BANKRUPTCY PROPOSED NEW RULE

NEW PROPOSED BANKRUPTCY RULES moving ever forward.

The first bankruptcy proposed new rule is to shorten the Proof of Claim (POC) filing from 120 days to 60 days after the date of bankruptcy filing.   Remember, no POC means no money for the creditor.  This change would severely hamper creditors ability to manage the debt.  60 days is a short time frame to receive notice, process the notice, hire an attorney, if necessary, obtain current balances owed, obtain complete documentation, prepare the POC, and file the POC.  On top of all of this, the bankruptcy proposed new rule wants to change the form which will require a payment history on the loan or indebtedness back to the first date of the current default.  Such detail will delay the preparation time.   But there can be no delay when you have only 60 days.  Remember that the POC is signed subject to penalties of perjury.  The creditor makes an affirmative representation that the figures are true and accurate.  So rushing to meet the 60 day time frame and filing an incomplete form may subject the creditor to such penalties.    Creditors need to gear up as this proposal should go into effect this December.

The second proposal was to create a national Chapter 13 plan.  This would have eased the necessity of creditors who do business throughout the country from continuing to learn countless variations in plans. Would this bring clarity nationwide and sacrifice specific needs in each District?  Like ever thing else in the world a compromise proposal was discussed allowing each jurisdiction to either accept the national form or opt out and establish its own district plan.

Bottom line is that nothing was agreed on. Stay tuned.

St. Louis debt collections

Two recent court cases add fuel to the St. Louis debt collections industry.  Debt collections is covered under the FDCPA (Fair Debt Collection Practices Act).  In McIvor v. Credit Control Services, the United District Court in Missouri ruled in favor of the creditor because the Plaintiff failed to allege enough facts in the petition to show the creditor’s communications were false, deceptive or misleading nor was the communication in connection with the collection of the debt.

In Portfolio Recovery Associates v. Schultz the Missouri Court of Appeal ruled in favor of the creditor and sent sent the case back to the trial court because the Judge did not allow at trial a business record affidavit with 30 pages of records attached. The trial court held the creditor failed to show a valid assignment of the count.  The trial court further determined the creditor violated the law and its actions constituted a misleading representation in connection with the collection of a debt in violation of 15 U.S.C. § 1692e of the FDCPA.  … Read More >

Who is a St. Louis Debt Collector?

Who is a St. Louis Debt Collector?  The FDCPA Technical Clarification Act of 2013 (H.R. 2892) would exclude a law firm or licensed attorney from the definition of who is a St. Louis Debt Collector.  This is not an outright exclusion for attorneys, but the new law would not apply to litigation related conduct. The bill has received limited support from Democrats.  The passage of such legislation would reduce the threat of frivolous FDCPA litigation against attorneys and allow the true intent of the FDCPA to be enforced.  If there is a problem with  St. Louis Debt Collector attorneys bringing baseless claims in court, then allow the courts to sanction St. Louis Debt Collector attorneys or dismiss the improper claims.  The intent of the FDCPA was not to regulate the courts and deter creditors and their attorneys.  So, why allow Plaintiff attorneys to bring baseless actions against attorneys who engage in what would otherwise be considered legitimate litigation.

St. Louis Debt Collector attorneys are concerned that the Consumer Financial Protection Bureau (CFPB) intends to regulate the debt collection industry using the Dodd-Frank Financial Reform Act.  This Act was signed by President Obama in 2010 to promote financial stability by improving accountability and transparency in the financial system.  The Act established the CFPB who has the ability to “exercise its authorities under federal consumer financial law to administer, enforce and otherwise implement the provisions of federal consumer financial law”.  Key issues are being raised with Proposed Regulation F, among them are vast changes to key terms such as debt collector.  This term is already defined in the FDCPA; however the CFPB is attempting to further define the term which is an administrative overreach and will definitely cause more confusion.   Proposed Regulation F also wants to impose restrictions on creditor remedies in state court which historically have been the province of state regulations.  The proposal cites potential geographic burdens on consumers to appear in court, a great number of default judgments, and a potential abuse of choice of venue by creditors.

 

CREDIT CARD ABUSIVE PRACTICES

Credit card customer sued debt collector for abusive practices for violating the Fair Debt Collection Practices Act (FDCPA) by using deceptive and abusive practices to collect the debt by falsely representing the legal status of the debt and threatening action that could not be legally taken.  Royal Financing Group v. Perkins, Missouri Court of Appeals, Eastern District (2013).

Royal falsely represented its standing to collect the debt in that it couldn’t prove its status as valid assignee of Chase Manhattan Bank.
– Royal knew that it lacked evidence to support its claim and engaged in deceptive behavior intended to intimidate Perkins into paying;
– Royal misrepresented the character of the debt by treating the entire amount as principal and seeking interest thereon without any knowledge of the actual breakdown of the total;
– Royal wrongly attempted to collect amounts not permitted by contract in that the cardholder agreement attached to its petition was inadequate to impute an obligation to Perkins for attorney fees; and
– Royal possessed no documentation whatsoever establishing Perkins’s obligations under the purported cardholder agreement as alleged in Royal’s petition.  

