Former Musings of an (illegally shut down) Philadelphia Law Firm

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2011-10-16T19:09:00.000-04:00

Continue to follow David Wisniewski at http://phillyattorney.org

Debtors' Prision: Alive And Well

2011-03-17T15:09:00.005-04:00

Even though the US abolished debtors' prison in 1833, the Wall Street Journal (via the ABA Journal) has an article out today about the growing use of arrest warrants by collection attorneys to collect on court judgments. Not surprisingly, most of the judgments were default judgments, where the defendant did not respond to the lawsuit and, subsequently, was not given an opportunity to defend themselves.

According to the article, Illinois and the Federal Trade Commission are investigating the use of arrest warrants in debt collection cases, examining, among other things, whether the consumer was properly notified of the lawsuit.

FTC Recommends Changes to State Laws Concerning Collection Law Suits

2010-07-13T09:10:00.004-04:00

The Federal Trade Commission has issued a new report, calling on the States to institute various reforms to protect consumers from a broken debt collection system. Among the FTC's recommendations:

States should consider adopting measures to make it more likely that consumers will defend themselves in litigation, decreasing the prevalence of default judgments.
States should require collectors to include more information about the alleged debt in their complaints.
States should take steps to make it less likely that collectors will sue on debt on which the statute of limitations has run.
Federal and state laws should be changed to prevent the freezing of a specified amount in a bank account including funds exempt from garnishment.

Based upon my experience, New Jersey has one of the most dysfunctional court systems concerning consumer debt collection. Collection lawsuits are allowed to be filed with no documentation or facts showing that the debt is actually owed, default judgments are rampant (and some judges are loath to vacate them, even when it is clear that the complaint was never served), and the NJ Courts refuse to enforce R.4:43-2(a) that govern how default judgments are entered (the rule requires an entry of default to be based upon an affidavit and that all documents giving rise to the claim be included - rarely, if ever, does this happen).

Hopefully, the New Jersey Legislature, Courts, and Attorney General will heed the FTC's recommendations and level the playing field so that consumers are treated in a fair and even-handed manner. A good start is if NJ implements a Court Rule along the lines of Pennsylvania's Pa.R.C.P. 1028 that permits a motion to dismiss if a complaint does not attach documents that give rise to the cause of action, such as the original credit card agreement, past-due invoices, and any sale/assignment of a debt.

In New York, Some Judges Are Now Skeptical About Debt Collectors’ Claims

2010-05-09T17:37:00.005-04:00

The New York Times has done another excellent story on third-party debt buyers and the law firms that represent them. The story focused on a women who was sued by Erin Services Co., LLC. The judge in the case eventually decided enough was enough and sanctioned Erin Services' law firm, Eltman, Eltman & Cooper, in the amount of $14,800 for filing a bogus law suit and making false claims to the court.

The article also touched on another little-known fact, that the debt-buyer plaintiff is sometimes owned by the law firm that filed the suit. While not mentioned in the article, there are at least two NJ debt buyers that are owned by a collection law firm: (1) RAB Performance Recoveries, LLC shares the same owners of the law firm of Eichenbaum & Stylianou, LLC; (2) New Century Financial Services, LLC is owned/controlled by the law firm of Pressler & Pressler.

In New Jersey and Pennsylvania, the problem is also acute, with debt-buyers filing thousands of frivolous suits a month. I hope that the NYT continues to do these articles and that maybe the courts and the politicians will wake up to what is happening.

2010-04-02T10:04:00.008-04:00

The New York Times, in its April 1, 2010 edition, has an excelled article titled More Struggling Borrowers Facing Pay Garnishment - Pay Garnishments Rise as Debtors Fall Behind. It talks about the problems facing defendants in collection lawsuits - how a lot of consumers do not defend the lawsuit in court (either because they were never served or can't afford an attorney) and find out later that their bank accounts have been frozen. The article also highlights the important fact that the claimed creditors, in the case of a default judgment, do not have to prove to a judge that they are actually owed the money they are claiming.

Most consumers never offer a defense, and creditors win their lawsuits without having to offer proof of the debts, much less justify to a judge the huge interest charges and penalties they often tack on.

The New York Times writer actually realizes that a lot of claimed creditors can't prove in court that they are actually owed any money:

In the rare event that a consumer battles back, creditors frequently lack the documentation to prove their claim, and cases are dropped. That is because many past-due debts are owned not by the banks that issued them, but by debt collectors who bought, for cents on the dollar, a list of names and amounts due.

The article also highlights a tactic used by collection attorneys who know they can't win in court, convincing the consumer to sign a binding settlement agreement, prior to the case being heard by a judge.

