I recently taught a class for the People's Law School for the Philadelphia Bar Association. The topic of the class was consumer credit/debt issues. One area that was talked about was how to deal with collection agencies, including companies that have claimed to purchase a defaulted consumer account, such as a credit card.
Some of the debt purchasing companies are NCO Financial Corp. (a/k/a/ NCO Group, NCO Portfolio Management, NCO Financial), Midland Credit Management, Inc. a/k/a Midland Funding a/k/a/ Encore Capital Group a/k/a/ MRC Receivables, Unifund, Asset Acceptance, Hudson & Keyse, LLC, CACH, LLC a/k/a/ Collect America a/k/a/ CACV, LVNV Funding, LLC, Resurgent Capital, Alegis Group, LLC, Sherman Financial Group, LLC, Sherman Acquisitions, Ventus Capital Services, Performance Recovery Group, Receivables Management Solutions, Erin Capital Management, Pinnacle Financial, and Atlantic Credit and Finance.
These type of companies bring law suits against consumers, claiming that they purchased or were assigned the account from the original creditor, such as a credit card company. In my experience, 99.99% of the time these companies do not have the required documentation showing that they did in fact purchase the debt, nor do they have documentation relating to the original account, such as the account agreement or any of the alleged past-due invoices. What that means for the consumer who has been sued by such companies is that you are very likely to win your case in court.
The way to beat these companies is to demand that they produce the documents that they claim to have. That means, that they need to produce: (1) a copy of the original signed agreement that opened the account, such as the credit card application; (2) a copy of all claimed past-due invoices; and (3) a copy of the purchase agreement / assignment between the company and the original creditor. Be wary of a company that just produces a one-page affidavit or "bill of sale" - the entire purchase agreement needs to be produced, including the so-called "forward flow agreement", and documentation showing that the consumer's specific account was purchased.
If a lawsuit has not been filed, but you are receiving collection phone calls and/or letters from these companies, demand that they produce these documents before you agree to pay them. Don't let them or their attorneys intimidate you.
Under Pennsylvania Law, any debt purchasing company attempting to bring suit on behalf of a claimed purchase of a defaulted consumer debt must produce these documents. If these documents are not produced, then the company cannot meet its' burden of proof and cannot collect any money from the consumer.
As stated previously, if you receive a summons and complaint, it is very important that you respond to the lawsuit - otherwise a default judgment can be entered against you.
Friday, October 2, 2009
Wednesday, May 27, 2009
New York Attorney General Takes Gloves Off - Goes After Debt Settlement Companies
In a May 19, 2009 press release, the New York Attorney General announced that he has filed suit against two "debt negotiation" companies: CSA-Credit Solutions of America, Inc. and Nationwide Asset Services, Inc., along with its affiliates - ServiceStar LLP and Universal Debt Reduction, LLC - and its marketer, FGL Clearwater, Inc. d/b/a American Debt Arbitration for fraudulent business practices and false advertising.
In addition, the NY AG launched a new web site, http://www.nydebthelp.com, to educate consumers about any company that claims that they can reduce your outstanding debt. The web site also gives information about how to handle debt collection companies, and what they are legally allowed and not allowed to do.
In addition, the NY AG launched a new web site, http://www.nydebthelp.com, to educate consumers about any company that claims that they can reduce your outstanding debt. The web site also gives information about how to handle debt collection companies, and what they are legally allowed and not allowed to do.
Thursday, May 14, 2009
New York Investigates Debt Reduction / Settlement Firms
In a May 7, 2009 press release, the New York Attorney General announced that they were looking into various companies that market "debt reduction" or "debt settlement" services to consumers.
The following companies were subpoenaed by the NY AG: American Debt Foundation, Inc.; American Financial Service; Consumer Debt Solutions; Credit Answers, LLC; Debt Remedy Solutions, LLC; Debt Settlement America; Debt Settlement USA; Debtmerica Relief; DMB Financial, LLC; Freedom Debt Relief; New Era Debt Solutions; New Horizons Debt Relief Inc.; Preferred Financial Services, Inc.; U.S. Financial Management Inc. (d.b.a. My Debt Negotiation); and the Allegro Law Firm.
