HSBC admits huge data loss in Hong Kong

The Debt Collector vs. The Widow

Have You Already Lost?  - Elizabeth Warren

PayDay Loan Industry Throttled Back by Ohio Gov.

IRS Ends Credit Counselors' Tax Exemption

Attorneys say new bankruptcy law ineffective

NCO Group Announces Settlement with Commonwealth of Pennsylvania

Public Reprimand for Collect America
Minimum Credit Card Payments Going Up

Bankruptcy law backfires on credit card issuers

Collection agency hit with record fine

KRG Capital purchases Collect America

How Citibank scams you on credit card offers.

Is there Money in Debt Collecting?

Zombie debt collectors dig up your old mistakes

Did credit-card companies collude to force arbitration?

Overdue Credit Card Bills Hit Record High

Bankruptcy law will hurt victims

Hurricane Victims Pile Up Credit Card Debt

Debt Lawyer Could Face 25 Years

Suit Alleges Credit Card Companies Colluded

Marketer of Free Credit Reports Settle FTC Charges

Payday Loan Scams

MBNA Turns Up the Heat

FTC Moves to Freeze Assets - AmeriDebt

West Virginia Sues New Jersey Bill Collector

Profile of a Debt Collector

Consumers Blindsided by Arbitration Clauses in Credit Card Contracts

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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. There were no client files in the traditional sense, with all materials relating to the debtors stored on computers owned by Collect America. For example, in the Violet Pfaff Matter, her "file" in the computer was owned by Collect America. This electronic file was respondent's firm's file to the extent that he was representing Collect America and was the attorney collecting debt from Violet Pfaff. Respondent had limited access to the file, and this access ceased when he terminated his relationship with Collect America. Collectors reported to Jim Wooley and Craig Howard, who were partners/owners of the U.S. Collections franchise. Craig Howard's salary was paid by U.S. Collections through respondent's payroll account. Respondent did not have the authority to hire and fire collectors without first going through a supervisor employed directly by U.S. Collections. As a result of these disciplinary complaints, respondent attempted to fire a collector, Joyl LaRoy, for violating the Fair Debt Collections Act,(3) but was told by U.S. Collections that he could not. Respondent represented that he had fired the collector, Billy Melton, for similar conduct, but there was no written document in Melton's personnel file reflecting that he had been fired or discharged. The collectors, LaRoy and Melton, committed misconduct when contacting debtors. The following matters are based on that conduct. Izola Wilson Matter During a telephone call Wilson received from Melton on June 28, 1999, Melton engaged in the following: (1) offered legal advice; (2) threatened criminal prosecution;(4) (3) referred to the creditor as "my client;" (4) gave a legal opinion that jurisdiction was vested in Richland County; (5) used abusive language by describing Wilson's situation as the same as if she used a gun and robbed the creditor and "ripped them off;" and (6) referred to Wilson's owing of an unpaid debt as equivalent to welfare. Violet C. Pfaff Matter Pfaff, a Michigan resident, was told by one of respondent's employees that, "We don't deal with lawyers or law firms. Tell your lawyer that!" During two separate telephone calls, Pfaff was called a "bloodsucker," a "liar," a "swindler," and a "leech." Greg Leaf Matter Respondent, in January 1999, mailed a letter to Ilene Chase, a New Mexico attorney, regarding an attempt to collect a debt on behalf of Wells Fargo in the amount of $5,471.98. The letter was sent to Chase's business address. Thereafter, Chase and/or her husband, Greg Leaf, received a number of telephone calls from respondent's employee. During these conversations, the employee was belligerent, profane, and accused Leaf of making promises to pay and not keeping those promises. Telephone calls ceased after Leaf wrote a letter to respondent requesting the telephone contact cease pursuant to the Federal Consumer Protection Act. Peggie Kay Ungerer Matter Ungerer, a Pennsylvania resident, received telephone calls from Melton regarding the collection of a debt. Calls were made to her employer's office twice on July 14, 1999, once on July 15, twice on July 16, twice on July 22, twice on July 23, twice on July 29, twice on July 30, and once on November 18. Calls were also made to her home on July 24 and July 31. During an August 4th telephone call, Melton referred to Ungerer as a "liar." When she returned a call to respondent's firm she spoke with Melton, who again called her "a liar" and hung up on her. During the July 14th call, Melton threatened criminal prosecution and offered a legal opinion that Ungerer's wages would be