Going to court is no guarantee of victory, of course. Consumers who do go are sometimes intercepted by collection lawyers, who press them to sign papers settling without a trial. These settlements may be against the interests of debtors, but they sign anyway.

The moral of this is, is your are sued, do not ignore it. You must preserve your rights and defend the action. If you are having difficulty locating an attorney, call your local county bar association for an attorney referral. Most bar associations offer no or low cost referrals. If you can not afford an attorney, contact one of your local legal aid organizations.

If you are in Philadelphia:

Philadelphia Bar Association Attorney Referral
215-238-6333

Philadelphia Legal Assistance
215-981-3800

If you are in Camden County, NJ:

Camden County Bar Association
856-482-0618

Camden Regional Legal Services
856-964-2010

New Jersey Fair Debt Collection Practices Act

2010-03-21T19:20:00.005-04:00

The NJ Legislature is debating a bill A2493 / S1988 called the "New Jersey Fair Debt Collection Practices Act". The language in these companion bills mostly mirrors the language contained in the federal Fair Debt Collection Practices Act, so I'm not entirely sure why this law is under consideration, except for the purpose of politicians wanting to be seen as "doing something".

If NJ politicians really want to protect consumers, then they will strengthen the laws concerning third-party debt buyers operating in New Jersey, by requiring them to post a bond (as collection agencies are required to do), and most importantly, prohibit them from bringing suit under a so-called assignment without first (1) having written documentation showing that the original account existed, (2) the account went into default (i.e. have copies of all past-due invoices), and (3) that the account was actually sold to the debt-buyer.

Debt Purchasing Companies to Watch Out For

2009-10-02T16:39:00.014-04:00

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.

New York Attorney General Takes Gloves Off - Goes After Debt Settlement Companies

2009-05-27T22:06:00.005-04:00

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.

New York Investigates Debt Reduction / Settlement Firms

2009-05-14T13:53:00.017-04:00

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.

In a downturn, more act as their own lawyers

2009-04-13T17:09:00.000-04:00

April 10, 2009 New York Times

Afni and Zombie Debt

2009-04-01T20:53:00.006-04:00

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.

Severance Agreements and Employment Discrimination

2009-03-23T20:52:00.005-04:00

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.

Filmmaker/former CP contributor Mary Patel files suit against Make U Famous Productions partners

2009-03-19T17:44:00.002-04:00

Philadelphia City Paper's Staff Blog "The Clog" - April 18, 2009

Your Credit Report

2009-03-09T12:45:00.014-04:00

What information is contained in a credit report

Your credit report contains information about your credit worthiness to potential creditors, such as credit card companies, mortgage companies, auto finance companies, and other businesses that you might seek credit from. The information in your credit report contains information about all credit that you have applied for in the last 7 years and details how long an account has been open and the payment history.

There are 3 major credit reporting bureaus that maintain credit reports on you – TransUnion, Equifax, and Experian. However, the information contained in your credit report is not necessarily the same from TransUnion, Equifax, and Experian. Also, when you apply for credit, the potential creditor will not necessarily look at all 3 credit reports, but usually only 1 or 2. The higher your credit score, the lower the interest rate that you will pay. A separate company called Fair Issac calculates your credit score, based on the information contained in your credit reports.

How to get a copy of your credit report

You can get a free copy of your credit report every 12 months from TransUnion, Equifax, and Experian. If you have access to the Internet, the fastest and easiest way is via the Federal Trade Commission’s website Annualcreditreport.com or via phone at 877-322-8228 or by printing out the request form and mailing it in. Do not be fooled by ads saying you can get a “free” copy of your credit report from Freecreditreport.com or other websites. It is not free – you have to give them a credit card number and sign up for their “credit monitoring” service!

How to correct inaccurate information in your credit report

Once you get your credit report, it is important to make sure that all the information is accurate. Sometimes, an account that does not belong to you will appear on your credit report, because of a similar name or social security number. In addition to making sure all the accounts listed are yours, make sure that your accounts are being reported accurately for example, if an account is marked as “open” when you really closed it years ago.

You can dispute inaccurate information in your credit report by writing a letter to the credit bureau and stating why you believe the information is incorrect. The address to send the dispute to is generally located at the end of the credit report. In your dispute letter, you should enclose a copy of your driver’s license or other form of identification and a copy of the credit report that you believe are inaccurate. Make sure to keep a copy of all information that you send (including the dispute letter) and send the dispute letter and supporting documentation via certified mail, return receipt requested and also via regular mail. Send a copy of your dispute letter to the company who placed in the inaccurate information in your credit report too.

