Buffalo News Story on Lenahans Validates Web Site

Buffalo News, by Fred O. Williams -10/15/2005

The legal profession's ethics cops watched for two years while a local law firm rented its name to debt collectors, some of whom threatened to jail people or seize their homes, court records say.

Using the name "Lenahan Law Office," the collection outfit had 100 to 200 workers in offices around Buffalo. It reaped tens of millions of dollars from people around the country on the basis of poorly documented debts, court investigators found.

The collections continued while an arm of the court that is supposed to protect the public from rogue lawyers investigated a flood of complaints about the firm.

Read the story here

For years Bud Hibbs has warned consumers about the Buffalo, NY crime wave masquerading as The Lenahan Law office and FINALLY the authorities have taken actions. What we want to know is why it took so long and what are you doing about those who replaced the Lenahans.

 When are you going to take actions against these RENT-A-LAWYERS?

Attorney Terrance D. McKelvey?   Attorney Rodney A. Giove?  

Attorney Douglas R. Burgess?     Attorney Sherree Meadows?      Attorney Timothy R. Collins?   Attorney Christopher Raneri?

What about their ringleader Douglas J. MacKinnon, Sr and Mark S. Bohn?

What about their accomplices: Jack Sortino, Greg MacKinnon, Harvey Denis, Account Management Services, First American Investment Company and all the scammers involved with them?

They have ripped off millions from consumers under the names above just like they did with the Lenahans; it’s time to start holding those who are responsible accountable for their crimes. 

Consumers who stopped paying the Lenahans should also STOP all payments o these criminals, they are doing the same thing!

Vegas Business Makes Fat Money from Fine Print   David Lazarus   Friday, July 7, 2006

South San Francisco resident Michael Wisper was shocked when he opened his mail the other day. He'd received a pre-approved, no-interest credit card from something called CCA in Las Vegas.

"I don't know who these people are and never requested this card," Wisper told me, and he asked if I knew anything about the issuer.

I didn't. But after some digging, I now know that CCA has ties to a former Nevada state senator who currently serves on the board of regents of the Nevada System of Higher Education, which oversees the University of Nevada.

I also know that CCA has had run-ins with the Federal Trade Commission and has a steady track record of consumer complaints.

"We've got stacks and stacks of complaints about this company," said Sylvia Campbell, president of the Better Business Bureau of Southern Nevada. "They're one of the top contenders on our list of companies that we wish would go someplace else."

Campbell said no fewer than 720 complaints about CCA, otherwise known as Capital Credit Alliance, have been received since 2003. Twenty complaints were submitted by consumers nationwide last month alone.

In May, the New York Consumer Protection Board issued a warning about CCA, which it said also goes by the name CCS, as in Consumer Credit Services.

"These cards appear to be no-interest credit cards, offering consumers a credit limit between $6,500 and $8,000," said Teresa Santiago, the board's executive director. "But you learn the truth in the fine print."

And that print is indeed fine.

Wisper's CCA mailing, which he shared with me, includes six pages of dense, virtually unreadable legalese that few consumers would want or be able to wade through.

But if you do, you discover that CCA's First National card isn't in fact a normal credit card in the sense that you can use it to make purchases anywhere you please.

Rather, the card can be used only to buy things from CCA's own catalog of merchandise, which the Better Business Bureau's Campbell said is similar to a Sears or JC Penney catalog but with more-expensive goods.

The card comes with a $199.99 activation fee, which will be deducted from your checking account if you don't cancel the card within two weeks of calling to activate it via an automated process.

There's also an annual fee of $198 the first year and $99 for all subsequent years, and what the contract says are "2 great annual benefits" costing $99.99 each.

One great annual benefit allows cardholders to defer payments for up to six months if they lose their jobs or are permanently disabled. The other allows payments to be waived for items that are stolen within 30 days of purchase.

These benefits are so great that CCA says it will automatically bill you for them unless you notify the company in writing that you don't want them.

"People get into this and don't realize the costs involved," Campbell said.

And it gets worse. The contract stipulates that any dispute must be resolved by binding arbitration or in small claims court. Cardholders waive the right to a jury trial and can't be part of any class action lawsuits.

The contract specifies that CCA's First National card "is not a credit card but is instead a membership card allowing you to shop directly with us without financing your purchases."

Cardholders are required to make a 30 percent down payment for all purchases and to pay shipping and handling charges. Outstanding balances that aren't paid will be reported to credit bureaus and collection agencies.

On top of everything else, CCA's privacy policy says the company "may disclose all of the information that we collect" -- including your name, address and Social Security Number -- to "nonfinancial companies such as retailers, direct marketers and publishers."

So who are these guys?

I reached Stuart Honig, CCA's chief financial officer, at the company's Las Vegas office and identified myself as a writer for this newspaper.

"We don't do interviews," he said.

I asked why this was, and Honig said the press can't be trusted to get the facts straight. And then he hung up.

According to Nevada public records, CCA is run by W. Shane Kelly, who is listed as the company's president, secretary, treasurer and director.

In 2000, William Shane Kelly agreed to pay $150,000 to settle charges from the FTC that he'd engaged in deceptive business practices.

