

If you apply for a job and think you’ve been rejected because of your credit, you may have a legal claim.  The FCRA protects you if you were not properly notified or if you were rejected based upon credit report information that is incorrect, false or outdated.

Employment credit checks can be an unfair barrier to finding work so try to be proactive in managing your credit report before you apply.  For more information, visit http://www.consumer.ftc.gov/articles/0157-employment-background-checks.  The FTC has more helpful links on employment credit and background check issues.

Debt Collector Harassment

Resource for Bad Debt Collection Tactics

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Bad debt collector tactics are finally getting some much needed publicity.  National Association of Consumer Advocates’ co-member Stephanie Tatar (of The Tatar Law Firm) posts very helpful consumer law/debt collection articles.  Visit Debt Collection Harassment Digest at http://paper.li/ConsumerLawNet/1430249856?edition_id=54af3610-8d5a-11e5-b6bc-0cc47a0d1609 to read more.  Yesterday’s shared post involves a look at the New York Times’ editorial piece “Bad Debt Collectors and their Prey.”

The editorial focuses on three areas of consumer protection concern: (1) debt collectors filing false affidavits in court when consumers have not properly been served with a collection lawsuit; (2) threatening to sue on debts that are too old to collect on through litigation; and (3) targeting of minority communities in bulk debt filings.

Also highlighted in the Digest is a discussion of the November 4, 2015 Federal Trade Commission announcement — http://www.jdsupra.com/legalnews/ftc-cfpb-and-states-collaborate-to-36291/.  The FTC’s new initiative Operation Collection Protection, is “an unprecedented coordinated federal-state enforcement effort targeting deceptive and abusive debt collection” and reports 30 new coordinated law enforcement actions targeting debt collectors using illegal methods such as harassing phone calls and false threats of litigation, arrest, and wage garnishment.

We’ll continue to keep consumers updated on problematic debt collection trends, settlements, and media alerts — an educated consumer is the first step towards fairness in the marketplace.

 

Chicago Waiving Certain Penalties, Interest, and Collection Costs

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Effective Sunday, November 15, 2015, the City of Chicago is offering a form of debt relief.  On certain fines and tickets, the City will waive penalties, interest, and collection costs from now until December 31, 2015.  This reduces the total amount due to the original fine or tax amount.  For information about whether your debt is eligible, visit http://www.cityofchicago.org/city/en/depts/fin/provdrs/accounts_receivabledivision/news/2015/october/DebtReliefProgram.html.

Under the amnesty program, consumers and businesses can pay outstanding parking and red light camera tickets, taxes and administrative hearing fines issued before January 2012 without paying additional charges.  Payments must be made before the end of the year to take advantage of these fee waivers.

Given the City’s budget woes, it’s possible you’ve recently received notice of an unpaid ticket or fine from ten, fifteen or even twenty years ago.  As noted by reporter John Byrne in the Chicago Tribune,

Faced with pushing through City Council a massive property tax increase and other fees as part of a 2016 budget, Mayor Rahm Emanuel is trying to slightly soften that politically difficult package by offering an amnesty program for people who have unpaid tickets and back taxes they owe the city.

Under the program announced Friday, people or businesses with parking tickets and other vehicle violations and back taxes issued before 2012 would be eligible for amnesty. Emanuel’s office said applicants will not have to pay any late fees or fines added on qualifying unpaid debts between Nov. 1 and Dec. 15.

 

 

Homeowner Rights & Tenants Rights - Bardo Law PC

Wells Fargo Bank, N.A. Settles With DOJ

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The Department of Justice’s U.S. Trustee Program reached a national settlement with Wells Fargo over mortgage servicing complaints.  Announced yesterday, Wells Fargo will pay $81.6 million for its repeated failure to provide homeowners in bankruptcy with required payment change notices.  Even though Bankruptcy Rules require mortgage creditors to file and serve a notice before adjusting a Chapter 13 debtor’s monthly mortgage payment, Wells Fargo admits it failed to do so, impacting nearly 68,000 mortgage accounts.  Details of the settlement are available at http://www.justice.gov/opa/pr/us-trustee-program-reaches-816-million-settlement-wells-fargo-bank-na-protect-homeowners.

Homeowners will receive credits on their mortgage accounts, depending upon the mortgage balance, with an average result of $1,254 per homeowner.

Director Cliff White of the U.S. Trustee Program stated:

I am pleased that Wells Fargo has acted responsibly by accepting accountability for its deficient bankruptcy practices, agreed to compensate affected homeowners for those deficiencies and committed to making necessary improvements in its bankruptcy operations…When creditors fail to comply with the bankruptcy laws and rules, they compromise the integrity of the bankruptcy system and must be held accountable.  Transparency in the process is of paramount importance.  Homeowners in bankruptcy have the right to proper and timely notices, particularly when they are being asked to pay more.  The U.S. Trustee Program remains diligent in its effort to hold financial institutions that disregard the law accountable for their actions.

What if I get a Citation to Discover Assets?

Consumer Law Q&A: What happens after judgment?

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If you were sued on a consumer debt and a judgment is entered against you, Illinois law still provides you with rights to make sure that judgment is being collected fairly. One method a judgment creditor will use to try and collect from you is called a “Citation to Discover Assets.”

If you are served with a Citation, it is best to speak with an attorney first. Organizations such as CARPLS https://www.carpls.org/ and Illinois Legal Aid Online http://www.illinoislegalaidonline.org/ have resources available that may assist you. But here are some general tips.

If you receive a citation, you will be asked to appear in court on a particular date and discuss your assets. You may be asked to bring certain documents with you (such as pay stubs or tax returns). You will be asked questions such as: Do you own a home? A car? Do you work full-time? Do you have checking and savings accounts?

You must answer these questions honestly but if you feel like the collector is badgering you or going on a true “fishing expedition,” and asking irrelevant questions that do not have to do with your ability to pay the judgment, ask the Judge for help.

Also, if any of your income comes from Social Security, disability or child/spousal support, make sure to let the collector know right away. Unemployment compensation, public assistance benefits, veteran’s benefits, pensions, and other retirement benefits are some of the types of income and property that may be exempt from collection.

Remember – collectors cannot take more from you than the law allows so don’t be intimidated from exercising your rights to claim exemptions.