Consumer credit reports are governed by the Fair Credit Reporting Act 15 U.S.C. § 1681, et seq. The Act requires that not only the credit bureaus (Experian, TransUnion, and Equifax) report accurate information, but also that the creditor provide accurate information about the consumer. Once you send a dispute letter, the credit bureau has 30 days to investigate and send you a report on the outcome of their investigation. Once a credit bureau receives a dispute letter, most of them will forward it to the creditor who placed the information in the credit report and generally, that creditor will tell the credit bureau that the information is correct, which the credit bureau will report to you.

If you still believe that the information is not accurate, send another dispute letter. Another thing you can do is require the credit bureau to place a 100-word statement that you write in your credit report as to why you believe the information is not correct. If the credit bureau cannot verify the dispute, it must delete the information from your credit report. All accurate information, even if it is derogatory, will stay on your credit report for 7 years from the date it was first reported. A bankruptcy will stay on your credit report for 10 years.

Beware of some creditors and/or collection agencies who attempt to “re-age” information in your credit report. This happens when “new” information is placed in your credit report about an account, in an attempt to re-set the 7 year clock or re-set the statute of limitations (in Pennsylvania, the statute of limitations on a contract is 4 years – which begins to run from the date of default or date of last payment, whichever is sooner). If you do not consent to the account being “re-aged” then it is illegal under the Fair Credit Reporting Act.

What to do if the creditor or credit bureau refuses to correct your credit report

If you have disputed inaccurate information with the company who placed the information in your credit report and the credit bureau has not removed the information, under the Fair Credit Reporting Act, you have the right to file a lawsuit against the credit bureau and the company who placed the inaccurate information in the credit report. Beware that you have 2 years from the date that you discover the violation or 5 years from the date that the violation actually occurred. You can file a lawsuit in any state or federal court, though it is generally cheaper and easier to bring suit in your local small claims court. It is advisable that you consult with an attorney before filing any lawsuit.

Credit report scams to watch out for

The Credit Repair Organizations Act, 15 U.S.C. § 1679, et seq., governs any individual or company that provides any type of service relating to repairing or fixing credit reports. The Act prohibits the individual or company from making any false statements about credit repair and makes it illegal for these operations to charge you until they have fully performed their services.

Beware of any person or company who claims that they can “erase” or “remove” information from your credit report, such as bankruptcies, delinquencies, charge-offs, repossessions, judgments, foreclosures, late-payments, tax liens, or garnishments. It is a crime to file a frivolous dispute letter in an attempt to get derogatory, but correct, information removed from a credit report. Only information that is inaccurate can legally be removed from a credit report.

Also beware of any person or company that claims that they can create a second or new credit report for you. The scammer will tell you that all you have to do is to use a different social security number or apply for a tax identification number from the IRS and use it instead of your own social security number when applying for credit. This practice is called “file segregation” which is a fraud and is prosecuted as a felony and you could face fines and jail. It is a federal crime to make any false statement on a loan or credit application.

Any individual or company who, for a fee, offers to “repair” your credit is probably going to rip you off. Why pay someone hundreds or thousands of dollars to dispute inaccurate items in your credit report when you can do it yourself for free?

Dealing With Collection Agencies

2009-03-03T21:46:00.006-05:00

If you receive a telephone call or letter from a debt collector (be it a collection agency or debt collecting law firm), here are some helpful hints:

The best (and safest) way to deal with debt collector is in writing. That way, you have a written record of everything that transpires between you and the debt collector. We advise our clients to send any letter via certified mail, return receipt requested, and via regular mail. If a debt collector calls you on the phone, politely ask them to stop calling you and to correspond with you only in writing.

Always request verification of the alleged debt. Under the Fair Debt Collection Practices Act (FDCPA), which is a federal statute that governs how consumer debt is collected, a debt collector must provide the consumer with written verification of the alleged debt upon written request within 30 days of the first written letter from the debt collector. The request can be as simple as "I dispute the validity of this debt. Please provide me with verification". However, a lot of debt collectors ignore consumer's request for verification. That is why it is important to communicate with the debt collector in writing, so you have proof that you requested verification.

Do not allow a debt collector to threaten or harass you. It is illegal under the FDCPA. There are numerous horror stories of debt collectors threatening to garnish people's wages, have them arrested, notify their neighbors, co-workers, employers, etc. If you experience any of this type of behaviour, be sure to make a note of the name of the debt collector, what was said to you, and the date and time.

If you feel that a debt collector has violated the FDCPA (or your state's consumer protection laws, such as Pennsylvania's Fair Credit Uniformity Extension Act), you generally can bring a claim against the debt collector in court and seek statutory damages, attorney fees, and costs. In some cases, we have been successful in having all or part of the alleged debt wiped away because of the debt collector's illegal tactics.

An attorney who handles consumer credit/debt issues can more fully explain the FDCPA and other relevant laws to you and advise you on your particular situation.