The FTC said Kelly was part of a Las Vegas operation that led consumers to believe they were receiving a line of credit but in reality were being required to buy goods from a catalog. Between 1996 and 1999, more than $12 million in fees reportedly were collected from 80,000 consumers.

"These credit cons are especially contemptible," an FTC official said at the time. "The FTC will not tolerate such blatant illegal activity by any lender."

One of the companies involved in the operation was identified by the FTC as Continental Direct Services, or CDS. According to Nevada records, the president of CDS at this time was Jack Lund Schofield, who served as a Nevada state assemblyman from 1970 to 1974 and as a state senator from 1974 to 1978.

Schofield ran unsuccessfully for governor in 1978 and subsequently became an educator, including a stint as science teacher at Southern Nevada Vocational Technical Center, also known as Vo-Tech High School. He has served on the Nevada System of Higher Education's Board of Regents since 2002.

Reached by phone, Schofield, 83, told me that Kelly had been his student at Vo-Tech. "He was one of the finest young men I ever met," Schofield recalled.

In 1999, he said, Kelly was having business troubles. "He asked me if I would come in and help them correct a situation," Schofield said. "They were having issues with the FTC."

He said he agreed to become president of Kelly's company, CDS, but stressed that Kelly "was the actual owner."

Schofield said the FTC misrepresented CDS' activities in its settlement with the company. He said many customers' complaints about CDS were exaggerated.

"I saw that the company had great potential," Schofield said. "They're very successful today, thanks to some of my suggestions about what they should do. I take credit for guiding them along so they can do the right thing."

CDS changed its name to CCA in 2001, according to public records. Schofield declined to discuss the reason for the switch.

He described Kelly's business troubles as "an evolution of circumstances that he had no control over. As he got deeper into the concept, I explained to him that he has to give customers what he says he'll give customers."

Schofield declined to elaborate, observing only that "right now they're not having any FTC problems."

He said he stepped down as CCA's president in 2002. Kelly subsequently took over as president, records show.

Kelly couldn't be reached for comment at CCA's office.

The Better Business Bureau says it has received complaints about CCA from pretty much every state in the nation -- except the company's home state of Nevada. That's the one place CCA doesn't hawk its First National cards.

"It's so that they don't come to grief with the Nevada attorney general," the bureau's Campbell said.

She said complaints about CCA are received directly from consumers who know the company's Las Vegas address and also are passed along by other bureau offices throughout the country.

Aaron Carruthers, a spokesman for California Attorney General Bill Lockyer, said no complaints have been received to date about CCA.

"It sounds like these guys skate on a thin line of legality," he said. "If anyone has a problem, they should contact us, and we'll take a look."

Used to be, banks didn't waste much time chasing credit card deadbeats.

Their staffs would hound debtors by phone for six or seven months, then invite outside collection agencies to take a crack. Few debtors were sued. Those who hunkered down long enough could escape without paying.

Not anymore. In the brave new world of debt, unpaid bills never die. Today speculators are buying thousands of these aging accounts at a time and extracting payments the original lenders could not.

Some debt buyers are hauling consumers into court and getting permission to garnishee their wages, empty their bank accounts or even seize their cars. Others are convincing debtors to pay down old bills that are no longer legally enforceable.

The amount of written-off credit card debt sold to debt buyers in 2004 - $63-billion worth, according to the Nilson Report - was 100 times the amount sold in 1993. This year, a Las Vegas convention hosted by the Debt Buyers' Association trade group drew 1,400 debt buyers, sellers, brokers, resellers and lawyers.

Other credit issuers are selling their unpaid bills, too, including such retailers as Radio Shack, Wal-Mart and Bally Total Fitness, and hospitals, auto lenders and utilities.

Asset Acceptance, one of five publicly traded debt buyers, operates a 52,000-square-foot collections center in Riverview. In 2000, the Michigan company sued 25 debtors across Pinellas, Hillsborough, Pasco, Hernando and Citrus counties. Last year, it sued 3,855.

Over the same period, the types of lawsuits debt buyers usually file - small-claims breach of contract, monies due or accounts suits - rose 56 percent across Pinellas, Hillsborough and Pasco counties.

A morning cattle call at the Tampa courthouse shows why.

Courtroom 306

Hillsborough County Judge Charlotte Anderson reviews small-claims lawsuits every Wednesday. This morning's docket allots 150 minutes for 165 pretrial hearings, more than half involving debt buyers.

In every case, the debt buyer has a lawyer. Not a single accused debtor does. Only two put up a fight.

Sandra A. Thompson, accused of stopping payment on a $2,003 credit card debt in 2001, tells the judge the debt was erased in bankruptcy court. The plaintiff agrees to dismiss Thompson's case on the spot.

Michael A. Johnson says he has "no recollection" of a 2001 credit card debt totaling $2,118. The answer earns him a trip to mediation.

Everyone else goes down without a punch. Each admits owing all or some of his alleged debt. Dozens more automatically lose because they didn't bother coming.