garnished, without determining whether garnishment was lawful under Pennsylvania or South Carolina law. During this conversation, Melton also used profane language and called Ungerer back five minutes later. During a July 16th call, an employee of respondent called Ungerer at her employment and her employer directed him not to call the office again. Respondent's employee began cursing at Ungerer's employer. Ungerer was also called at home on July 14th. In this call, respondent's employee called her while she was still asleep and directed the person answering the phone to "wake her . . . up and put her on the phone." (Expletive deleted). Shirley Benson Matter Benson, a Texas resident, received a telephone call from one of respondent's employees regarding the collection of a debt. This employee screamed and yelled at Benson, used profanity, called her "very low names," and referred to her as a "worthless deadbeat." Four days later, the employee called Benson at her office while she was on another line. Benson's employer answered the phone and asked respondent's employee if he would like to leave a message. The employee yelled at Benson's employer not to hang up on him. When she did, the employee called back immediately and asked to speak to the manager. When told he was speaking with the manager, the employee began yelling. Benson's employer hung up the telephone. A few minutes later, when Benson's employer picked up the phone to make an outgoing call, respondent's employee was still on the line laughing at her. Linda McClain Matter McClain, a Nevada resident, received a letter from respondent which advised that his firm had been authorized to offer her a settlement of $1,410.00, a discount from her original debt of $2,851.21. The letter offered to accept six equal payments per month, and concluded that upon receipt, respondent would take the steps necessary to update her credit report. McClain made the payments and they were accepted by respondent's firm. Thereafter, McClain attempted to receive a response from respondent's law firm to no avail. She wrote a letter of complaint to the North Carolina State Bar which was subsequently forwarded to the Commission on Lawyer Conduct. At his Notice to Appear, respondent testified McClain's case had been marked closed as a result of her making the payments. Special Investigator Matters A special investigator interviewed a few debtors who had been contacted by Joel LaRoy. Eight debtors reported early morning calls, profanity, and/or threats of criminal prosecution. Panel's Findings The Panel found the following violations of Rule 7(a) of the Rules for Lawyer Disciplinary Enforcement, Rule 413, SCACR: (1) violating the Rules of Professional Conduct, Rule 7(a)(1); and (2) engaging in conduct tending to pollute the administration of justice or to bring the courts or the legal profession into disrepute, Rule 7(a)(5). The Panel further found respondent, through the actions of the collectors, violated certain rules from the Rules of Professional Conduct, Rule 407, SCACR. The Panel found violations of Rule 4.4, respect for rights of third persons (using means that have no purpose other than to embarrass, delay, or burden a third person); Rule 4.5, threatening criminal prosecution; Rule 5.3, responsibilities regarding non-lawyer assistants (lawyer shall make reasonable efforts to ensure that his firm has in effect measures giving reasonable assurance that non-lawyer employee's conduct is compatible with lawyer's professional obligations, and shall make reasonable efforts to ensure that person's conduct is compatible with those obligations, and shall be responsible for that person's conduct if lawyer has direct supervisory authority over the person, and knows of conduct at time when its consequences can be avoided, but fails to take reasonable remedial action). The Panel also found respondent had violated Rule 5.4 (professional independence of a lawyer), Rule 5.5(b) (unauthorized practice of law), and Rule 8.4 (violation of a rule of professional conduct), of the Rules of Professional Conduct, Rule 407, SCACR. The Panel found the following mitigating factors: (1) respondent's inexperience; (2) respondent's full cooperation; and (3) respondent's lack of a disciplinary history. The Panel recommended respondent be given a public reprimand, and that he be directed to pay the costs of the proceedings against him. DISCUSSION The authority to discipline attorneys and the manner in which discipline is given rests entirely with the Supreme Court. In re Long, 346 S.C. 110, 551 S.E.2d 586 (2001). The Court may make its own findings of fact and conclusions of law, and is not bound by the Panel's recommendation. In re Larkin, 336 S.C. 366, 520 S.E.2d 804 (1999). The Court must administer the sanction it deems appropriate after a thorough review of the