On November 12, 2014, the American Bar Association issued Formal Opinion 469, regarding the practice of some States’ Attorneys allowing debt collectors to use their letterhead for a fee. Here is what they concluded:
Debt Collectors’ False Threats of Arrest and Jail in Maryland and elsewhere is a Crime: Multimillion-Dollar Debt Collection Scam That Targeted More Than 6,000 Victims In All 50 States
Abusive debt collectors falsely threatened Maryland and other consumers with arrest and jail. Now the owner of the firm, together with six of his employees, are under arrest for making false threats of arrest to consumers and pretending to work for the federal government. A press release by the FBI and U.S. Attorney for the Southern District of New York makes it clear that the threats were not made by “rogue” employees, but were part of the firm’s policy which had over 6,000 victims in all 50 states:
Robo-signing of affidavits and other legal documents used in Maryland foreclosures has led to the predictable scenario where long after the foreclosure was approved, junk debt buyers are now seeking foreclosure deficiency judgments on what was the difference between the amount of the mortgage and the price fetched at the foreclosure sale.
Most participants in our legal system agree that robo-signing (including consensual forgery, perjury, and falsely stating one has personal knowledge of events) is an assault on the integrity of the courts. But as is well known, when faced with admittedly fraudulent documents, most courts simply looked the other way, and allowed the foreclosures to go through.
A recent article in the New York Times by Gretchen Morgenson illustrates the long shadow that robo-signing in foreclosures has created, and shows why robo-signing’s negative effects on people’s legal rights will continue for years to come. By way of example, although the state of Maryland disciplined two lawyers for admittedly submitting false affidavits in thousands of foreclosures, not a single one of those foreclosures was overturned. See here and here. Now the deficiency amounts from cases like these are being sold for pennies on the dollar to junk debt buyers, who are reopening the foreclosure cases and seeking tens or even hundreds of thousands of dollars from former homeowners who thought their cases were finally over. The good news in Maryland (unlike in other states) is that a law was passed which shortened the statute of limitations from twelve to three years on seeking foreclosure deficiency judgments.
Usually, zombie debt is associated with unscrupulous debt collectors, trying to collect debts beyond the statute of limitations or which were discharged in Bankruptcy. However, according to Jessica Silver-Greenberg at the New York Times’ Dealbook, four major banks are under investigation: JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial (formerly GE Capital).
Two debt brokers (businesses which buy junk debt, then sell it to other junk debt buyers) were sued by the FTC earlier this year for posting on the internet private personal financial information about individual consumers for public view, as part of their attempts to market portfolios of junk debt to JDBs.
Auto-lenders have found new weapons to use against consumers believed to be in default: ignition interruption devices and GPS tracking. These weapons allow creditors to prevent consumers’ cars from starting. Jessica Silver-Greenberg (author of an outstanding series of articles on debt collection, here) and Michael Corkery report here.Read More »Lenders Disabling Cars Remotely: The New Face of Subprime Auto Loans
NPR and ProPublica have been studying the use of garnishments to collect consumer debt, with the help of payroll firm ADP. Garnishment occurs when a court orders a judgment debtor’s employer to turn over some of the debtor’s paycheck to a creditor, or orders a bank to turn over the contents of a debtor’s accounts to a creditor. ADP’s full report is available from ProPublica here.Read More »NPR & ProPublic Report on The Effects of Garnishments
The Sixth Circuit Court of Appeals has decided Stratton v. Portfolio Recovery Associates, a proposed FDCPA class action, which grew from a typical debt buyer lawsuit.
The CFPB’s Fall 2014 supervisory highlights, covering supervisory activity between March and June, points to failings by student loan servicers and debt collectors. The highlights identified six failings by student loan servicers, including misleading statements to consumers and telephone harassment. Debt collectors’ misconduct included charging illegal convenience fees to consumers paying by credit card, false threats of litigation and improper disclosure to third parties.