Debt buyers say landslides like this January morning's prove their account records are accurate. But critics like Bud Hibbs, a consumer advocate in Texas who calls debt buyers "scavengers," says more than 90 percent of all defendants would prevail if they could afford to hire a competent lawyer. Tampa lawyer Don Golden says many accused debtors would be better off filing for bankruptcy anyway, which can slay multiple debts at once for a fraction of the legal fees.

The consequences of losing in court are steep. A successful plaintiff in Florida is entitled to tap a debtor's wages and assets for up to 20 years, with interest.

Athena Funding Group, a Tampa debt buyer, successfully sued Allen Pankow in 2004 over a $924 credit card debt. When Pankow, then a 51-year-old Largo resident, ignored several court orders to disclose his income sources and assets, Athena asked that he be jailed for contempt, court records show.

He was. After his $500 bail was posted, Athena obtained the court's permission to snag it.

"Some people are only motivated by the stick," said Carol Freeland, who chairs the Asset Buyers Division at ACA International, a collections industry trade group.

Filing suit isn't for everybody.

Freeland, a partner at PRM Financial Services in Texas, says her company primarily buys accounts that are near or beyond the statute of limitations (three to 15 years, depending on the state). PRM offers to discount the amount owed and transfer the balance to a new credit card.

With regular payments, the debtor can improve his credit rating and eventually use the card for limited new purchases. Despite the 18.9 percent interest rate, Freeland says, many debtors are grateful.

What most debtors don't realize is that a person is not legally obligated to repay a debt whose statute of limitations has expired. But transferring the balance to a new credit card resets the clock to zero.

Debt buying: the science

Companies pay just pennies on the dollar for unpaid debts. Last year, for example, Asset Acceptance paid $102-million for $4.2-billion of consumer debt, about 2.5 cents per $1.

The discount is steep because the debts are difficult to collect. Half the accounts Asset bought in 2005 stymied at least three prior collectors. Even after spending several cents more per $1 on legal fees or other collection costs, most buyers would be happy to recover 20 or 25 cents per $1.

"The vast majority of what they buy never gets collected," says Charles Trafton, an industry analyst with America's Growth Capital in Boston. "It's old, they haven't had payments in a long time, (and) oftentimes you don't get great addresses, known places of employment."

"We're buying somebody else's discarded accounts," said Jeffrey Bovarnick, a principal at Asset Recovery Management in Needham, Mass. "We take huge risks, and we're entitled to make a return on our investment if we abide by the law."

That's why there's a science to buying bad debt.

Debt buyers kick a portfolio's tires before bidding on it. They obtain partial account data from the seller and dump the stats into a software program designed to assess value.

Key variables include the average account balance, length of delinquency, number of years remaining under the statute of limitations, number of previous collection attempts, whether Social Security numbers are available, and debtor characteristics such as ZIP code and credit score, according to ACA International's Buying Receivables.

Historical patterns show that middle-aged people and those living in more affluent ZIP codes are more likely to repay a debt.

A buyer who has had success collecting on auto loans may pay more for them at auction than someone skilled at medical collections. A buyer who expects to file many lawsuits may pay more for a portfolio that offers original account documentation.

After submitting the winning bid, a buyer typically scrubs his new portfolio of debtors who have died or otherwise are not worth chasing, such as those whose debts were erased in bankruptcy. The buyer informs the remaining debtors by mail that their accounts have been purchased and that they have certain legal rights, such as to end routine collection calls and letters. Most debt buyers piggyback a settlement offer onto the notice.

The next step is to assign each account a collection strategy. Every buyer handles this differently.

At Asset Recovery Management, the first priority is to quickly sue any debtor whose statute of limitations is nearly up. Others are given roughly six months to respond to the company's initial letter and make a deal, most likely a monthly repayment plan. Those who don't may be sued, too, though cost is an issue.

"That's not my preferred course of action," Bovarnick says.

It's what they do

What makes debt buyers better collectors?

A gentle touch, says Barbara Sinsley, legal compliance chief at Asset Acceptance, where debtors are called "customers" and 36 percent of all collections come via the courts.

"Our mantra is 'Just be nice,' " says Sinsley, who works at Asset's Riverview office. "I mean, frankly, if you're not working with a customer, they're less likely to pay."

Debt buyers can afford to be patient. Unlike creditors, most aren't subject to accounting rules that require them to quickly write off defaulted loans as a loss. Some are willing to wait as long as 10 years for a debtor to recover from the drug habit, gambling problem, illness, divorce, job loss or jail sentence that knocked him off his financial feet.

Because of their anonymity, debt buyers are freer to customize repayment plans.

"Citibank doesn't want to be known for settling with debtors for 10 cents on the dollar, because then everybody would try to settle with them for 10 cents on the dollar," says Gobind Sahney, chairman of Receivables Acquisition & Management Corp. in New York.

Debt buyers also are freer to turn the screws. A creditor, such as a retail chain, might soften its tactics for fear that an angry debtor will cease shopping at its stores and bad-mouth it. But the debt buyer's primary constraint is the law, including the federal Fair Debt Collection Practices Act and Fair Credit Reporting Act.