record. Id. The Panel's recommendation that respondent be publicly reprimanded is appropriate. In the past, we have imposed this sanction for similar conduct. See, e.g., In re Edens, 344 S.C. 394, 544 S.E.2d 627 (2001) (attorney publicly reprimanded for failing to properly supervise real estate transactions involving refinancing of client's property without client's knowledge or consent); In re Cromartie, 340 S.C. 54, 530 S.E.2d 382 (2000) (attorney publicly reprimanded for, among other things, failing to supervise non-lawyer employees who were responsible for giving correct wiring instructions to lenders for funds to be wired to real estate trust account); In re Davis, 338 S.C. 459, 527 S.E.2d 358 (2000) (same); In re Reeve, 335 S.C. 169, 516 S.E.2d 200 (1999) (attorney publicly reprimanded for failing to properly supervise non-lawyer employees and assisting person in unauthorized practice of law). Further, we agree with the Panel's finding that respondent violated Rule 5.5(b), of Rule 407, of the Rules of Professional Conduct. Respondent assisted the collection agency in performing activities that constituted the unauthorized practice of law. Pursuant to S.C. Code Ann. § 40-5-320(A) (2001), it is unlawful for a corporation or voluntary association to: (3) hold itself out to the public as being entitled to practice law, render or furnish legal services, advise or to furnish attorneys or counsel, or render legal services in actions or proceedings; (4) assume to be entitled to practice law or to assume, use, or advertise the title of lawyer, attorney, attorney at law, or equivalent terms in any language as to convey the impression that it is entitled to practice law or to furnish legal advice, services, or counsel. See generally A.L. Schwartz, Annotation, Operations of Collection Agency as Unauthorized Practice of Law, 27 A.L.R. 3d 1152 (1969). U.S. Collections, through its collectors, who were respondent's employees, held themselves out to debtors as being the "Zenner Law Firm." In the Izola Wilson Matter, a collector offered Wilson legal advice, referred to the creditor as "my client," and gave a legal opinion that jurisdiction was vested in Richland County. In the Peggie Kay Ungerer Matter, a collector offered the legal opinion that Ungerer's wages would be garnished, without determining whether such garnishment was in fact lawful. Therefore, by these actions, U.S. Collections held "itself out to the public as being entitled to practice law." Further, respondent's lack of control over the files and over the hiring and firing of employees lends support to the finding that he assisted in the unauthorized practice of law because the collection agency controlled his actions. We agree with the Panel and find respondent's conduct warrants a public reprimand. 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   The industry muscled through tough changes that were supposed to make more filers repay some of what they owe. But that isn’t happening.  By Liz Pulliam Weston Credit card issuers and other lenders spent a small fortune to get bankruptcy reform legislation passed. Now the new law is costing them even more. An unprecedented spike in filings before reform took effect in fall 2005 is chewing into lenders' bottom lines, and the subsequent lull is showing signs of being short-lived. Bankruptcy attorneys say their caseloads are starting to pick up, and credit counseling agencies -- which provide now-mandatory sessions for consumers who want to file -- say they're seeing significantly more people than they initially predicted. All this is raising questions about whether lenders will profit as much from the new bill as they hoped. 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. Lenders initially said that the rush of filers merely accelerated losses that would have happened anyway -- that people essentially decided to file sooner, to beat the deadline, rather than a little later. Indeed, filings dropped sharply to 9,447 the week following reform, according to Lundquist Consulting. But the following week, filings rose to 14,291. Some of those cases appear to be backlog -- filings under the old law that courts are just getting around to reporting -- but the numbers are expected to climb as weeks pass. How far is the question. Counselors see lots of traffic Sam Gerdano, head of the nonpartisan American Bankruptcy Institute, said he wouldn't be surprised if filings remain extremely low at least through the first half of the year. "We could be seeing records in the other direction," Gerdano said, "with filing numbers we haven't seen since the 1980s." But some believe the respite will be shorter than lenders hope. "There was a real lull for awhile, but we're starting to pick up again," said Los Angeles bankruptcy attorney Leon Bayer. "We're getting back to normal now." Credit