Judges Jailed Kids for Cash

2009-02-13T00:26:00.009-05:00

Two former Luzerne County, Pennsylvania judges, Mark Ciavarella and Michael Conahan pleaded guilty to federal fraud charges today. The fraud charges stem from some $2.6 million in kickbacks paid by Mid-Atlantic Youth Services Corp.'s PA Child Care, LLC and Western PA Child Care, LLC youth detention centers to the judges from 2003 to 2006 in exchange for the judges sentencing youths to those specific centers. In many cases, lawyers were not provided to the defendants during court hearings, despite the United States Supreme Court's In re Gault decision, which mandated that all juvenile defendants must be afforded the same rights as an adult in a criminal proceeding, including the right to have an attorney present.

Not surprising, PA Child Care and Western PA Child Care are claiming to be the "victim" and claim that the judges forced them to pay the money. However, in 2002, Conahan shut down the Luzerne County-run youth detention center and helped PA Child Care and Western PA Child Care secure multi-million dollar contracts with the County. Some of these contracts paid based on the number of youths locked up. One 20-year contract worth approximately $58 million with PA Child Care was later canceled by the County.

According to this AP article, various youth-advocacy groups consistently complained about Ciavarella's and Conahan's harsh sentences (such as sentencing a kid to 3 months for creating a Myspace page making fun of an assistant principal). Apparently, during the 2002 - 2006 time period, the statewide rate of juvenile defendants sentenced to detention was 1:10, with Ciavarella, it was 1:4.

The Pennsylvania Supreme Court finally got a clue and removed Ciavarella and Conahan from the bench on January 26, 2008, shortly after they were charged. Now, all of the cases adjudicated by Ciavarella and Conahan are being reviewed to see if the sentences should be overturned and the record expunged.

Until June 2008, Robert J. Powell, a Pennsylvania attorney, was a co-owner of PA Child Care and Western PA Child Care. No word yet on whether federal criminal charges will be brought against PA Child Care, Western PA Child Care, Mid-Atlantic Youth Services Corp., or Powell (or if he will be subject to attorney disciplinary proceedings).

Don't Pick Up The Phone

2009-01-09T12:31:00.003-05:00

In the January 2009 issue of Philadelphia Magazine, Jason Fagone writes a (not very complimentary) article on your friend and mine, NCO Financial titled, "Don't Pick Up the Phone".

It is worth reading as it details the not-too-pleasant experiences people throughout the country have had with NCO.

How Your Credit Score Is Calculated

2009-01-04T21:16:00.003-05:00

We have many people asking how their Credit Score is calculated. A person's credit score is used by various creditors, such as credit card companies, mortgage companies, and other companies that lend money, to determine your credit worthiness.

A private company called Fair Issac Corp. calculates your credit score based on the information that appears in your credit report as maintained by Equifax, TransUnion, and Experian, hence, it is important that the information contained in your credit report is accurate. The credit score, called FICO, ranges from 300 to 850. The median FICO score is 720. The higher your FICO, the more easily you will be able to borrow money and at a lower interest rate.

While you can obtain a free copy of your credit report for free, Fair Issac charges you to obtain your credit score. When you order a copy of your credit report from the Federal Trade Commission's Annualcreditreport.com you can order a copy of your credit score.

According to Fair Issac, a credit score is made up of these five factors:

35% of the score is based on your payment history. Even if you can only afford the minimum monthly payments, that is better than missing a payment or two.

30% of the score is based on the percentage of the total credit available to you compared with how much of that credit is used. If you have credit that you are not using (such as a credit card that you haven't used in a while), it is better for your FICO score to leave that account opened rather than close it.

15% of the score is based on your credit history. The longer your credit history the better.

10% reflects how many new accounts have been recently opened.

10% of the score is based on the type of credit you have (i.e., the mix of installment, revolving, consumer finance, etc.)

More Cowbell

2008-11-20T22:58:00.003-05:00

More Cowbell -

"Debt Relief" Firms: Help or Hinderance?

2008-10-19T17:58:00.003-04:00

October 14, 2008 Wall Street Journal
Debt-Relief Firms Attract Complaints

Some of the highlights:

(1) A lot of firms charge hefty up-front fees of between 10% - 15% of the total debt outstanding, which can mean consumers have to pay thousands of dollars to these firms before they will start performing any work.

(2) A lot of credit card companies, such as American Express, will not work with any debt relief company.

(3) A debt relief company's instruction to their customer to stop paying their creditors often leave the customer worse off, in the form of bad credit, higher interest rates, late fees, and creditors filing a law suit to collect their money.