In short, the lender's core business is to lend. The debt buyer's is to collect.

Who's the bad guy?

Debt buyers don't appreciate being portrayed as heartless corporations sucking the marrow of innocents, whose only crime was getting sick, fired or divorced.

Freeland is still steaming over a recent episode of the television show Boston Legal in which a law firm employee complains she owes her credit card lender $50,000. After shattering the bank's window in frustration, the employee whines about the card's high fees and interest rate. Her boss, a lawyer, responds with a blowy tirade that scares the bank's attorney into erasing the debt. Never addressed is the fact that no one held a gun to the employee's head when she ran up her bill.

"Everyone's against the idea that we would have the gall to ask someone to pay their bills," says Michael Weinard, president of Tampa company Athena Funding.

Debt buyers are in business to make money, of course, but they say the debtor benefits as well - with flexible repayment terms, an improved credit rating, even relief from a guilty conscience. The debtor may be able to borrow money more cheaply in the future, too.

But forgive a debt? Out of the question.

"This business isn't for sissies," Freeland says. "We can't become so sympathetic that we just say, 'Oh, this is so awful, we can't collect this.' "

She harks back to the era of her grandfather, a banker, when "people jumped off roofs or shot themselves" rather than live with the shame of financial ruin.

"Now, people go to a cocktail party and they say, 'By the way, who's your bankruptcy attorney? I need one.' "

Consumer advocates aren't buying it. Mark Tischhauser, a Tampa lawyer who has sued several debt buyers for allegedly violating debtor-protection laws, says such companies naturally resort to abusive tactics because their old, overworked accounts are so hard to crack.

Tischhauser worries about the unlevel playing field in court, where few debtors can afford an attorney and most are unaware of their rights. How many debtors know there is a statutory time limit on most debts - as little as four years in Florida? How many know that the only way to stop a buyer from getting a judgment on a time-expired debt is to raise the issue themselves in court?

Of the 90 people called to face a debt buyer in Courtroom 306 that January morning, only two apparently understood the value of a good legal defense. And one of them, Michael Johnson, couldn't get a lawyer to return his calls.

Left to his own devices, Johnson sought legal advice on the Internet, where the "I don't recall" defense strategy is often recommended.

Debt-buyer attorneys decry such tactics, which they consider disingenuous. That Johnson purchased a $112,500 Tampa home in 2003, two years after he allegedly stopped paying off a credit card debt, would only stoke their ire.

Johnson says he suspects that a former acquaintance or his ex-wife may have run up the charges on his credit card. He makes no apologies for being skeptical about lawsuits.

"I had a paternity suit when I was 18 years old," Johnson says. "At that time I was very religious and still a virgin. I'd never even kissed a girl. They just subpoenaed every Michael Johnson they had."

Times staff writer Matthew Waite and staff researcher Angie Drobnic Holan contributed to this report. Scott Barancik can be reached at barancik@sptimes.com or (727) 893-8751.Lawsuits suit them


LAWSUITS SUIT THEM

Debt buyers say they are no more likely than lenders to sue a borrower. But in three Tampa Bay area counties* between 2000 and 2005, the types of small-claims lawsuits debt buyers and other collectors typically file - breach of contract, monies due and accounts suits - have gone up sharply.

Small-claims debt collection suits

County 2000 2005 Increase

Hillsborough 5,098 8,570 68 percent

Pasco 2,597 3,496 35 percent

Pinellas 4,676 7,244 55 percent

Total 12,371 19,310 56 percent

* Numbers not available in Hernando and Citrus counties

Source: County clerks of court, Times research


WHEN A DEBT BUYER CONTACTS YOU

If a debt buyer purchases your unpaid bills, it usually will notify you by mail. There are several ways to respond.

Dispute it

Do you really owe the money? Consumer advocates recommend you write back within 30 days and ask for proof.

There are four reasons why you might not owe the money: identity theft, identity confusion, clerical error or the passage of time. In Florida, a debt is not legally enforceable if it has been more than five years (sometimes four) since the debt became delinquent, your last payment was made or you promised in writing to repay it.

Be careful not to restart an expired debt. The statute-of-limitations clock resets if you make a payment, transfer a debt balance to a new credit card or declare in writing that you will repay the debt.

Settle it

Many debt buyers will offer a discount if you agree to settle right away. If you can pay off a debt within five years, request a long-term payment plan. If you can pay it all at once, your discount may be higher.

Ignore it

A collector might let you get away with ignoring your debt if it appears you have no money or property that can be legally seized. But ignoring a debt won't keep it off your credit report or guarantee you won't be sued.

FILE FOR BANKRUPTCY

If you have multiple overdue bills and can't repay them within five years, consider filing for bankruptcy court protection. Doing so can eliminate or reduce most of your credit card, medical or other unsecured debts. A bankruptcy lawyer costs about $1,000.

WHEN A DEBT BUYER SUES YOU

If you owe the money, contact the collector and try to settle (see above). As long as you stick with the payments, the lawsuit will be mothballed.

If the debt is inaccurate or not yours, consider hiring a lawyer. Note: In debt cases, most lawyers will want their legal fee up front.

