Tag Archives: debt collection

Dealing with Debt Collectors

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V0015846 Portrait of a debt collector (?) thumbing through his papers Credit: Wellcome Library, London. Wellcome Images images@wellcome.ac.uk https://wellcomeimages.org Portrait of a debt collector (?) thumbing through his papers outside a front door. Mezzotint by W. Bonnar after T. Bonnar the elder. By: Thomas the elder Bonnarafter: William BonnarPublished: - Copyrighted work available under Creative Commons Attribution only licence CC BY 4.0 https://creativecommons.org/licenses/by/4.0/

I was quoted by CreditCardGuide.com in Know Your Rights with Debt Collectors. It reads, in part,

Regardless of how deep your financial troubles go, you are protected by state and federal law when it comes to how debt collectors can treat you.

First off, you should understand who the people are behind the debt collection notices and phone calls. “A debt collector is defined as someone who is not the original creditor,” explains David Reiss, professor of law and research director of the Center for Urban Business Entrepreneurship at Brooklyn Law School, who also writes the REFinBlog. And, he says, what might start out as a legitimate debt collector contacting you on behalf of a creditor, can change over time since debt collection companies often sell their lists to other companies. Unfortunately, your contact information might end up with a fly-by-night operation that resorts to shady practices, such as trying to frighten you with threats and bullying.

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Consider this your peek into the debt collection rulebook so that you can arm yourself against abusive tactics:

What debt collectors cannot do

  • Call you under a false identity. “That means they cannot say they are an attorney if they are not, or say they are from the sheriff’s office if they are not,” says Reiss.
  • Discuss your debt with your employer, family members (other than your spouse), neighbors or publish your name on a list of people who owe money. “They can call a third party and leave a message for you, but they can’t disclose the details of your debt,” says Tayne. Generally, they can only discuss your debt with you, your spouse and your attorney.
  • Call you at ridiculous hours, such as before 8 a.m. or past 9 p.m. They also cannot call you repeatedly in a single day.
  • Be abusive, threatening or vulgar. In other words, says Tayne, they cannot bully you by calling you a deadbeat or loser for not making payments, and they should never curse at you.
  • Make false threats that they will seize your property, drain your bank accounts or arrest you, says Reiss.

What debt collectors can do

  • Contact you in person, by mail, by phone or by fax between the hours of 8 a.m. and 9 p.m. However, they can’t contact you at work if they are told you can’t get calls there. Also, if you write to them to stop calling you, they must comply, although they might respond by suing you, so think carefully before sending that letter.
  • Sue you in court. If they do, you’ll have to appear, and it’s in your best interest to hire an attorney. Ideally, you want to work something out before getting to this stage, says Reiss, because court and attorney costs can pile up.
  • Report you to the credit agencies. “Debt collectors can report your default to the credit bureaus,” says Reiss. This negative item will remain on your report for seven years, and your credit score will take a hit.

What you can do

If you think debt collectors are crossing the line, you do have options for recourse, says Reiss. “First, build up a paper record as this can help you later on.” That includes taking notes on every conversation you have, with dates, times and who you spoke to.

You could also try sending a cease-and-desist letter, or asking a lawyer to do so on your behalf, says Reiss. “They may be afraid and back off if a lawyer is involved,” he says.

Tayne finds that such letters aren’t always effective for more hostile debt collectors. “If they’re really out of line, file a lawsuit in small claims court,” she says.

You should also report shady collectors to your state attorney general’s office as well as the Consumer Financial Protection Bureau, say Reiss and Tayne.

If you do end up making a payment to a debt collector, request documentation that states your debt is paid, and then be sure that the payment is reflected on your credit reports within 90 days. You can get your credit reports for free at AnnualCreditReport.com.

Ideally, you don’t ever want to be in a situation in which debt collectors are tasked with contacting you, and incentivized to do whatever it takes to get you to pay them. But if you do end up in that situation, knowing your rights is your best defense. Says Reiss, “Debt collectors do not want consumers to invoke their rights under the FDCPA because the act can severely limit what they can do.”

LawProfs in MERS Litigation

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The Legal Services Center of Harvard Law School (through Max Weinstein et al.); Melanie Leslie, Benjamin N. Cardozo School of Law; Joseph William Singer, Harvard Law School; Rebecca Tushnet, Georgetown University Law Center and I filed an amicus brief in County of Montgomery Recorder v. MERSCorp Inc, et al. (3rd Cir. No. 14-4315). The brief argues,

MERS represents a major departure from and grave disruption of recording practices in counties such as Montgomery County, Pennsylvania, that have traditionally ensured the orderly transfer of real property across the country. Prior to MERS, records of real property interests were public, transparent, and provided a secure foundation upon which the American economy could grow. MERS is a privately run recording system created to reduce costs for large investment banks, the “sell-side” of the mortgage industry, which is largely inaccessible to the public. MERS is recorded as the mortgage holder in traditional county records, as a “nominee” for the holder of the mortgage note. Meanwhile, the promissory note secured by the mortgage is pooled, securitized, and transferred multiple times, but MERS does not require that its members enter these transfers into its database. MERS is a system that is “grafted” onto the traditional recording system and could not exist without it, but it usurps the function of county recorders and eviscerates the system recorders are charged with maintaining.