Poor Man's Copyright

2008-08-31T20:34:00.005-04:00

A songwriter called the other day, saying that he thought that a record company and producer had stolen his song. When I asked if he had registered the copyright for the song, he said that he did the "Poor Man's Copyright". He thought that he was protected. In theory, the "Poor Man's Copyright" might work. However, in practice, it is fraught with problems. The "Poor Man's Copyright" involves mailing yourself a copy of the work, on the theory that you will have "proof" that you thought up the idea at the time that you mailed the envelope to yourself, preempting anyone else from laying claim to your work.

The biggest reason that people give for doing a "Poor Man's Copyright" (as opposed to registering with the US Copyright Office), is time and cost. In reality, it is relatively inexpensive to register a work with the Copyright Office. It costs $45.00 to register a basic claim via paper and $35.00 to register via the Interwebs. As for time, it takes only a few minutes to register with the Copyright Office.

There are numerous shortcomings to the "Poor Man's Copyright". The biggest is that it is very easy to fake mailing something to yourself. Unless someone impartial is present to witness you opening the envelope, there really is no proof that you actually mailed yourself anything. The other major shortcoming is that there is no mechanism to put anyone else on notice that you created the work. If another party does not have a way to know that you were the first to create the work, then it will be very difficult to prevail.

There are numerous benefits to registering with the Copyright Office. First, you have the protection of US Copyright Act of 1970. Second, you have proof, in the form of the registration, that you lay claim to the work. Third, once you register, that is deemed to put others on notice that you are claiming the work as your own. Other benefits are that in the case of infringement, you can file suit in federal court, and seek not only your actual damages, but statutory damages, as well as attorney fees and costs.

If you don't register the work with the Copyright Office, you will be deemed to have a "common law copyright" - assuming your state recognizes such a thing. You will be limited to filing in state court (unless you meet the federal court's diversity requirements) under state law, and generally, can only seek actual damages.

With the low cost and ease of registration, there is no reason at all for doing the "Poor Man's Copyright".

NCO Collection Agency

2008-05-11T19:39:00.006-04:00

NCO Financial Corp. (aka NCO Group, NCO Portfolio Management, NCO Financial) is a collection agency and a company that purchases consumer accounts that have gone into default. They purchase this debt from a variety of companies, such from credit cards, hospitals, student loans, mobile phones, etc. If you see the following address appear on your credit report or on any other documentation, it is NOC: 507 Prudential Road, Horsham, PA 19044.

If NCO is acting as a collection agency on behalf of another company, they must comply with the Fair Debt Collection Practices Act. If they are trying to collect on a debt that they allegedly purchased, the FDCPA still applies, as the Federal Trade Commission still views it as collecting someone else's debt. Furthermore, several states, such as Pennsylvania, have consumer protection statutes that govern how original creditors collect consumer debts. For a discussion of the FDCPA and other consumer protection statutes, see our previous post entitled “Consumer debts – Myths and Facts.”

If NCO is attempting to collect a debt that they claim to have purchased (or was assigned to them), there are several things that you should know. In order for NCO to collect these types of debts, the original creditor (such as the credit card company) must assign or sell the debt to NCO. If NCO can’t prove that the debt was sold or assigned to them, then legally, they can’t collect it. If you are contacted by NCO and they claim that your debt was sold or assigned to them, make them prove it. In a number of cases that we were involved in, NCO was unable to provide any documentation that showed they purchased or were assigned the debt.

In addition to providing proof that the debt was assigned / sold to NCO, NCO also must prove that you owe the money. Make NCO provide you with proof that you owe the debt to the original creditor (such as as the credit card company). Refuse to accept any NCO-generated statement of account – demand that they provide you with invoices, bills, etc. from the original creditor (such as the credit card company).

NCO is very quick to give the accounts they allegedly purchased or were assigned to a law firm for legal action. NCO’s (and their lawyer's) business model is based on them depending on you not respond to the law suit. That way, NCO and their attorney does not have to prove that you owe the money they are claiming you owe.

When a defendant does not respond to a law suit, the plaintiff can have a default judgment entered against you. That then allows the plaintiff to attempt to collect on the judgment. Disrupt NCO’s and their attorney’s business model, by responding to the law suit and make them prove what they say.

In the past six-months, Wisniewski & Mensing, LLP has successfully represented two clients against NCO. One of the cases was won at trial, the other was won on a summary judgment motion. In each case, we prevailed by showing that NCO was unable to prove that our clients owed the money NCO claimed, resulting in over $13,000 in alleged debt being wiped away in one case and over $6,000 in alleged debt being wiped out in the other.