Whatever you do, don't ignore a lawsuit. You automatically lose if you don't respond or show up at your hearing. That may entitle the debt buyer to garnish your pay, seize your bank accounts or even take your car.

Wounded Soldiers Fight Off Bill Collectors at Home

Congressman Calls It 'Financial Friendly Fire'; Military Blames Payroll Errors
Army demands $2K from soldier who lost his in Iraqi bomb attack.

Financial Friendly Fire    Brian Ross - ABC News

April 26, 2006 — Hundreds of soldiers wounded in battle in Iraq have found themselves fighting off bill collectors on the home front, according to a report to be released tomorrow. The draft report by the Government Accountability Office, which ABC News obtained, said that hundreds of wounded soldiers had military debts incurred through no fault of their own turned over to collection agencies.

"Financial friendly fire," said Rep. Tom Davis, R-Va., chairman of the House Committee on Government Reform. "Because their financial records are so bad, this is a friendly fire where we are hurting and wounding our own."

Army specialist Tyson Johnson of Mobile, Ala., had just been promoted in a field ceremony in Iraq when a mortar round exploded outside his tent, almost killing him.

"It took my kidney, my left kidney, shrapnel came in through my head, back of my head," he recounted.

His injuries forced him out of the military, and the Army demanded he repay an enlistment bonus of $2,700 because he'd only served two-thirds of his three-year tour.

When he couldn't pay, Johnson's account was turned over to bill collectors. He ended up living out of his car when the Army reported him to credit agencies as having bad debts, making it impossible for him to rent an apartment.

"Oh, man, I felt betrayed," Johnson said. "I felt like, oh, my heart dropped."

Payroll Errors, Says Military

And there are many more like Johnson. Staff Sgt. Ryan Kelly lost his leg in a roadside bomb attack in Iraq.

He didn't realize it, but the Army continued to mistakenly pay him combat bonus pay, about $2,000, while he was in the hospital rehabilitating, and then demanded that he pay it back.

He, too, was threatened by the Army with debt collectors and a negative credit report.

"By law, he's not entitled to the money, so he must pay it back," said Col. Richard Shrank, the commander of the United States Army Finance Command.

The Army said it moved wounded soldiers out of the battlefield so quickly its accounting office could not keep up, resulting in numerous payroll errors.

"This is no way to win a war, I can tell you that," said Davis. "You'd think after four years after fighting a war in Iraq, the government would have its act together."

But the Army said it is now trying to correct the problem. Since ABC News first reported on the plight of soldiers, featuring Johnson and Kelly in a "Primetime" investigation in October 2004, the Army has forgiven most of their debts.

But Davis said there may be thousands more whose thanks for putting their lives on the line has been a knock on the door from a Pentagon debt collector.

ABC News' Maddy Sauer contributed to this report.

Banks See Consumers Paying Off More Credit-card Debt
By David Enrich    Apr 19, 2006

NEW YORK (MarketWatch) -- In a development that could erode credit-card industry profits, U.S. consumers are paying down more of their monthly bills, according to two of the country's biggest issuers.  JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) reported this week that their total outstanding card loans declined during the first quarter. At JPMorgan, card loans fell $8 billion, or 6%, to $134.3 billion at the end of March. The decline at Citigroup was $5.7 billion, or 4%, leaving its outstanding balance at almost $136 billion.

Executives at both banks attributed the declining balances to rising payment rates by consumers, a problem because issuers earn more money when balances are higher. The trend has been developing for several months, with a number of banks last quarter reporting a similar phenomenon. But the magnitude of the first-quarter dropoff surprised bankers, analysts and other experts, who have grown accustomed to consumers racking up credit-card and other debt.

John McDonald, a Banc of America Securities analyst, described the lower first-quarter loan balance at JPMorgan as "an alarming drop." JPMorgan Chief Executive James Dimon warned that the trend could could make it harder for the company's card unit to reach its profit targets. And Citigroup Chief Financial Officer Sallie Krawcheck said that the rising payment rate "makes it a little bit tougher in terms of the revenue perspective."

Americans have become notorious for their free-spending ways. The U.S. saving rate last year slipped into negative territory for the first time since 1933, indicating that consumers were spending more than they earned. That has helped the credit-card industry rake in huge profits. Card companies rely largely on the hefty fees and interest rates they charge consumers who run up big balances. Rising payment rates therefore could crimp profits.

The causes of the banks' declining credit-card balances aren't entirely clear. One likely factor is that credit-card balances tend to balloon around the holiday shopping season in the fourth quarter and then taper off. Another contributor is the higher minimum monthly payments that card companies began phasing in last year to comply with new regulatory guidelines.

But bank executives say those factors don't fully explain the recent trend, and they're stumped about the root causes.

"It's more than that in this period," said Michael Cavanagh, JPMorgan's chief financial officer, referring to a post-Christmas slowdown and the new minimum-payment rules. "There are broader factors that seem to be affecting us and our competitors here."
Cavanagh predicted that the higher payment rates, which he described as an industrywide phenomenon, would persist at least through the second quarter.
Curtis Arnold, a consumer advocate and founder of CardRatings.com, said the higher payments reported by Citigroup and JPMorgan are a good sign. He said consumers apparently are learning about the dangers of excessive debt.

