• Consumer Protection Law and Advocacy — Chicago, IL

Debt Collection

Debt Collection Abuse, Consumer Law Services at Bardo Law PC

New Debt Collection Rules In Effect

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New debt collection rules are in effect. Starting November 30, 2022, the CFPB’s debt collection rule changes now apply. While some rules leave consumers vulnerable to increased debt collection contact, others provide clarity and greater protection. Let’s take a look at the most important changes.

First, debt collectors must contact consumers before reporting a debt to the credit reporting bureaus. This allows debts to be negotiated, disputed or paid before it negatively impacts credit.

Second, debt collectors must provide expanded dispute or “validation” notices.  The new model notice gives consumers multiple options for disputing debts.  For example, “this is not my debt,” or “the amount is wrong” are now listed right on the collection notice as options to check off.

Third, debt collectors are now specifically restricted from suing on debts that are past the statute of limitations.

And finally, debt collectors should not call more than seven times within seven consecutive days about a specific debt.  More than this is now presumed to be harassment.

The new rules also contain specific provisions related to collecting debts via e-mail, text or social media.  Check out the CFPB’s rule highlights at https://www.consumerfinance.gov/about-us/blog/understand-how-cfpb-debt-collection-rule-impacts-you/.

For more information on your debt collection rights, visit http://bardolawpc.com/services/#.

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Struggling Renters Protected By New CFPB Rule

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The Consumer Financial Protection Bureau (CFPB) just added new rules to protect struggling renters.  Effective May 3, 2021, debt collectors must advise renters of their rights in eviction actions.  With nearly 9 million households behind on rent due to COVID-19, there is still need for greater eviction protections.

Debt collectors were always prohibited from misrepresenting their tenants’ eligibility for eviction protection.  Now, however, they need to affirmatively disclose any right to seek temporary eviction protection.  The debt collector must make the disclosure in writing, either with the eviction notice or lawsuit, and the disclosure must be clear and conspicuous.

Full details available at https://www.consumerfinance.gov/about-us/newsroom/cfpb-rule-clarifies-tenants-can-hold-debt-collectors-accountable-for-illegal-evictions/.

Non-compliant debt collectors can be liable for up to $1,000 in statutory damages plus actual damages and attorney’s fees for failing to comply with the new rules.  If you have been served an eviction notice without notice of these rights, contact our office today.

 

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Beware of Phantom Debt Collectors

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Phantom debt collectors — they’re scam artists who make up debts to gain access to your bank account information.  They’ll call often, and may even tell you that someone is trying to serve you with court papers.  They may call from what appears to be a local number so you are more likely to pick up the phone.  The collector may have personal information about you, such as your spouse’s name, your address or your employer.  You’re scared, so what do you do?

First, write down the number calling you.  Ask what company the collector is calling from.  If the collector won’t identify him or herself, hang up.  If the collector does provide information, ask that the agency send you a letter describing the debt.

All legitimate collection agencies attempting to collect “consumer” debts (those incurred for personal, family or household purchases) must provide you with a letter describing the amount of the debt and where it is from.

Next, file a complaint with the Consumer Financial Protection Bureau (“CFPB”).  The CFPB has an online complaint portal, available at https://www.consumerfinance.gov/complaint/.  You can also call (855) 411-2372 for more information.  While the CFPB may not be able to locate the phantom debt collectors, lodging a complaint may help others avoid problems.  That’s because the CFPB will:

  • Forward your complaint to the appropriate company for a response
  • Share complaint data with other state and federal agencies
  • File a case if there are enough complaints against a particular company
  • Make complaints available to the public as a resource guide to avoid scammers (without personally identifying you)

You can search the CFPB’s Consumer Complaint Database at https://www.consumerfinance.gov/data-research/consumer-complaints/.  Check to see if the company calling you is listed.

Finally, end the call and don’t provide any additional information about yourself.  If the collector is legitimate, the agency will send a letter in the mail describing the debt you owe.  You can also contact your local Clerk of Court to confirm that no case has been filed against you.

If you need more help and want to contact an attorney, keep a list of the calls you’ve received.  The attorney should be able to help determine if the call was legitimate.

Stopping Debt Collector Harassment

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Debt collector harassment – through collection calls and letters – comes with increasing frequency the moment you stop making payments. Federal law empowers you with certain rights – but you need to know how to use those rights. Ask yourself the following questions:

  1. Who is calling or sending you letters?
  2. Why did you stop making payments?
  3. Are you receiving calls on your cell phone or landline?
  4. Do you have a lawyer?

Who is contacting you?

If the calls and letters are coming from the original creditor, you may be able to work out a payment arrangement, change your payment due date or apply for debt assistance. Many credit card companies offer insurance for missed payments if you lose your job or become disabled. Sometimes, you may not even know such insurance is included. Check our your credit card terms and conditions to see what your options are. Be wary of hiring credit counseling agencies to do what you can do yourself!