counselors report a similar uptick. Demand for pre-bankruptcy counseling, which is now required before consumers can file, has been unexpectedly strong at the 71 agencies affiliated with the National Foundation for Credit Counseling that have been approved by the Department of Justice to provide such services, said foundation President Susan Keating. "The volume is significantly higher than their original projections," Keating said. "We originally expected our client volume of 1 million to double in 2006 (because of the new requirement). Now we're thinking we may be looking at even more." Few able to repay Bankruptcy attorneys and many consumer advocates worry the counseling requirement will allow agencies to divert potential filers into debt repayment plans that the debtors can ill afford. But Keating said her agencies, which currently represent 80% of the counselors approved by the Justice Department, aren't seeing many clients who have the ability to repay their debts. "The conversion rate of customers who are eligible to go into an alternative, a debt-management plan, has been very, very low," Keating said. "These customers are really in serious financial trouble and have no alternative other than filing for bankruptcy." That's certainly been true at Riverside, Calif.-based Springboard, which counseled 2,200 pre-bankrupts between Oct. 17 and Nov. 28, said President Dianne Wilkman. Wilkman said her counselors, who mostly talk with customers by phone, sometimes have to strain to average the 90 minutes the Justice Department requires of pre-bankruptcy counseling sessions because their clients' situations are so cut and dried. "After 45 minutes you're left with saying, 'So, what about those Dodgers?'," Wilkman said. "But then with other clients with more complex situations, you use much more than 90 minutes." 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."   Collection agency hit with record fine After checking into complaints going back to 2003, Minnesota imposed its biggest civil penalty against the out-of-state company. Joy Powell, Star Tribune A debt-collection company licensed to operate in Minnesota has paid a record fine of $125,000 for 15 violations that included an unauthorized bank withdrawal and employing a violent felon as a collector. Arrow Financial Services of Niles, Ill., also agreed to design and implement a compliance program within 60 days as part of the enforcement action by the Minnesota Department of Commerce. Mary Coffey of St. Peter in Nicollet County was among 10 people whose complaints from late 2003 through June 2005 touched off a yearlong probe by the state agency, Commerce Department spokesman Bruce Gordon said. Coffey said the company even withdrew more money from her bank account than she owed on a credit card. Violations included calls to debtors' employers after being asked to stop, and telling a debtor's co-worker about a collection action. Arrow is a division of Sallie Mae, the nation's No. 1 student loan lender. The violations occurred before and after Sallie Mae bought Arrow in September 2004, Gordon said. Arrow buys old debt that's been charged off by credit-card, telecom, auto or utility companies, said Tom Joyce, a spokesman for Sallie Mae and Arrow. "We obviously agreed to this order to put this matter behind us, rather than get caught up in a longer process that would have likely cost our customers and shareholders more in legal and other fees," Joyce said. Commissioner Glenn Wilson of the Commerce Department -- which regulates 879 licensed collection agencies and nearly 31,000 individual collectors -- said that laws are intended to protect consumers but that Arrow Financial Services "missed the mark." "The violations are serious and we cannot and will not tolerate this type of activity in Minnesota," Wilson said. "That's why a comprehensive compliance plan is part of the consent order." The Arrow enforcement action is among 33 imposed against collection agencies and individual debt collectors by the state agency since Jan. 1, 2003; those have resulted in $309,500 in civil penalties. Arrow's new state-monitored compliance program must include: • A company compliance officer who reports directly to Arrow's president and board of directors. • A training program educating Arrow's debt collectors in Minnesota concerning collection laws, and a signed statement that each received the training. • Written policies and procedures for screening debt collector applicants, including criminal background checks, before they are registered. Living check-to-check Coffey, a grandmother who works at a clerical job in St. Peter, south of the Twin Cities, said her troubles began after she and her husband bought a house and he was laid off from his construction job. "I've worked pretty hard all my life, but my husband and I live check-to-check," she