"I do think some consumers have heeded the warnings," Arnold said. "I think that message is starting to get out there."

The actual impact on card companies' profits remains to be seen. Already, many big banks have cautioned that their results will be pinched by rising payment rates caused by new minimum-payment requirements - but those effects aren't expected to kick in until the second half of the year. Those losses could swamp the gains banks are currently enjoying as a result of a steep decline in bankruptcy filings following a new law making it harder for people wipe away their debts.
On the other hand, the card companies may be able to make up for that lost income by hiking other fees. Arnold said some issuers already have boosted the fees they assess when customers transfer card balances between different accounts.
One key question mark is whether other major card companies also are seeing consumers paying off more of their bills. Bank of America Corp. (BAC), the nation's biggest card issuer thanks to its recent acquisition of MBNA Corp., reports its first-quarter earnings Thursday morning. Capital One (COF), another major issuer, also reports earnings Thursday.

Debt Collectors Seek To Auto-Dial Cellphones

By Caroline E. Mayer     Washington Post Staff Writer
Wednesday, April 19, 2006

Debt collectors are asking the Federal Communications Commission for
permission to use automated dialers to call a debtor's cellphone about
overdue bills.

ACA International, the trade association that represents collectors, said
federal rules formerly permitted collection agencies to call cellphones
using a computerized system that stores and dials numbers. But a change in
FCC rules in 2003 barred collectors from using such technology to call
cellphones. They may use dialers to call land lines, but they must dial
cellphones manually.

Earlier this month, the FCC said it would review the request and sought
public comments which are due next month. Its review comes as complaints
about debt collectors continue to mount.

The Federal Trade Commission last week issued its annual report on the
collection industry, showing consumer complaints rising to a high of 66,627
in 2005, up 13.5 percent from 58,698 in 2004. More complaints were filed
about debt collection than any other industry. They accounted for 19.1
percent of all complaints filed with the FTC in 2005, up from 17 percent of
all complaints in 2004.

The FTC said that, given the millions of collection calls made to consumers
each year, the number of complaints it received is a "small percentage of
the overall number of consumer contacts." However, it said it thought the
number of consumers who complain is only a "relatively small percentage of
the total number of consumers who actually encounter problems with debt
collectors."

The debt-collection association argues that the FCC ban on cellphone calls
was inadvertent, part of the commission's attempt to curtail abusive
telemarketing calls by auto-dialers that randomly or sequentially called
cellphones.

The ACA says collectors don't dial randomly, but rather selectively call
consumers who owe money. "We're not buying lists of consumers just to call
them for the fun of it; we're not looking for cellphone numbers we don't
have," said Rozanne M. Andersen, the ACA's general counsel. Andersen added
that creditors and collectors have the cellphone numbers because consumers
provided them when they applied for credit.

Not being able to call cellphones with auto-dialers will be "extremely
detrimental to the industry and consumers," she said. According to the FCC,
6 percent of U.S. households now rely exclusively on wireless service, up
from 1.2 percent in 2001. "We have generations of people moving exclusively
to cellphones, and there is no practical way for creditors and debt
collectors to communicate with them," she said. The ACA says creditors could
lose billions of dollars annually if the rule is not changed.

The National Consumer Law Center, a public-interest consumer advocacy group,
has already filed an objection to the ACA's petition, saying consumers will
be "hard pressed to see the benefit" because the automatically placed calls
will use up high-cost daytime minutes. The NCLC added that a consumer giving
a cellphone number when applying for credit shouldn't be considered as
giving permission to a debt collector to call that number later.
 

Major Credit Agencies Adopt Uniform Scoring System
Tuesday, March 14, 2006

NEW YORK — The three major consumer credit reporting agencies announced Tuesday that they have created a new credit scoring system aimed at simplifying the loan process for both lenders and borrowers.

The announcement by Equifax, Experian and TransUnion said the new "VantageScore" was "a direct result of market demand for a more consistent and objective approach to credit scoring."

The agencies in the past each used their own proprietary formulas to create their own scores, meaning that a lender dealing with a consumer's application for a credit card or a mortgage might have to reconcile three widely different scores.

With the new system, a single methodology will be used to create the scores.

"Under the new scoring system, credit score variance between credit reporting companies will be attributed to data differences within each of the three consumer credit files and not to the structure of the scoring model or data interpretation," the agencies said in a joint statement.

It added that VantageScore "will provide consumers and businesses with a highly predictive, consistent score that is easy to understand and apply."

Credit scores are important because they measure how much debt a consumer is carrying and how well the consumer keeps up with bills.

The higher the score, the more creditworthy the consumer is considered and the lower the interest rate the consumer is likely to be charged.

The three credit agencies termed the move to a unified score as "unprecedented."

The scores will range from 501 to 990. The top end is slightly higher than scores currently in use.