New Jersey's Family Leave Act

2008-05-04T22:11:00.002-04:00

On May 2, 2008, New Jersey joined California and Washington to become just the third state to pass a family leave law. Modeled on the federal Family and Medial Leave Act (FMLA), New Jersey’s law, known as the “Family Leave Act” (FLA), permits an employee to take up to six weeks of paid family leave a year and collect 2/3 of their weekly pay, up to $524 a week. The FLA works alongside the FMLA.

If you’re an employer, there are some bad things and some “not-so-bad” things about NJ’s law.

The Bad:

Employers with 50 or more employees must hold open the job for their employee on FLA leave. All employees, no mater where they are based, are counted towards the 50 number. So, if an employer has 49 employees working in Pennsylvania and 1 working in NJ, the employer is deemed to have 50 or more employees and must hold open the job for the NJ employee on FLA leave.

The Not-So-Bad:

Employers with less than 50 employees don’t have to hold open a job for an employee that is on FLA leave and is protected by statute from any legal action by an employee concerning the FLA. Please note that the employer will still be required to comply with all the other state and federal labor and employment regulations.
The monetary costs for the law will be borne by a new payroll tax on all NJ employees. Employers will not directly bear any costs of the FLA.
Employees must give their employer notice, between 15-30 days, before taking FLA leave, unless the leave is “unforeseeable”.
Employers may require an employee to expend up to 2 weeks of the employee’s sick, vacation, or other paid time-off before taking FLA leave.
If the leave is not child-care related, the employee must provide their employer with a doctor’s note. (This provision was added to address employer concerns of employee abuse of the FLA, as there is wide-spread abuse of the FMLA among employees).
Employees are eligible for FLA leave only if they have worked for that specific employeer for at least 20 “base weeks” and earned at least 1,000 times NJ’s minimum wage during that time, which is currently $7.15 an hour.
FLA runs concurrently with the FMLA.
An employee is qualified to take FLA leave only for care of a family member’s “serious health condition” or to care for a child during the first 12 months of the child’s birth or adoption.

New Jersey’s Department of Labor and Workforce Development will be issuing regulations on implementation and application of the FLA. The FLA will go into effect on July 1, 2009. Employee payroll tax deductions will begin January 1, 2009.

Conclusions:

Expect to see more businesses leave NJ and move to Pennsylvania or Delaware, due to increased costs to do business in NJ. For employers that do remain in NJ, expect demand for temporary employees to rise, to cover the work-load of the employee on FLA leave. Unfortunately, as with the FMLA, litigation is likely, as there are enough undefined terms and unclear language in the FLA. Also, as with the FMLA, expect some employees on or returning from FLA leave who were fired/let go for job-performance or other legitimate reasons to file suit under the FLA, claiming that they were fired simply for taking FLA leave.

Be Careful What You Wish For - You Might Just Get It

2008-04-29T20:46:00.008-04:00

The New Jersey Appellate Court has upheld New Jersey’s Government Records Council determination that a freelance journalist must pay $1,877.93 in charges in connection for documents that he sought under New Jersey’s Open Public Records Act (OPRA), N.J.S.A. 47:1A-1, et seq. in Janon Fisher vs. Division of Law, Superior Court of New Jersey, Appellate Division, No. A-2288-06T3, A-2448-06T3.

Janon Fisher had submitted a wide-ranging request under the OPRA to New Jersey’s Division of Law, Department of Law and Public Safety. The records custodian responded that several attorneys spent 52.5 hours searching for information that was responsive to Fisher’s request and submitted a invoice of $1,877.93 for the work, based on the salaries of the attorneys involved. Fisher refused to pay the invoice and filed a complaint with the Government Records Council.

The Records Council required the Law Division to justify the charges, which it did by submitting records showing that the lowest paid attorney who reviewed the records had an effective hourly rate of $35.77. As part of its certification that the charges were justified, the Law Division stated that more than 15,000 emails and files were reviewed over a 2 year period.

Under the OPRA, an agency can charge for the actual costs of copying government records. N.J.S.A. 47:1A-5(b). In addition, the OPRA permits an agency to levy a “special service charge” if searching for the requested records requires a “extraordinary expenditure of time and effort.” N.J.S.A. 47:1A-5(c).

The moral of the story is, don’t request records unless you have the ability to pay for them. This is also true when issuing document subpoenas, as many banks and other institutions will charge upwards of $1.00/page for “copying” costs and upwards of $50.00/hour for “research” costs. What I’ve found helpful when issuing document subpoenas is to ask that if any charges might be incurred, that the custodian contact us before incurring any charges, so that I can see if our client wants to spend the money.

Reducing Your Company's Outstanding Account Receivables

2008-04-15T20:57:00.023-04:00

This post will be made by Wisniewski & Mensing, LLP's CFO, P. Bear:

Yes, I am cute, cuddly, and have fluffy ears. But don't let that distract you from the advice I am about to impart to you.