If the calls and letters are coming from a debt collector (a company hired by your creditor) and you have no ability to pay the debt, consider whether you want to request the collector cease further contact. Even though you still owe the money, you don’t have to accept the calls. Send a letter – via fax or certified mail, return receipt requested – requesting that the collection agency cease all further communications. While the agency can still report the debt on your credit report and you could still be sued for the balance, if the calls and letters don’t stop, you may have a claim under the Fair Debt Collection Practices Act.

Why did you stop making payments?

If you stopped making payments because you filed for bankruptcy, make sure the debt has been included in your bankruptcy and tell your lawyer if you keep receiving payment demands. You should not be receiving any collection calls or letters after you file bankruptcy.

If you stopped making payments because your sole income is Social Security, SSI or SSDI, be sure to inform the creditor or agency about your income source. These benefits cannot be touched by your creditors.

Are you receiving calls on your cell phone or landline?

Even if you originally told your creditor to call your cell phone, you can revoke that consent. Once you tell the agency all calls to your cell phone are prohibited, you may have a claim under the Telephone Consumer Protection Act if those calls continue.

Do you have a lawyer?

If you have a lawyer, either in bankruptcy or to represent you in a debt matter, ask your lawyer if you can include his or her name and telephone number on a cease contact letter. Once you do this, all future communications must go to your lawyer. It can stop the contacts to you and keep your lawyer apprised of any potential additional rights you may have.

Here are some other helpful links to check out on this subject:

https://www.consumer.ftc.gov/articles/0149-debt-collection

https://www.consumerfinance.gov/ask-cfpb/category-debt-collection/

Wrongful debt? Bardo Law can help you deal with credit fraud, wrongful debt and defense.

Debt Collection Update

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A new debt collection update was published earlier this week.  Unfortunately, consumers continue to struggle to resolve their collection issues.  Here are some highlights from the CFPB’s January 2017 report:

  • Approximately 1 in 3 consumers with a credit record report they have been contacted by at least one creditor or debt collector during the year prior to the survey.  72% of those consumers reported being contacted about two or more debts;
  • Past due medical bills, credit cards, and student loans are the most common types of debts in collection;
  • More than 50% of consumers contacted about debts did not recognize them — they report that either the debt is not theirs or they do not agree with the balance;
  • While 1 in 7 consumers contacted about a debt were sued on it, only 26% reported attending a court hearing;
  • More than 1/3 of consumers contacted about a debt receive at least four collection contacts per week, with 17% of that group reporting at least eight contacts per week; and
  • Only 1 in 4 consumers reported success in having collection contacts stop after making such request.

http://files.consumerfinance.gov/f/documents/201701_cfpb_Debt-Collection-Survey-Report.pdf

What does this teach us?  First, there is still a high incidence of incorrect debt collection efforts.  More than half of surveyed consumers did not owe the debt, were contacted about a debt owed by a family member or needed to challenge the amount of the debt.  Second, consumers are not protecting themselves by appearing in court when sued.  We need to continue to educate consumers about the need to defend themselves.  At minimum, if a debt is properly being collected, settlement is often a far better option than risking a judgment.  Consumer debt judgments can remain on credit reports for ten years, and can lead to garnishment and other citation proceedings.

Finally, as noted by the Consumerist:

Although ensuring that consumers are treated fairly when it comes to repaying debts is a priority for federal regulators, the way in which debt is sold and transferred among collectors is a growing concern.

https://consumerist.com/2017/01/12/1-in-4-consumers-contacted-by-debt-collectors-feel-threatened/

The fact that a sampling of these sold debts show most were purchased for cents on the dollar, the personal data shared about consumers is cause for some concern.  According to the CFPB, debt portfolios often contain names, Social Security numbers, account numbers, and dates of birth and, “In some instances, the CFPB’s review of 298 debt portfolios found unencrypted, identified personal information had been available to any visitor to a debt marketplace website.”

There must continue to be heightened scrutiny over debt purchasers to ensure compliance with consumer privacy rights.

Be Wary of Year-End Collection Calls!

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As 2016 winds down, debt collectors making collection calls tend to get more aggressive.  Companies are trying to close out their books and write off accounts as “bad debt.”  Calls start to increase this time of year and you should be prepared in case you get one.  So, what do you need to know before talking to a debt collector?

  • Ask for proof of the alleged debt in writing and make sure you know who you allegedly owe.  Get the name, employee ID, telephone number or e-mail address of the collector who called you. Don’t ever agree to make a payment unless you have something in writing from the collector.
  • Find out what the alleged debt is for.  Do you recognize the account?  Do you recognize the amount?  Check your credit report after the call to see whether the debt is being reported.  Your credit report may also help you figure out how old the debt is and what the outstanding balance is.
  • If you recognize the debt, go back through your bank records to see when you last made a payment.  It’s important that you do NOT re-start the statute of limitations (the deadline for filing a lawsuit).  A $5, $10, or $25 payment on an old debt can make the entire balance due and owing again.  Talk to a lawyer about what statutes of limitations may apply on your accounts.
  • Take notes on what the collector says to you.  Did the collector threaten to mark your credit report or sue you?

If you have any questions about collection calls you may be receiving, talk to a lawyer in your state.  The National Association of Consumer Advocates has a “Find an Attorney” resource, available at http://www.consumeradvocates.org/find-an-attorney.