In a separate statement, Experian said the new scores will be grouped on "the familiar academic scale." Experian gave these groupings:

A — 901-990
B — 801-900
C — 701-800
D — 601-700
F — 501-600

Experian said it was hoped that "as consumers increase their awareness of the importance of credit scores and credit reporting, the consistency of VantageScore will provide the type of information they need to evaluate their credit standing and make sound financial decisions."

Kerry Williams, group president of Experian's Credit Services, said in the statement that the new approach "is a further progression of our efforts to satisfy client and consumer needs."

VantageScore is being independently marketed and sold separately through each of the three national credit reporting companies via licensing agreements with VantageScore Solutions LLC, the joint announcement said.

It said the new scores would be available immediately.

The credit reporting agencies are operated by Equifax Inc. of Atlanta, Experian Information Solutions Inc. of Costa Mesa, Calif., and TransUnion LLC of Chicago.
 

January 30, 2006

NCO Group, Inc., a leading provider of business process outsourcing services, announced today that it entered into an Assurance of Voluntary Compliance with the Commonwealth of Pennsylvania. Under the terms of the Agreement, NCO specifically denies that it has engaged in unlawful or inappropriate business practices, and has agreed to pay the Commonwealth $300,000 to be used towards the costs of the investigation and/or future public protection purposes. The Agreement also requires NCO to comply with consumer protection laws and to maintain certain policies and procedures designed to facilitate and monitor its ongoing compliance.

Commenting on the Agreement Michael J. Barrist, NCO Chairman and CEO stated; "It has always been our policy to work with regulators to assure that we are promptly and effectively responding to consumer issues. As the largest provider of Accounts Receivable Collection services in the world, NCO contacts consumers approximately 400 million times per year. Although we provide our services on a national basis, a disproportionate number of consumers look to the Commonwealth for assistance because we are headquartered in Pennsylvania. I am very pleased we were able to reach this Agreement with the Commonwealth since it resolves all issues to date and, more importantly, provides for a positive working relationship in the future."

PUBLIC REPRIMAND

Attorney General Charles M. Condon and Senior Assistant Attorney General James G. Bogle, Jr., both of Columbia, for the Office of Disciplinary Counsel.
S. Jahue Moore, of Wilson, Moore, Taylor & Thomas, P.A., of West Columbia, for respondent.

PER CURIAM: In this attorney disciplinary matter, the Commission on Lawyer Conduct filed formal charges against respondent. Respondent filed a response and later agreed to a stipulation of facts. After a hearing, the Panel recommended respondent be given a public reprimand.

FACTUAL BACKGROUND

The charges against respondent stem from his involvement with a collection agency, the Collect America Network. U.S. Collections, a franchise of Collect America, and the Zenner Law Firm entered into a contract on February 16, 2000.

Refinance America, a wholly owned subsidiary of Collect America, purchased uncollected debt from, for example, credit card companies and forwarded it to Collect America, who then forwarded it to respondent's firm. Collect America would send batches of these accounts in contract form. According to the accounts contract, a placement of the amount with respondent's firm was made for a limited period of 120 days for a contingency fee of twenty-five percent (25%) of any recovered funds.

Collect America operated with two types of franchise agreements, including one in which a private corporation, for example U.S. Collections, bought the franchise and the license to use a particular software (STARS) to collect the debt. As a franchise, U.S. Collections was required to retain an attorney, such as respondent, to collect the debt.

U.S. Collections employed collectors and paid them through respondent's payroll account.(1) Further, U.S. Collections owned the computers and telephones, and provided respondent with an office for his private practice, adjacent to the property leased by U.S. Collections. All collectors made telephone calls to debtors, identifying themselves as "Zenner Law Firm," in the adjacent building.(2)

Each collector was required to generate collections of $30,000 each month. They were paid a base salary and received a bonus of a percentage of any excess collected over $30,000.

Respondent's first contract with U.S. Collections allowed him ten percent of the total amounts collected and paid his costs, except for payroll. Under his last contract, which was imposed on respondent and not reduced to writing, he received a flat $3,000 per month. U.S. Collections then paid the collectors through respondent's account.

PUBLIC REPRIMAND.

s/Jean H. Toal C.J.

s/James E. Moore J.

s/John H. Waller, Jr. J.

s/E.C. Burnett, III J.

s/Costa M. Pleicones J.

1. Respondent testified the collectors were employees of his law firm and that they each received a W-2 from his law firm.

2. One collector testified that when respondent visited the area where collection calls were made, his supervisors told the collectors to "behave," and to watch their "P's and Q's because he was an attorney."

3. Two statutes govern debt collectors' conduct when contacting debtors. S.C. Code Ann. § 37-5-108 (Supp. 2000) prohibits a debt collector from:

(1) threatening to use criminal prosecution against the consumer;

(2) communicating with the consumer at frequent intervals during a twenty-four hour period or at unusual hours so that it is a reasonable inference the primary purpose of the communication was to harass the consumer;

(3) communicating with a consumer at any unusual time or place known or which should be known to be inconvenient to the consumer, with convenient time being between 8 a.m. and 9 p.m.;

(4) contacting a consumer at his place of employment after the consumer or his employer has requested in writing that no contacts be made;

(5) using obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.