The New York Attorney General is looking to see if these firms made false and misleading statements to consumers, and if these firms performed any work for the fees charged, among other things.
As Wisniewski & Mensing, LLP has been telling people who ask about these types of "debt negotiation" companies, the New York Attorney General offers the same suggestions:
*Be wary of debt settlement companies which falsely promise to obtain substantial lump sum debt reduction settlements. Many advertise “reduce debt now,” and claim as much as 50% to 75% off credit card debt, but rarely obtain advertised reductions.
* Never agree to sign a contract with a debt settlement company that requires payment in advance prior to obtaining the promised debt reduction.
* Enrollment in debt settlement plans may not stop creditors from bringing collection law suits, or prevent enrolled accounts from growing larger by the addition of late fees, interest, and penalties. Also, credit reports will reflect derogatory information, including assessed late charges and non-payment of debt, and consequently credit scores will be adversely affected.
* Creditors are under no legal obligation to accept a settlement offer for less than the outstanding balance owed.
* Only a small number of consumers who enroll in debt settlement plans have the financial means to complete them. Usually, they drop out after having paid service fees to the companies with no settlements.
* Enrollment in a debt settlement plan premised on stopping payments to creditors will likely lead to more frequent and aggressive creditor collection efforts often resulting in judgments, wage garnishments, and freezing of bank accounts.
* Check with the Better Business Bureau to obtain a Reliability Report on a particular debt settlement company and its rating.
* A wise first step to help resolve an outstanding account is to speak directly to the credit card issuer. Alternatively, it may be helpful to speak to an attorney or an accredited credit counselor who can help develop a plan of action that best works for each consumer’s unique situation.
The following companies were subpoenaed by the NY AG: American Debt Foundation, Inc.; American Financial Service; Consumer Debt Solutions; Credit Answers, LLC; Debt Remedy Solutions, LLC; Debt Settlement America; Debt Settlement USA; Debtmerica Relief; DMB Financial, LLC; Freedom Debt Relief; New Era Debt Solutions; New Horizons Debt Relief Inc.; Preferred Financial Services, Inc.; U.S. Financial Management Inc. (d.b.a. My Debt Negotiation); and the Allegro Law Firm.
The New York Attorney General is looking to see if these firms made false and misleading statements to consumers, and if these firms performed any work for the fees charged, among other things.
As Wisniewski & Mensing, LLP has been telling people who ask about these types of "debt negotiation" companies, the New York Attorney General offers the same suggestions:
*Be wary of debt settlement companies which falsely promise to obtain substantial lump sum debt reduction settlements. Many advertise “reduce debt now,” and claim as much as 50% to 75% off credit card debt, but rarely obtain advertised reductions.
* Never agree to sign a contract with a debt settlement company that requires payment in advance prior to obtaining the promised debt reduction.
* Enrollment in debt settlement plans may not stop creditors from bringing collection law suits, or prevent enrolled accounts from growing larger by the addition of late fees, interest, and penalties. Also, credit reports will reflect derogatory information, including assessed late charges and non-payment of debt, and consequently credit scores will be adversely affected.
* Creditors are under no legal obligation to accept a settlement offer for less than the outstanding balance owed.
* Only a small number of consumers who enroll in debt settlement plans have the financial means to complete them. Usually, they drop out after having paid service fees to the companies with no settlements.
* Enrollment in a debt settlement plan premised on stopping payments to creditors will likely lead to more frequent and aggressive creditor collection efforts often resulting in judgments, wage garnishments, and freezing of bank accounts.
* Check with the Better Business Bureau to obtain a Reliability Report on a particular debt settlement company and its rating.