said. They fell behind with a credit-card payment, which triggered a higher interest rate and late fees. She agreed to let Arrow deduct $235 a month on a balance of about $1,200. Each month, Arrow sent a letter saying it would be deducting the amount on a certain date. "I was keeping track of my debt going down, and it came to the last payment," Coffey said. "They said they were going to take out the same amount they always had. The problem was, I didn't owe that anymore. I owed less than that." She called Arrow twice and was told that the extra money would not be taken. But the company took the full monthly amount, about $50 more than was owed, without Coffey knowing it. In the meantime, she wrote about five small checks for groceries and other items. They all bounced, each with an $18 fee. "Fifty dollars, that's a lot to me," she said. "To have to go to the bank and explain to them what happened, that it was a collection agency, was embarrassing." In another case, Arrow collectors repeatedly called a debtor at work, despite five letters and three e-mails asking them to cease. Arrow also failed to establish procedures when screening collectors before applications to the Commerce Department for licensing. In one case, an applicant didn't qualify for licensing because of a recent felony conviction for aggravated assault of a police officer. Arrow then failed to respond to the department's inquiries. The company now follows Sallie Mae's control and compliance program, Joyce said. "Treating customers fairly is our primary concern," Joyce said. "We do our utmost to comply with all federal and state laws and regulations."     KRG Capital purchases Collect America The leveraged-buyout firm pays $350 million for the debt-collection franchiser, founded by a Denver lawyer. By Will Shanley  Denver Post Staff Writer Denver's KRG Capital Partners, one of Colorado's largest leveraged-buyout firms, has purchased Collect America for $350 million. Collect America, a Denver-based company that pioneered a unique lawyer-franchise system to become one of the nation's largest debt-collection companies, buys debt at below face value from mostly banks, credit-card issuers, auto-financing companies and hospitals. As of 2004, Collect America employed 105 workers at its headquarters at 370 17th St., and counted at least 32 franchisee debt-collection law firms throughout the U.S. It is unknown how the deal will affect Collect America's workforce locally. Neither KRG nor Collect America returned phone calls Monday. Denver lawyer Scott Lowery, son of Denver lawyer Phil Lowery, founded Collect America in 1994. The company hands off the debt it purchases to one of its many law-firm franchises throughout the country. The franchisee then contacts the debtor to collect at least a portion of the money owed. The collected money is then split between the franchisee and Collect America. KRG owns about a dozen companies, mostly in North America, including Longmont's Case Logic, a manufacturer of storage cases. According to KRG's website, Collect America was an attractive acquisition target because "broader trends of increasing consumer credit" (debt) will drive growth. Leveraged-buyout firms, including KRG, use borrowed money to acquire companies, often using the acquired company's assets as collateral.   How Citibank scams you on credit card offers: In a junk mail solicitation recently received from Citibank, on American Airlines AAdvantage® miles, I discovered the following: THE DEFAULT APR is now 30.49% on Citibank cards (up from 28.9%) There is a 3% fee to transfer balances from other cards, (with a $75.00 maximum) There is a 3% fee for cash advances. (With a $75.00 maximum charge) LATE FEES: $39 on balances of $1,000 and over. ANNUAL MEMBERSHIP FEE: $50. RETURNED PAYMENT FEE: $29. RETURNED CONVENIENCE CHECK FEE: $29. STOP PAYMENT ON CONVENIENCE CHECK FEE: $29. RATES, TERMS AND FEES MAY CHANGE: We may change the rates, fees, and terms of your account at any time for any reason. These reasons may be based on information in your credit report, such as your failure to make payments to another creditor when due, amounts owed to other creditors when due, the number of credit accounts outstanding, or the number of credit inquiries. These reasons may also include competitive or market-related factors. If we make a change for any of these reasons, you will receive advance notice and a right to opt out in accordance with applicable law. PERCENTAGE RATE: on standard purchases is 16.49% (Prime rate is currently at 7%) EFFECT OF APR INCREASES: If an APR increases, periodic finance charges increase and your minimum payment may increase. ARBITRATION: The card agreement that you will receive with your card if you are approved for credit provides that disputes are subject to binding arbitration. Arbitration replaces the right to go to court, including the right to a jury and the right to participate in a class action or similar proceeding. KICKBACK TO AMERICAN AIRLINES: The fee (commission?) paid to American Airlines for access to their customer list of AADVANTAGE® miles was not disclosed.  