The Federal Consumer Protection Act, 15 U.S.C. §§ 1671, et. seq., also prohibits the debt collector from engaging in the conduct listed above.

4. Melton admitted at the hearing that he would sometimes threaten criminal

Minimum Credit Card Payments Going Up

A change in banking regulations will mean higher minimum credit card payments for millions of consumers beginning in January. At the urging of federal banking regulators, credit card companies are boosting the minimum payment on balances from two percent to four percent.

The idea is to help consumers. By increasing the minimum payment, the feds reason, consumers will pay down their balances faster, with a greater percentage of their payment going to principal instead of interest. But many cash-strapped consumers may find themselves overwhelmed.

"I have certain funds allocated for certain expenses and if that nearly doubled I would definitely have to realign my budget," Chicago consumer
Cetrina Williams told WBBM-TV.

But Justin McHenry, Research Director for IndexCreditCards.com, says the new rules will probably be less burdensome to consumers than they fear. He’s seen the media reports of "double credit card payments" and thinks it’s overblown.

"While the government is requiring credit card companies to increase monthly minimum payments, the goal is to help credit card customers pay off balances without undue hardship," McHenry said.

Specifically, where most credit card issuers previously required customers to pay off 2% of their outstanding balances each month, most will now require customers to pay all monthly interest and fees, plus 1% of the outstanding balance.

What does that mean for monthly payments? McHenry said significant monthly increases will occur in only the most extreme cases, those in which very large credit card debt is combined with very high interest rates. Even then, he says the result is not as scary as you may think.

For example, he says, imagine a person with a $10,000 credit card debt and a 19 percent annual interest rate, both higher than the average consumer is carrying.

Using the two percent minimum balance calculation, this person would have a required monthly payment of approximately $203.16. Under new requirements, the monthly payment would be $258.33 ($158.33 in interest, plus $100 of the outstanding balance). This is a difference of roughly $55 – on a balance and interest rate that exceeds what the average consumer is carrying. Most credit card customers will have much smaller minimum payment increases, if any, he said.

"Unless a credit card company has specifically announced raising their minimum payment from two to four percent, it’s almost impossible to think of a realistic scenario in which payments will double," says McHenry.

The upcoming change in minimum payments is a result of guidance from the government’s Office of the Comptroller of the Currency, which told banks they must require minimum payments that allow customers to pay off their debts in a reasonable amount of time.

Under the current industry-standard two percent minimum payment, customers with high balances can conceivably "meet the minimum" without even paying off a full month’s interest, much less taking a chunk out of the principal balance.

"While 'this is for your own good' generally should be met with skepticism," says McHenry, "in this case it's true."
 

Bankruptcy law backfires on credit card issuers
 

It wasn't supposed to be this way. The new law contains a “means test” that was supposed to steer higher-income filers toward repayment plans. Lenders expected a rush of consumers trying to beat the bankruptcy deadline, but nothing like the surge that actually occurred. More than 500,000 bankruptcy cases were filed in the two weeks before the law took effect, compared with a normal weekly volume of 30,000 to 35,000. So far this year more than 2 million cases have been filed, 49% more than the same period last year and eclipsing all previous records.

"I think the actual magnitude really surprised some people," said Cynthia Ullrich, a director in the Fitch Ratings credit card group. "The feedback we received (from credit card issuers) is that it was larger than anticipated."

The hurting begins
Once a consumer files bankruptcy, lenders have 60 days by federal law to "charge off" the filer's accounts -- essentially recognizing that the debt is uncollectible and taking the loss. Fitch predicted the charge-off rate for major issuers could rise more than 30% to 7.5% in the next few months, compared with 5.7% of accounts currently.

Some issuers have already admitted their pain:
 

• J.P. Morgan Chase & Co., the nation's largest credit card issuer, said its charge-off volume would rise 44% in the fourth quarter to $2.3 billion from $1.6 billion for the same period a year ago.
   
• Capital One warned its charge-off rate could rise up to 1 percentage point from the year's previous range of 4.05% to 4.14%.
   
• Discover said it expected the bankruptcy surge to add $250 million to its costs.

The bottom line?
Even if filings don't return to previous levels, the reform law may not contribute much to lenders' bottom lines. Fitch and Barclay Capital have predicted charge-off rates will "normalize" to usual levels, but won't drop.

"If a consumer can't pay their bills, they might not file for bankruptcy" but their accounts will still be charged off, Fitch's Ullrich said.

Lenders may recoup some money from filers who are forced into Chapter 13 repayment plans rather than being allowed to erase their debt in Chapter 7 bankruptcy. But the dollar amount recovered may not be significant, given the small number of bankrupts that will be diverted to Chapter 13 -- less than 3%, by Gerdano's estimate -- and the high number of Chapter 13 plans that fail. Under the old law, about two-thirds of Chapter 13 cases never completed their repayment plans; that percentage isn't expected to change much under the new law, Gerdano said.

"The official word is that (lenders are) still confident the law will have its desired impact" of reducing bankruptcy filings and increasing repayments, Gerdano said. "But it may take a year before you know who really won and who really lost."