• Consumer Protection Law and Advocacy — Chicago, IL

Upcoming Events

What if I get a Citation to Discover Assets?

Bankruptcy Filings Impact Debt Collectors

750 499 StacyBardo

Bankruptcy filings impact debt collectors.  When a consumer seeks protection under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, debt collectors are typically notified of the bankruptcy filing.  They should not continue to try and collect a debt while the consumer is in bankruptcy.

Courts differ on whether contact with the consumer during bankruptcy is just a violation of the bankruptcy stay or if it also means the debt collector violates the Fair Debt Collection Practices Act, 15 U.S.C. 1692 (“FDCPA”).  Also unclear was whether a debt collector could try and collect in bankruptcy – by filing a proof of claim – if the debt was too old.  A new court decision helps consumers by confirming debt collectors may violate the FDCPA when they file bankruptcy proofs of claim on time-barred debts.  These time-barred debts are too old to sue on and therefore, consumers have the right to file claims under the FDCPA when this happens.

The Eleventh Circuit Court of Appeals stated, “Although the Code certainly allows all creditors to file proofs of claim in bankruptcy cases, the Code does not at the same time protect those creditors from all liability.  A particular subset of creditors – debt collectors – may be liable under the FDCPA for bankruptcy filings they know to be time-barred.”  This May 24, 2016 ruling was in the consolidated cases of Johnson v. Midland Funding, LLC and Brock v. Resurgent Capital Services, L.P. and LVNV Funding, LLC, Nos. 15-11240 and 15-14116.

Because it’s unlawful to make false, deceptive or misleading representations when collecting a debt, it should also be unlawful for debt collectors to make bankruptcy filings that misrepresent the age or ability to sue on a particular debt.  This decision makes good sense for consumers and helps keep collectors honest.

If you filed bankruptcy and have questions about debt collection in bankruptcy, talk to your bankruptcy attorney or turn to a consumer protection attorney for help.

CFPB Releases 2015 Fair Debt Collection Practices Act Report

750 500 StacyBardo

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.