The MERS system was modeled after the Depository Trust Company (DTC), an institution created to hold corporate and municipal securities, but, unlike the DTC, MERS has no statutory basis, nor is it regulated by the SEC. MERS’s lack of statutory grounding and oversight means that it has neither legal authority nor public accountability. By allowing its members to transfer mortgages from MERS to themselves without any evidence of ownership, MERS dispensed with the traditional requirement that purported assignees prove their relationship to the mortgagee of record with a complete chain of mortgage assignments, in order to foreclose. MERS thereby eliminated the rules that protected the rights of mortgage holders and homeowners. Surveys, government audits, reporting by public media, and court cases from across the country have revealed that MERS’s records are inaccurate, incomplete, and unreliable. Moreover, because MERS does not allow public access to its records, the full extent of its system’s destruction of chains of title and the clarity of entitlements to real property is not yet known.

Electronic and paper recording systems alike can contain errors and inconsistencies. Electronic systems have the potential to increase the accessibility and accuracy of public records, but MERS has not done this. Rather, by making recording of mortgage assignments voluntary, and cloaking its system in secrecy, it has introduced unprecedented and perhaps irreparable levels of opacity, inaccuracy, and incompleteness, wreaking havoc on the local title recording systems that have existed in America since colonial times. (2-3)

Foreclosures and the Fair Debt Collection Practices Act

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Bloomberg BNA quoted me in Third Circuit Says Foreclosure Complaint May Serve as Basis for Claims Under FDCPA (behind a paywall). The article opens,

A foreclosure complaint may form the basis of a Fair Debt Collection Practices Act (FDCPA) claim, the U.S. Court of Appeals for the Third Circuit held, saying foreclosure meets the broad definition of “debt collection” under the statute (Kaymark v. Bank of Am. N.A., 2015 BL 97853, 3d Cir., No. 14-cv-01816, 4/7/15).

Dale Kaymark filed a class suit against Bank of America and Udren Law Offices, P.C., a Cherry Hill, N.J., law firm, including in its claims an allegation that Udren violated the FDCPA by listing in a foreclosure complaint not-yet-incurred fees as due and owing.

Kaymark also said the firm violated the statute by trying to collect fees not authorized by the mortgage agreement.

A district court dismissed those and other claims by Kaymark, but the Third Circuit reversed April 7, allowing all but one of his FDCPA claims against Udren.

According to the court, a 2014 Third Circuit ruling on debt collection letters also applies to foreclosure complaints.

“We conclude that a communication cannot be uniquely exempted from the FDCPA because it is a formal pleading or, in particular, a complaint,” Judge D. Michael Fisher said. “This principle is widely accepted by our sister Circuits,” he said.

Wide Impact Seen

Udren Law Offices did not immediately respond to a request for comment on the case. In separate briefs filed in August 2014 and December 2014, lawyers for the firm predicted that application of the FDCPA to foreclosure complaints might allow any state foreclosure action to spark an FDCPA suit, with ill effects for legal practice.

A Bank of America spokeswoman April 8 declined to comment on the ruling. The FDCPA claim was directed only at the law firm, not the bank. Lawyers for Kaymark also did not immediately respond to a request for comment.

Brooklyn Law School Professor David Reiss, the Research Director of the Center for Urban Business Entrepreneurship, said the decision highlights increased judicial sensitivity in some areas of the law.

“It’s a well-reasoned ruling that clarifies application of the statute in the foreclosure context and that will affect contacts that lawyers have with alleged debtors,” said Reiss, who maintains a real estate finance blog. “In terms of practical effects, it won’t necessarily mean thousands of new lawsuits, but it does mean that lawyers will have to be very careful about how they communicate fees and estimates. It’s going to mean, to some extent, a cleaning-up of informal practices in the foreclosure bar, such as treating not-yet-accrued costs as accrued costs,” Reiss told Bloomberg BNA.

Appellate Court of Illinois Awarded Summary Judgment to Plaintiff Where Defendant Failed to Show That Plaintiff was an Unlicensed Debt Collector Under the Collection Agency Act

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The Illinois court in deciding Kondaur Capital Corp. v. Sreenan, 2013 Ill. App. (Ill. App. Ct. 1st Dist. 2013) affirmed the judgment of the circuit court granting summary judgment for the plaintiff.

In the summary judgment motion, the plaintiff asserted that it was the legal holder and in possession of the note at issue pursuant to the assignment from PNC.

The court held that the circuit court did not err in awarding summary judgment to the plaintiff where the defendant failed to demonstrate that the plaintiff was an unlicensed debt collector under the Collection Agency Act (225 ILCS 425/1 et seq.).

The court also held that there was no abuse of discretion in refusing to strike affidavits in support of the plaintiff’s motion for summary judgment where the affidavits were premised upon documents that qualified as “business records” under Supreme Court Rule 236 (Ill. S. Ct. R. 236).

Lastly, the court held that any error in allowing the plaintiff to respond to the defendant’s affirmative defenses in the context of the plaintiff’s summary judgment motion was harmless.

Foreclosure = Debt Collection

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The Sixth Circuit ruled in Glazer v. Chase Home Finance LLC, __ F.3d ___ (Case No. 10-3416, Jan. 14, 2013) that “that mortgage foreclosure is debt collection under” the Fair Debt Collection Practices Act. (2) As Glazer indicates, courts have been split on this issue, but the trend seems to be in accord with Glazer.

Of particular note to lawyers:  “Lawyers who meet the general definition of a “debt collector” must comply with the FDCPA when engaged in mortgage foreclosure. And a lawyer can satisfy that definition if his principal business purpose is mortgage foreclosure or if he “regularly” performs this function.” (16)