Their commercials state that “At Citibank… Money Isn’t Everything” however Citibank DOES sue if you default on their cards, they WILL garnish your wages, LIEN your home, SEIZE your bank account, even illegally monitor your personal checking accounts, just ask the thousands who are victims of  Citibank….’where money isn’t everything!’ Portfolio Recovery Associates Reports Increased Earnings for Q3    October 26, 2005 Portfolio Recovery Associates, Inc. (NasdaqNM: PRAA), a company that purchases and manages portfolios of defaulted consumer receivables and provides a broad range of accounts receivable management services, today reported net income of $9.3 million, or $0.58 per diluted share, for the quarter ended September 30, 2005. The Company's third-quarter 2005 earnings represent growth of 34% from net income of $7.0 million, or $0.44 per diluted share, in the same period a year earlier. Total revenue increased 33% to $37.5 million in the third quarter of 2005 from $28.3 million in the year-earlier period. Total revenue consists of cash collections reduced by amounts applied to the Company's owned debt portfolios plus commissions from its fee-for-service businesses. During the third quarter of 2005, the Company applied 28.4% of cash collections to reduce the carrying basis of its owned debt portfolios. This ratio was 30.3% for the quarter ended September 30, 2004. "Portfolio Recovery Associates performed well in the third quarter with solid results across the board. Debt purchases totaled $16.5 million, despite a market that continues to be quite competitive from a pricing perspective. Collector-force productivity approached record levels. New marketing efforts by our IGS and Anchor fee-for-service businesses began to yield results, and the integration of newly acquired Alatax proceeded even more smoothly than expected. At PRA, we remain focused, as always, on producing steady, disciplined growth regardless of market conditions. The third quarter of 2005 demonstrates once again our ability to execute on this strategy," said Steven D. Fredrickson, Chairman, President and Chief Executive Officer. The Company's earnings through the first nine months of 2005 totaled $27.3 million, or $1.69 per diluted share, compared with $19.7 million, or $1.25 per diluted share, for the first nine months of 2004. Nine month 2005 revenue was $109.2 million, compared with $81.7 million in the first nine months of 2004. For the year to date, the Company has applied 30.6% of its cash collections to reduce the carrying value of its owned debt portfolios, compared with a ratio of 30.9% for the same period in 2004. Financial and Operating Highlights Cash collections rose 22% to $47.5 million in the third quarter of 2005, up from $38.8 million in the year-ago period. Productivity, as measured by cash collections per hour paid, the Company's key measure of collector performance, stands at $136.18 for the first nine months of 2005, compared with $117.59 for all of 2004. The Company purchased $445 million of face-value debt during the third quarter of 2005 for $16.5 million. This debt was acquired in 29 pools from 13 different sellers. The Company purchased $2.47 billion of face value debt for $57.3 million during the first nine months of 2005, and bought $3.14 billion of face value debt for $79.8 million during the trailing 12 months ended September 30, 2005. The Company's fee-for-service businesses generated revenue of $3.5 million, up from $1.2 million in the same period a year ago. The Company's cash balances were $67.4 million as of September 30, 2005, down slightly from $68.5 million as of June 30, 2005. During the quarter, the Company used $32.6 million of cash, both to fund the acquisition of Alatax and purchase new debt portfolios. Portfolio Recovery Associates continues to have no debt outstanding under its $25 million revolving line of credit. "In the third quarter, Portfolio Recovery Associates displayed once again our ability to generate significant amounts of cash, deploy that cash intelligently, and exploit our competitive strengths in both debt buying and collection by opportunistic diversification through acquisition and organic growth. We enter the final quarter of 2005 with plenty of cash, ample bank lines, strong cash flow, and solid levels of raw material resulting from our strong debt purchases over the past 12 months. From this position, we look forward to continued success in the fourth quarter and into 2006," said Kevin P. Stevenson, Chief Financial Officer.   Zombie debt collectors dig up your old mistakes

