Under the terms of the settlement reached in several class actions against Midland Funding for its (apparently past) practice of employing robo-signers to execute affidavits for debt buyer lawsuits, each class member would receive under $20 — and that’s it. The Sixth Circuit rightly decided this was unfair (pdf).
Unfortunately, the Sixth Circuit seemed to think the settlement was unfair primarily because the named plaintiffs (i.e., those whose names actually appeared on the complaints) would receive $8,000 plus the elimination of their debts. The class members who opted into the settlement just got $17.38 each, and still owed their debts:
It turns out that a comically-large number (26%) of consumer credit reports may have errors. However, 95% of those with errors do not need to worry about them, because those errors do not affect their “credit risk tier.” Or, conversely, only 5% of the consumers with errors on their credit reports were “significant enough” that the consumers affected (about 10 million) might have been denied credit or paid more for it.
Which means there is a good chance that you have errors on at least one of your credit reports (which you should obviously fix), although they probably do not affect your credit.
Of course, being denied for credit or paying more for it are only two consequences of credit reporting errors. Many more people experience other consequences, like incessant calls from debt collectors looking for someone else.
Right now, you have a right to a free credit report, but not a free credit score. That’s annoying, because the score is what really matters whenever you apply for credit. Consumer Union wants to make it easier for consumers to get their score, and is putting in motion a grass-roots campaign to put free credit scores on Congress’s agenda.
So contact your representatives, and let them know you want a free credit score. Here’s where you can find out how to contact them:
The [Fair Debt Collection Practices Act](http://lawyerist.com/tag/FDCPA/) is basically a checklist for debt collectors, a list of things they must do and things they cannot do. With some regularity, someone actually breaks it up into a list. Consumerist just put together a list of 23 things debt collectors may not do, which includes the obvious:
As well as the not-so-obvious:
This list is far from complete, but it is a good place to start. It is also worth pointing out that these prohibitions only apply to consumer debts; they do not apply to business debts. (Via Consumer Law & Policy Blog)
Refund anticipation loans are very similar to payday loans; they are short-term, high-interest loans made in anticipation of future income — your tax refund, in this case. And they are a bad deal.
The best interest rate you can expect from a refund anticipation loan is around 36% APR. That is two or three times the rate someone with decent credit can expect to get from a credit card. But APRs of 100% or more are still common. That means if you paid the loan back in one year, you would actually pay back twice the amount you borrowed.
In other words, the math doesn’t make sense. It is much better to just wait for the check from the IRS.
I’ve said as much, and the Minnesota Attorney General thinks so, too. Well, actually, she thinks “a debt buyer should have admissible evidence” to back up its claims. That’s not really a higher burden; it’s what the law requires. Except in cases of default, which is what debt buyers really want, after all.
The reason this is even an issue is that debt buyers often file thousands of lawsuits without the ability to back up their claims. They often have faulty information, and frequently get default judgments, which gives them the right to garnish bank accounts.
The ability to garnish bank accounts is serious. It gives debt buyers the right to freeze money in a defaulted defendant’s account before the court is even aware of the lawsuit. This is too serious to allow without knowing whether or not the debt buyer can even produce evidence to support its claims.
Sometimes administrative errors cause real problems for real people. From Consumerist:
Typically, the notices of delinquent bills get mailed in late January to mid-February, but this year there was a transition to a new collection agency, which delayed the process.
That same transition mucked up the city’s ability to easily figure out which property owners still owed some or all of their $178 annual fee for the last 10 years. Instead, the collection company was authorized to use the city’s written records to put together a database of who still owed money.
It sounds like they send collection notices to a lot of people who already paid. Residents are pissed, but the city seems to think it’s no big deal. “If a property owner can produce proof of payment, such as a receipt or canceled check, [the city treasurer] will certify that the fee was paid.” I’m sure that will be great comfort to everyone who has kept 10 years of receipts and canceled checks.
Read “Scranton sends out delinquent garbage bills from 1999 through 2011” on the Scranton Times-Tribune.
Everyone agrees that a consumer plaintiff who prevails in a Fair Debt Collection Practices Act lawsuit is entitled to get his or her attorney fees and costs paid by the debt collector defendant. But in Marx v. General Revenue Corporation, the question is whether, under the Federal Rules of Civil Procedure, a debt collector can collect costs from an unsuccessful plaintiff. In other words, does the FDCPA apply, or do the rules of civil procedure?
This is a Really Big Deal, because if debt collectors can collect costs from unsuccessful plaintiffs, it will make it riskier to sue debt collectors. Quite apart from the law, the whole point of the FDCPA is to provide a formidable check on debt collection abuses. Damages in these cases are small, so if they cannot recover attorney fees and costs — or if they risk having to pay substantial costs — they will not sue.
If you want people to be able to stop debt collection abuses, then you cannot increase the risk. Doing so will render the FDCPA far less effective as a check on debt collection abuses. If you think consumers and consumer lawyers are running amok, then I suppose you favor the debt collector’s position.
Read Argument preview: Court considers litigation expenses in debt-collection disputes on SCOTUSblog. (Thanks, Graham!)
According to the National Law Journal*, the American Bar Association’s Business Law Section filed comments (PDF) with the Consumer Financial Protection Bureau objecting to its latest move to assume jurisdiction over debt collectors — plenty of which are lawyers and law firms. Lawyers don’t like anyone regulating us but other lawyers, generally through state professional responsibility boards, which hear complaints and dole out punishment for ethical infractions. Judges can also punish lawyers for misusing the legal system.
But those options don’t seem to have stemmed the tide of complaints about debt collection abuses, some of which surely come from law firms with more than $10 million in annual receipts from debt collection — the ones now subject to the CFPB’s jurisdiction. Exempting debt collectors from the CFPB’s jurisdiction just because they happen to work for a law firm would be just as silly as exempting them from the Fair Debt Collection Practices Act. Which they aren’t.
Today, the Consumer Financial Protection Bureau announced that it would finally start taking a good, hard look at the debt collection industry. It’s about time. Few industries need the attention more.
The CFPB also released 3 resources (all in PDF format):
Read Consumer Financial Protection Bureau to oversee debt collectors from the CFPB.