You can also submit a complaint against collection agencies with the Consumer Financial Protection Bureau online at http://www.consumerfinance.gov/complaint/.  There are state and federal laws (namely, the Fair Debt Collection Practices Act) that require collectors treat you fairly.

Try not to give in to high pressure tactics.  It’s important to know your rights BEFORE it’s too late.

Handling Old Unpaid Accounts

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Handling old unpaid accounts continues to cause a lot of confusion for consumers.  Often times, after a debt is “charged off” by an original creditor, another entity will buy the debt.  Companies that buy old debts — called debt buyers — will send collection letters encouraging you to pay.  These letters will offer special deals and settlements if you “pay now.”  But watch out for these tactics.

There is a limited period of time by which an unpaid debt can be sued on.  This time period, known as the “statute of limitations,” can vary from state to state and depends on the type of account. For example, in Illinois, there is generally a five-year statute of limitations to sue on a consumer credit card debt.  And if your vehicle was financed and repossessed, there is generally a four-year statute of limitations in Illinois to sue on any deficiency balance from the vehicle loan.

Why is this important?  Because if you make a payment in response to a collection letter, even if it’s only a $5 or $10 payment, you re-start the statute of limitations.  If you can’t or don’t intend to pay the whole debt, you may make it easier for the debt buyer to sue you on that whole debt.  And this can lead to court fees, possible judgments, and garnishment or citation proceedings.

Worse, if it’s a debt you don’t recognize, making a small payment thinking the problem will go away can obligate you on a debt that wasn’t even yours to begin with.  This so-called “zombie debt” was the subject of a fabulous John Oliver segment (watch it at http://www.rollingstone.com/tv/news/watch-john-oliver-forgive-15-million-in-debt-20160606) and multiple news articles, including this one from the Guardian: https://www.theguardian.com/money/us-money-blog/2015/nov/08/zombie-debt-is-menacing-america-and-mine-even-has-a-name-kathryn.

If you have any questions about collection letters on old or unrecognizable debts, talk to an attorney BEFORE you pay.

Appellate Court Holds Debt Buyers Accountable

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A recent Appellate Court decision holds debt buyers accountable under the Fair Debt Collection Practices Act (“FDCPA”).  In Janetos v. Fulton Friedman & Gullace, LLP and Asset Acceptance, No. 15-1859, the Seventh Circuit Court of Appeals ruled that debt buyer Asset Acceptance was liable for the unfair collection practices of its collection agent.  Opinion available at http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2016/D04-07/C:15-1859:J:Hamilton:aut:T:fnOp:N:1733811:S:0.  There, the consumer filed a lawsuit explaining that Asset Acceptance’s collection agent did not accurately disclose the identity of the consumer’s current creditor.  Even though the collection letter was sent by the collector, the court found that Asset was also responsible.  Because Asset is a debt buyer, it is a debt collector subject to the FDCPA.  Moreover, debt buyers can be liable for the bad acts of their agents because:

We believe this is a fair result because an entity that is itself a “debt collector”—and hence subject to the FDCPA—should bear the burden of monitoring the activities of those it enlists to collect debts on its behalf.

This decision is good news for consumers.  By holding debt buyers accountable, the court has helped ensure that the buck is not passed.  It also confirms that the consumer has the right to know:

(1) who owns the debt;

(2) who is trying to collect the debt; and

(3) whether payment will resolve the entire matter.

This helps consumers because, assuming a payment is made, the consumer will be able to verify that the actual debt is truly resolved.  As the Court stated, when collection letters do not properly identify who currently owns the debts, “a consumer wishing to verify that a payment would extinguish her obligation could not contact the current creditor to confirm that paying the letter-writer would be the proper course of action.”

If you are receiving collection letters or phone calls that do not properly identify who you owe money to, contact a lawyer for assistance.

CFPB Releases 2015 Fair Debt Collection Practices Act Report

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The CFPB just released its 2015 Fair Debt Collection Practices Act Report.  This informative annual report helps consumer attorneys see the trends in debt collection practices.  It also provides evidence on exactly how consumers are being impacted by collectors.  Notably, collection efforts on student loan debts have significantly increased in the last year and advocates will need to address the massive number of student loan debtors experiencing economic hardships.  The CFPB continues to see debt collection as the leading source of consumer complaints, which is guiding the Bureau’s rulemaking efforts.  According to Director Cordray:

[T]the Bureau is making progress on developing the first comprehensive federal regulations covering debt collection. In developing these rules, we are considering provisions to protect consumers from problematic practices of some collectors as well as to reflect technological changes in the debt collection industry.

Interestingly, the most common type of debt collection complaint continues to be collectors trying to collect debts the consumer states is not owed.  “The vast majority of consumers submitting complaints about continued attempts to collect a debt report that the debt is not their debt (64%) or that the debt was paid (26%), while the remaining percentage of consumers report that the debt resulted from identity theft (6%) or the debt was discharged in bankruptcy (4%).”

The full report is available at http://files.consumerfinance.gov/f/201503_cfpb-fair-debt-collection-practices-act.pdf.

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.