Businesses, large and small, struggle with their account receivables. Here are some ideas that are easy to implement to improve your cash-flow and reduce delinquent accounts:

(1) Try to get a deposit from your client at the time the contract is signed. Ideally, you should obtain a 50% deposit.

(2) If your customer is a company, have the owner of the company sign the contract in their individual name, in addition to signing in the name of the corporation. This can head-off problems down the road if the company runs into trouble, as you can then look to the individual for payment.

(3) In your contract, have the terms for payment no more than 30 days. Better yet, have the contract state that payment is due upon receipt of any invoice. If payment has not been received once it is due, call or send your customer a polite follow-up message. The longer an invoice remains past-due, the risk of delinquency rises.

(4) In your contract, make sure to have it say that you will charge interest for any invoice that is past-due. Usually, interest begins to accrue once an invoice is more than 30 days past-due. Typical interest rates are 18% compounded annually.^*

(5) In your contract, have it say that the customer will be responsible for any costs or attorney fees that you might incur with any past-due invoice.^*

(6) If you frequently deal with clients who are located in another state (or in your state but some distance from you), you can add language to your contract which fixes the location for any disputes that might arise. For example, if you are based in Philadelphia, PA, you can say that all disputes concerning the contract must be brought before any state or federal court situated in Philadelphia County, PA.^*

(7) You might want to incentivize your customers to pay on time, by offering a discount of a few percent if they pay on time.

(8) If possible, establish the credit bona fides of your new clients. Have your customer fill out a credit application, where you ask them for their name, address, bank references, business references, etc. You can also run a credit report. For a business client, Dun & Bradstreet offer them. For individuals, credit reports can be obtained from Experian, Equifax, or TransUnion. Be aware that information (or the lack thereof) might not be in every provider's report. Also, when dealing with individual credit reports, you must insure that you comply with the Fair Credit Reporting Act. Before pulling an individual's credit report, it is recommended that you get the person's written permission.

(9) If you have a lot of repeat business, every couple of months or so, have your accountant create a report listing all of the business' clients from the past 6 months. You want to know how much you have billed each client during that time period and how prompt they were in paying their bills. For the clients that have been consistently late with their payments, it might be a good idea to either cut the client off in the future, insist on a larger deposit, or come up with other ways to insure payment, such as having them authorize you to bill their credit card.

*It is advisable to work with an attorney when modifying (or creating) your business' contract, to make sure that it the terms are clear and that it is enforceable.

Rob Lowe's Lawsuits - Legitimate or Attempt to Stifle Speech?

2008-04-08T20:41:00.007-04:00

Rob Lowe recently filed law suits in California against two of his former employees, claiming that they violated a confidentiality agreement that the employees allegedly signed before working for Lowe. Among the laundry list of counts, Lowe claims that the former employees breached the confidentiality agreement and defamed Lowe. The law suits are available here and here.

What is interesting about this whole thing is that prior to filing the law suits, Lowe blogged about it in a post on the Huffington Post. In his post, Lowe claims that one of his former employees had blackmailed Lowe, wanting, “$1.5 million by the end of the week or she will accuse us both of a vicious laundry list of false terribles”. Minutes after the law suits were filed, Lowe’s attorney faxed a copy of the lawsuits to TMZ.com, who promptly posted them. Upon hearing of the alleged blackmail attempt, the Santa Barbara County Sheriff contacted Lowe to offer to help. Lowe is quoted as telling the Sheriff’s Office, “Your involvement isn't necessary. We're going to handle the matter civilly.”

To me, this whole thing smacks of nothing more than a public relations ploy by Lowe and his handlers to get in front of potentially damaging revelations by former employees. In reading both of the law suits, it seems that they were written more as press releases, rather than legitimate complaints. If Lowe really was being blackmailed (which is a crime), why would he turn away police involvement?

Even more ominous for Lowe (and his attorney), is that it does not seem that either complaint would survive a motion to dismiss based on failure to state a claim. Not only does either complaint attach a copy of the alleged confidentiality agreement, but the alleged agreements are not described in any sort of detail. Also, the complaints do not meet the pleading requirements in order to state a claim for defamation, breach of duty of loyalty, breach of fiduciary duty, intentional infliction of emotional distress, negligent infliction of emotional distress, intentional misrepresentation, negligent misrepresentation, trespass or abuse of process. For example, the complaints just say defendant defamed Lowe, without stating what the defamatory statement was, how it was defamatory or where the defamation occurred – all elements which are required to state a claim for defamation. Not to mention that as a public figure, Lowe has to meet a heightened pleading requirement to show defamation and must show that the allegedly defamatory statements were made with actual malice (knowledge or reckless disregard for the truth) under the US Supreme Court’s decision in New York Times vs. Sullivan, 376 U.S. 254 (1964).