* A wise first step to help resolve an outstanding account is to speak directly to the credit card issuer. Alternatively, it may be helpful to speak to an attorney or an accredited credit counselor who can help develop a plan of action that best works for each consumer’s unique situation.
Monday, April 13, 2009
Wednesday, April 1, 2009
Afni and Zombie Debt
Have you been receiving telephone calls or letters from a collection agency called Afni trying to collect on an old Verizon telephone bill? Most likely, the debt is what is called "zombie debt" and doesn't exist. With a "zombie debt" an unscrupulous collection agency (such as Afni) will attempt to collect on a debt that is not valid, either because it is past the statute of limitations or has already been paid. It is called "zombie debt" because you think that the debt has been dealt with, but it keeps rising from the dead, continuing to haunt you.
With most, if not all, of the Verizon debt that Afni attempts to collect, the consumer has already paid the debt in full (as acknowledge by Verizon). However, Afni will not take no for an answer, continuing to harass the consumer and violate the Fair Debt Collection Practices Act (FDCPA).
As with any collection agency, the best way to deal with them is (1) not to talk to them on the telephone, (2) get the full name and address of the collection agency, and (3) demand that the collection agency provide you with written verification of the alleged debt.
If you find that a collection agency is harassing you and/or not abiding by the FDCPA, you might be able to turn the tables on the collection agency and file a lawsuit against them. An attorney who handles consumer credit/debt issues would be able to discuss these issues with you.
With most, if not all, of the Verizon debt that Afni attempts to collect, the consumer has already paid the debt in full (as acknowledge by Verizon). However, Afni will not take no for an answer, continuing to harass the consumer and violate the Fair Debt Collection Practices Act (FDCPA).
As with any collection agency, the best way to deal with them is (1) not to talk to them on the telephone, (2) get the full name and address of the collection agency, and (3) demand that the collection agency provide you with written verification of the alleged debt.
If you find that a collection agency is harassing you and/or not abiding by the FDCPA, you might be able to turn the tables on the collection agency and file a lawsuit against them. An attorney who handles consumer credit/debt issues would be able to discuss these issues with you.
Monday, March 23, 2009
Severance Agreements and Employment Discrimination
With the rising number of layoffs, it is not surprising to learn that the number of employment discrimination claims that have been filed with the U.S. Equal Employment Opportunity Commission (EEOC) has increased. The EEOC is the lead U.S. government agency charged with enforcing the various federal laws that prohibit discrimination in the workplace. For fiscal year 2008, the EEOC received 95,402 charges of discrimination compared to 82,792 charges filed in 2007.
While a company is not legally obligated to offer a laid-off employee a severance package, it is not uncommon for most larger companies to offer them. In most cases, in order for the employee to receive the severance, the company will require the employee to sign an agreement where the employee waives their right to file a employment discrimination charge in exchange for the severance. Other conditions can include a non-compete agreement and/or non-disclosure agreement. Under the Older Workers Benefit Protection Act (which is incorporated into the Age Discrimination in Employment Act), an employee aged 40 or over has 3 weeks to consider whether or not to sign any type of post-employment document.
As these severance agreements are legally binding documents, it is a good idea to have an employment attorney review it before you sign. In addition to advising you of your rights, the attorney might be able to negotiate a better severance package for you.
While a company is not legally obligated to offer a laid-off employee a severance package, it is not uncommon for most larger companies to offer them. In most cases, in order for the employee to receive the severance, the company will require the employee to sign an agreement where the employee waives their right to file a employment discrimination charge in exchange for the severance. Other conditions can include a non-compete agreement and/or non-disclosure agreement. Under the Older Workers Benefit Protection Act (which is incorporated into the Age Discrimination in Employment Act), an employee aged 40 or over has 3 weeks to consider whether or not to sign any type of post-employment document.
As these severance agreements are legally binding documents, it is a good idea to have an employment attorney review it before you sign. In addition to advising you of your rights, the attorney might be able to negotiate a better severance package for you.
Thursday, March 19, 2009
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