DEBT COLLECTORS UNDER ATTACK

Debt Collectors under attack:  The Consumer Financial Protection Bureau (CFPB) made it clear that debt collection is a major focus by issuing two new bulletins and five action letters for consumers to use when responding to debt collectors. Most significantly, the bulletins not only address the conduct of debt collectors and debt buyers, but they are also directed at creditors and servicers.

When a consumer files a complaint against a collector who is not the original creditor, the CFPB’s website portal allows the consumer to send a separate complaint to the original creditor. This means creditors might be required to respond to complaints about debt buyers, who do not act as service providers and for whom creditors should not be responsible. This reflects a misguided view by the CFPB that there is no difference between debt buyers and debt collectors, and creditors can be responsible for violations of law committed by both types of entities. This underscores the need for creditors to review and potentially revise their debt sales agreements and conduct heightened due diligence on debt buyers.

Bulletin2013-07

This bulletin focuses on the application of the Dodd-Frank Act prohibition of “unfair, deceptive or abusive” acts or practices (UDAAPs) on debt collection. While reminding debt collectors and debt buyers subject to the Fair Debt Collection Practices Act (FDCPA) that they must also refrain from committing UDAAPs, the bulletin is primarily intended as a warning to persons collecting debts who are not subject to the FDCPA. The FDCPA generally does not apply to first-party creditors collecting their own debts or to servicers when collecting debts that were current when servicing began.

The bulletin reviews the standards the CFPB uses to determine whether conduct constitutes a UDAAP and provides examples of conduct “related to the collection of consumer debt that could, depending on the facts and circumstances, constitute UDAAPs prohibited by the Dodd-Frank Act.” The examples include various acts or practices that would likely be covered by the general FDCPA prohibitions on harassment or abuse, false or misleading representations, and unfair practices, as well as various acts or practices specifically identified in the FDCPA as conduct that violates those prohibitions.

Since the CFPB describes these examples as a “non-exhaustive list,” it would likely consider other acts or practices specifically identified in the FDCPA to be UDAAPs. Creditors who collect their own debts and servicers should review their collection practices with counsel knowledgeable about the FDCPA as well as state debt collection laws (which may track or incorporate certain FDCPA prohibitions).

Bulletin 2013-08

This bulletin targets deceptive representations made by creditors, debt buyers, and debt collectors when collecting consumer debts. (While not specifically mentioned, the bulletin would also cover representations made by servicers.) The bulletin highlights potentially deceptive representations about how paying debts can affect credit reports, credit scores, and creditworthiness. The CFPB states that “based on its supervision, enforcement, and other activities, the CFPB is aware that these types of representations are being made and is concerned that some of  them may be deceptive under the FDCPA, the Dodd-Frank Act, or both.”

The CFPB notes that its examples of what might constitute such potentially deceptive representations “are illustrative and non-exhaustive.” The CFPB indicates that during examinations and enforcement investigations, it may review “communication materials, scripts, and training manuals and related documentation” to assess whether such representations are being made and their factual basis.

The CFPB’s issuance of the bulletins was accompanied by its publication of five action letter templates that consumers can use when corresponding with debt collectors. The letters address various situations such as when a consumer wants to dispute a debt, restrict or stop all communications by the collector, or has hired a lawyer. (It appears that the CFPB’s template for consumers to request more information about a debt that they are disputing may have been based on a template used by a plaintiffs’ class action law firm.)

Also accompanying the bulletins’ issuance was the CFPB’s announcement that its consumer complaint system is now taking debt collection complaints “related to any consumer debt, including credit card debt, mortgages, auto loans, medical bills and student loans.” By inviting consumers to submit complaints about medical bills, the CFPB is likely to receive complaints about such bills regardless of whether they involve any extension of credit. (In the preamble to its debt collection “larger participant” rule, the CFPB acknowledged that the collection of medical debt is not a “consumer financial product or service” under the Dodd-Frank Act unless it involves an extension of credit.)

 

 

Congress Turns up the Heat on Debt Collectors

Medical and student loans now surpass other consumer debts.  Collectors are violating the Fair Debt Collection Practices Act (FDCPA) by threatening physical harm, threatening to dig up their dead children, calling repeatedly and attempting to collect on debts the collectors know are not collectable.  The Consumer Financial Protection Bureau(CFPB) and the Federal Trade Commission (FTC) are cracking down on companies who engage in overly aggressive debt collection practices and are reaching out to consumers to educate them about the law.  This crackdown lead to the largest civil penalty ever obtained by the FTC.  Expert Global Solutions, the nation’s largest debt collector paid $3.2 MILLION for violating the FDCPA.  However, federal officials are calling for new stricter laws on how debts are bought and sold between companies. Debt collectors often buy old debts in bulk.  They do not have the ability to obtain the data needed to accurately verify information about the debtor or underlying loan. Congress wants increased regulation that would:

require debt collectors to have possession of the documentation before issuing the first debt collection notice.

require information about previous debt collection attempts.

Prohibit the collection of unverifiable debts.