Putting all of the above aside for a minute, it could be that Lowe’s law suits are what are known as Strategic Lawsuit Against Public Participation (“SLAPP”) suits, which is a law suit that attempts to stifle comment in connection with a public issue. As Lowe is a public figure, it could be argued that any public comments about his life are a public issue. Several states, including California (Cal. Civ. Pro. §425.16), have enacted laws to combat SLAPP suits. If the Court determines that a law suit is a SLAPP suit, the Court can sanction the filer of the SLAPP suit and award attorney fees and costs.

Could it be that there was no blackmail and Lowe is just using his law suits as a way to hush up former employees who might say some unflattering things about Lowe (and drum up some publicity for himself)? It will be interesting to see how this plays out.

Consumer Debts - Myths and Facts

2008-04-07T21:10:00.013-04:00

I've spent some time reviewing the questions (and posted answers) over on Yahoo's Answer section relating to questions about personal credit issues. It amazes me the number of misconceptions and outright falsehoods that people continue to spread about consumer debt issues. In no particular order:

Myth: Collection Agencies can do whatever they want and there is nothing I can do to stop them or prevent them from harassing me.

Fact: Collection Agencies and all 3rd Party Debt Collectors (including attorneys attempting to collect consumer debts) are governed by the Fair Debt Collection Practices Act, 15 U.S.C. §1692, et seq. The FDCPA strictly regulates how a debt collector can interact with a consumer and what the debt collector can and cannot do. Violations of the FDCPA can result in the awarding of statutory damages plus attorney fees and costs. Wikipedia has a good overview of the FDCPA.

Also, many states, such as California and Pennsylvania, have consumer protection statutes the regulate how consumer debts can be collected. Sadly, New Jersey has no such statute.

Myth: Credit card companies and other creditors must comply with the FDCPA.

Fact: The FDCPA only governs 3rd party debt collectors, not original creditors. A credit card company attempting to collect its own debt is not covered by the FDCPA. But the minute the account is turned over to a collection agency or attorney, the FDCPA applies to those 3rd party debt collectors.

Myth: Credit card companies and other creditors can run roughshod over consumers.

Fact: While the FDCPA does not apply to original creditors, there are some states, such as California and Pennsylvania (via the Fair Credit Uniformity Extension Act, 73 P.S. §2270.1 et seq.) which have consumer protection laws that generally mirror the FDCPA but expand the scope so that they apply to original creditors attempting to collect their own debt. Sadly, New Jersey has no such statute.

Myth: A collection agency can garnish my wages if I don't pay them.

Fact: Some collection agencies like to threaten that they will garnish wages in order to get people to pay them. Such threats are prohibited under the FDCPA. Also, not all states permit wage garnishments. Pennsylvania is one of them. And, even if you live in a state that permits wage garnishment, it is only permitted if the plaintiff wins the lawsuit and there is a court-ordered judgment entered against the defendant.

Myth: I don't have any money / assets, so I have nothing to worry about if a collection agency contacts me / I am sued for unpaid bills.

Fact: This belief is based on a person's belief that they are "judgment proof", i.e. that since they have no assets / money, that there would be no money for a plaintiff to go after if they win a lawsuit. However, one must consider the effect of having an account placed in default on their credit report, which can reduce the ability of the person to obtain credit in the future. Also, the person might not be as "judgment proof" as they think, as a determined plaintiff who prevails in their lawsuit has many tools at their disposal to discover assets of the defendant in order to execute upon.

Myth: I can be sued at any time for a past-due account, even one that is many years old.

Fact: Each state has laws (called the Statute of Limitations) governing the maximum time that a person can file a law suit concerning a matter. After this time has passed, a law suit can not be filed. In New Jersey, the SOL for written contracts (such as credit card debt) is 6 years. In Pennsylvania, the SOL for written contracts is 4 years. The SOL begins to run when the debt became due (i.e. the contract was breached or account went into default) or the last payment was made. Be aware that the SOL can be re-set if a payment is made or the debt is re-validated (i.e., the debtor reaffirms the debt).

Myth: I can be arrested and send to jail if I do not pay my debts.

Fact: Debtor prisons haven't been legal in the US for over 150 years. You can not be arrested or sent to jail for not paying your debts. The only way you can be sent to jail in a civil matter is if you ignore a court order, are held in contempt of court and the court orders your arrest until you comply with the court's order.

As always, it is best to seek the advice of an attorney who is licensed in your state and familiar with consumer collection (also called consumer litigation) issues. You can usually get an attorney referral from your local county bar association and you might be eligible for free legal assistance from your local county Legal Aid office.