Imagine receiving a phone call that 25% of your wages are going to be garnished because of a credit card account opened 14 years earlier that was never paid off. Making things worse, you know you didn’t have a credit card from the bank in question at that time, so it can’t possibly be your debt. This should be an easily remedied error, but not if a court has already granted a default judgment against you, making you responsible for paying back money that you didn’t owe and didn’t find out about until it was too late.
A new National Consumer Law Center (NCLC) report argues that the Consumer Financial Protection Bureau (CFPB) should use its power to ban the collection of statute-barred debts:
In light of the inherent unfairness, deceptiveness and abusiveness that occur when collectors pursue time-barred debt and the inability of disclosures to adequately protect consumers, the CFPB should ban all efforts to collect out-of-statute debt—whether by litigation or other means.
The Consumer Financial Protection Bureau’s page “ask CFPB” on debt collection, is a useful resource for consumers. It also provides some insights into the kind of debt collection problems consumers face. Among the top ten most-viewed questions on the CFPB’s site are:
“Pennies on the dollar” is perhaps an overstatement. According to Paragraph 4 of a January 6, 2015 settlement agreement reached with the New York State Attorney General, Encore Capital Group, Inc. (which is publicly traded and is the parent of junk debt buyer Midland Funding, LLC) “paid approximately $1.2 billion to acquire portfolios, primarily charged-off credit card portfolios, with a face value aggregating $84.9 billion.” When you do the math (1.2 billion divided by 84.9 billion), that comes out to about 1.4 cents on the dollar — i.e. less than two pennies on the dollar.
As part of the settlement, Encore promises that it will stop suing to collect debts which are barred by the statute of limitations in New York. The full text of the settlement is Here.
Debt buyers routinely sue consumers after the statute of limitations has run, both in Maryland and around the country. The FTC’s study of the large debt buyers found that 30% of debts purchased were at least three years old and therefore were likely beyond the statute of limitations in Maryland and some other states.
Encore entities filed law suits and obtained thousands of judgments on time barred debts:
Jeff Sovern’s Groundbreaking Study on Forced Arbitration Clauses: Consumers are Unaware and do not Understand Them
The Consumer Financial Protection Bureau has to make an important decision soon, about arbitration clauses. Forced arbitration clauses (or “mandatory pre-dispute arbitration clauses” as they are sometimes called) appear in many standard consumer contracts. If you have a Paypal account, a mobile phone contract, a credit card, an employment contract, or if you have purchased a car of other large consumer item, the chances are that all of these contracts have forced arbitration clauses in them. Most people don’t read consumer contracts very closely, and many if not most people have ever even heard of forced arbitraiton. But suppose that you gave 600 ordinary American consumers a typical contemporary consumer contract, asked them to read it and then gave them a quiz. How would they do?
That is more or less what a major study by the St John’s University School of Law led by Professor Jeff Sovern did. It seeks to answer the question: do we understand forced arbitration clauses?
It is well known that some debt collection attorneys mass produce lawsuits and do so without properly reviewing their own documents. As one former collection attorney, quoted in Jake Halpern’s Bad Paper, put it “[t]here’s no way that you could effectively double-check all that stuff.” Despite slipshod review of the case files, the collection attorney’s firm netted “astronomical” profits.
However, the New York courts are not happy with this sort of behavior and Midland Funding LLC v. Austinnam is an excellent expression of their displeasure. In Austinnam, the court imposed a fine as a sanction on both the plaintiff, Midland Funding LLC, and its attorneys.
Troubles Mount for Ocwen in Maryland and Around the Country Due to Mounting Regulatory Actions and Private Lawsuits, and Ocwen Stock Plummets
Ocwen, which has an outsized presence in Maryland and which is the largest subprime mortgage servicer in the United States, has settled allegations by New York’s financial regulator, but still faces trouble in California. It is also in serious financial trouble: its stock closed at $7.71 on January 21, which is down from $16.01 a month ago, and down from $49.13 a year ago.
As his press release explains, New York’s Benjamin Lawsky, the Superintendent of Financial Services, alleged that Ocwen had a “serious conflict of interests” and had engaged in a variety of servicing misconduct including
(a) robo-signing, (b) inaccurate affidavits and failure to properly validate document execution processes, (c) missing documentation, (d) wrongful foreclosure, (e) failure to properly maintain books and records, and (f) initiation of foreclosure actions without proper legal standing.
Ocwen Servicing Abuses in Maryland and Elsewhere: Foreclosures Spark Lawsky Investigation and Lawsuits
Ocwen is a mortgage servicing company: it’s paid to collect payments from consumers in Maryland and elsewhere, deal with escrow accounts, and sort out any problems that arise. Servicers do not necessarily own the mortgage itself, only the “servicing rights”. The CFPB’s guidance for examining mortgage servicers explains “[t]his is because some entities have expertise in payment processing and other servicing responsibilities, while others seek to invest in the underlying mortgages.” Mortgage servicers are supposed to help the mortgage repayment process run smoothly and to deal with problems – such as mistakes in escrow or missed payments. According to Ocwen’s slogan “Helping homeowners is what we do!”
However, lawsuits filed in Maryland and around the country accuse Ocwen of everything from blatant fraud to utter incompetence, all to the detriment of the homeowners it claims to be helping. A lawsuit filed in Florida recently accuses Ocwen of needlessly forcing homeowners into foreclosure by turning minor problems into major ones. NPR reports the story of one couple who were charged massive fees after an error regarding property taxes:
Policy makers in Maryland and elsewhere should read “The Debt Disparity: What Drives Credit Card Debt in America”, released in the Fall of 2014 by the think tank Demos (www.demos.org). Demos conducted a survey of nearly 2000 consumers to discover how consumers with outstanding credit card debt differ from those with no credit card debt. The study found that those with credit card debt are more likely to have no college degree, no health insurance, to have experienced recent unemployment and to be underwater on their mortgages. They are also more likely to have children.
Scammers call and demand immediate payment via wire transfer or prepaid debt card. According to a recent statement from the Maine Attorney General
The red flag, however, is that they want you to make an instant payment with a pre-paid debit card or wire transfer. This is how you know you are getting scammed. Hang up the phone immediately.