Credit & Debt

ABA: It’s Unethical for Debt Collectors to Use Prosecutors’ Stationery

That title is a little over-simplified, so here is the ABA’s actual summary from Formal Opinion 469:

A prosecutor who provides official letterhead of the prosecutor’s office to a debt collection company for use by that company to create a letter purporting to come from the prosecutor’s office that implicitly or explicitly threatens prosecution, when no lawyer from the prosecutor’s office reviews the case file to determine whether a crime has been committed and prosecution is warranted or reviews the letter to ensure it complies with the Rules of Professional Conduct, violates Model Rules 8.4(c) and 5.5(a).

Basically that says prosecutors who just hand off their stationery to a debt collector (to collect parking fines or fines for bounced checks, for example) are engaging in unethical conduct. If they want to do this, then a lawyer from the prosecutor’s office has to actually take the time to review each file to determine whether a threat of prosecution is actually warranted.

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MN AG Sues TJ Process Service for “Sewer Service”

Sewer service happens when the process server — the person charged with telling the defendant they have been sued — lies about serving it. The Minnesota Attorney General just sued TJ Process Service for exactly that. The owner of the company leaves little room for doubt. Here is his sworn testimony:

Q: [Y]ou believe 100 percent he [Umland] engaged in sewer service?
A: Yes. What percentage and how many times that was, I don’t know.

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Subprime Auto Lenders Hold Your Car Hostage When You Fall Behind

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Ms. Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March.

About two million vehicles have devices installed that allow a lender to lock out a car from a smartphone. From the Dealbook article: “‘I have disabled a car while I was shopping at Walmart,’ said Lionel M. Vead Jr., the head of collections at First Castle Federal Credit Union in Covington, La.”

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Lifetime Student Loans

When you filled out the FAFSA before your freshman year of college, you probably did not consider the chance that you would still be paying off those loans well into retirement.

Rosemary Anderson could be 81 by the time she pays off her student loans.

She is not alone.

For all seniors, the collective amount of student loan debt grew … to about $18.2 billion last year.

In 2010 (I guess that is the most recent year for which there are numbers), 4% of seniors were still paying off their student loans. That is a small percentage, for sure, but it is growing. And most of these senior debtors are probably living on fixed incomes — social security in many cases. That’s probably why 25% of seniors with student loans are in default.

(h/t Legal Skills Prof Blog)

John Oliver on Payday Loans

“Basically, payday loans are the Lay’s potato chips of finance. You can’t have just one and they’re terrible for you.”

Bad Paper: A Debt-Collection Game with Some Questionable Advice

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Felix Salmon built Bad Paper around Jake Halpern’s book and New York Times Magazine piece of the same name. By playing the game, you can put yourself in the shoes of a debtor or collector and explore the different scenarios. You win when you get the case dismissed or collect a judgment.

It’s an interesting exercise, but the game is misleading about what it takes to win in court. According to the game, all you have to do is show up in court and say “Excuse me: Where’s the proof that this is my debt?” to the judge.

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Federal Government Turns Into Massive Zombie Debt Collector

Three years ago, Congress added this sentence to the farm bill:

Notwithstanding any other provision of law, regulation, or administrative limitation, no limitation on the period within which an offset may be initiated or taken pursuant to this section shall be effective.

What that sentence did was remove the statute of limitation on debts owed to the federal government. As a result, according to the Washington Post, the Treasury Department is intercepting hundreds of thousands of tax returns this year, to collect on very old debts, some going back to the 1960s. So far, it has collected something like $75 million using this tactic.

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Bankruptcy Reform Plugged the Relief Valve

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Bankruptcy is sort of a relief valve for the economy. When financial pressure (debt) builds up to a certain point, the relief valve opens and people use bankruptcy to discharge their debt. Then, they go back to being consumers and the economy can return to a healthy state. There are other relief valves, of course, but bankruptcy is really the only one available to consumers. Bailouts are for too-big-to-fail banks, not the little guy.

If consumers cannot declare bankruptcy, they cannot go back to being consumers. That means the pressure stays high and the economy has trouble returning to a healthy state.

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A New Debt-Collection Low: Taking Lunch Away From Schoolchildren

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A “child-nutrition manager” in Salt-Lake City, notified of an unusually-large number of students who owed money for lunch at Uintah Elementary School, came up with a brilliant plan: take away their lunches. Students with delinquent school-lunch accounts went through the lunch line as usual, but when their card was declined at the register, the lunch-room staff tossed their meal in the trash.

Several parents told the Salt Lake Tribune that they were not notified that they owed money for their children’s lunches. It doesn’t seem like anyone was notified that their children would have their lunches taken away from them, either. The school has said it is “currently investigating to see if [notification] guidelines were followed correctly.”

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Bradstreet & Associates Sued for Charging Excessive Interest

The Minnesota interest rate for debts due to overdrawn bank accounts is 6%. Bradstreet & Associates was trying to charge 21.75%. According to Minnesota Attorney General Lori Swanson,

Since 2009, Bradstreet and its predecessor company bought at least $18 million in debt that originated with Wells Fargo and U.S. Bank. This affects, we believe, at least 16,000 Minnesota consumers.

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