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:
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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:
3. Use threats of violence or harm;
5. Use obscene or profane language;
As well as the not-so-obvious:
17. Use a false company name;
21. Contact you by postcard.
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)
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.
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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.
For as often as I represented people sued by Gurstel Chargo or sued Gurstel Chargo for FDCPA violations, I’m shocked at how little I wrote about one of Minnesota’s busiest debt collection law firms. I actually know the marketer (a lovely person, actually) who came up with Gurstel’s current marketing campaign, and I chuckled when I saw it for the first time. Accountability Matters as a debt collector slogan is the height of hubris. I’m just grateful I’m here to see Gurstel take its own medicine.
Here’s what a Gurstel
lawyer told a disabled veteran:
Fuck you! Pay us your money! You can’t afford an attorney. You owe us. I hope your wife divorces your ass. If you would have served our country better you would not be a disabled veteran living off social security while the rest of us honest Americans work our ass off. Too bad; you should have died.
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It’s not surprising that debt collectors are always trying to figure out new ways to cloak themselves with the appearance of authority. That’s why the Fair Debt Collection Practices Act doesn’t allow debt collectors to pretend to be affiliated with the government:
The false representation or implication that the debt collector is vouched for, bonded by, or affiliated with the United States or any State, including the use of any badge, uniform, or facsimile thereof.
Of course, that’s not very effective when the government — in the form of prosecutors — essentially deputizes debt collectors to send collection letters on official letterhead. It’s attractive for the district attorneys involved. They get to farm out bad check collection, putting it out of sight and out of mind, while raking in a profit.
Prosecutors’ job is to enforce the law. One important part of that job is exercising some discretion over who to prosecute. That’s especially important in bad check cases. People bounce checks all the time, usually unintentionally. That doesn’t make them crimes. So a prosecutor’s job is to sort out the crimes from the accidents. Under the new arrangement, everybody gets contacted by a debt collector, which then demands even more money for a budgeting class — the profit from which goes into the collector’s pocket.
But, as Jeff Sovern points out at Consumer Law & Policy, the collectors are walking a thin line, at best. Not to mention what has to be horrible PR for the district attorneys involved, who should be doing their jobs, not farming out their discretion — and their letterhead — to debt collectors.
“The amount of defaulted loans — $76 billion — is greater than the yearly tuition bill for all students at public two- and four-year colleges and universities.”
Read Debt Collectors Cashing In on Student Loans on the NYT [via NextDraft]
Every once in a while, some regulator or another announces that it will henceforth be going after debt collectors with renewed vigor. This week, it’s a hodgepodge of federal and state regulators against abuses. In the case of California, at least, it may be because collectors went after the wrong person, state senator Lou Correa (D-Santa Ana):
Last year, Correa discovered his Senate paycheck was being garnisheed because of a $4,329 lien for the Sears debt. Brachfeld had obtained a default judgment in court, even though, Correa said, the lawsuit was never served on him and he knew nothing of the claim or the court hearing.
He later learned that the debt belonged to a Luis Correa from Santa Ana. The man had a different Social Security number, different address, even different first name — the senator is legally Jose Luis Correa.
Read Aggressive debt collection tactics are drawing federal scrutiny in the Los Angeles Times.