There’s a hot new growth industry: companies that buy bad debts for pennies and squeeze you to pay in flagrant violation of federal law. Here’s how to get them off your back.  By Liz Pulliam Weston Debbie made a mistake when she was in college. As a student in Fort Worth, Texas, she maxed out a Citibank credit card with a $300 limit and never paid the bill. Debbie said Citibank charged off the debt sometime between 1987 and 1989, and the liability has long since disappeared from her credit report. Besides that, the statute of limitations -- the amount of time a creditor can sue over an old debt -- expired in the early 1990s. Both her old home state of Texas and her current state of California generally prohibit creditors from suing once a debt is more than four years old. That’s why she was stunned when a collection agency called her last summer, demanding she pay the 17-year-old bill. The calls have continued off and on since then, along with monthly bills listing varying amounts that the collection agency wants her to pay. “The last time [they called], I told them the statute of limitations had run out on the debt and to stop harassing me,” Debbie said. “They said it hadn't. I finally had to hang up on the man.” There’s money in old debt A decade ago, most people who reneged on debts could rest easy after several years passed, since few creditors tried to collect on old bills, particularly for small amounts. Today, however, collecting on old debts is a rapidly expanding industry. Aggressive companies can buy charged-off credit card accounts from the original lenders for pennies on the dollar. Then, they use credit scoring and other new technologies to identify which debtors are most likely to pay. The players in this “junk debt” market range from fly-by-night outfits to well-established companies funded by Wall Street investors. It’s a business that barely existed 10 years ago. In the last three years, it’s been growing at a 30% annual rate, according to credit industry analyst Sean McVity of Keefe, Bruyette & Woods. Among the signs of the industry’s maturity: Four debt-buying companies have gone public in recent years, including Asset Acceptance of Warren, Mich., which had its $150 million IPO in February. Some buyers have attracted major funding from investment banks such as Bear Stearns and Goldman Sachs. Last year, more than $75 billion in old debts were sold.  The biggest debt buyers Debt buyer Headquarters 2002 revenue Debt purchased* Sherman Financial Group New York $325 million $7 billion Risk Management Alternatives Duluth, Ga. $295 million Not available Arrow Financial Services Niles, Ill. $156 million $2.9 billion Asset Acceptance Warren, Mich. $101 million $5.2 billion OSI Portfolio Services Duluth, Ga. $100 million $3 billion   Figures are self-reported for 2002. *“Debt purchased” is the face value of the accounts bought in 2002. Source: Credit & Collections World. The amount that companies pay for bad debt depends on the type of account and its age. In general, McVity said: Debts that have recently been charged off: 6 to 7 cents on the dollar. Accounts that are slightly older and on which a collection agency or two has already taken a whack: 1.5 cents to 2 cents on the dollar. Years-old, out-of-statute debts: A penny or less. A growing number of companies are discovering that these very old accounts, once thought to be uncollectible, are just the opposite. Squeezing even a small payment from these debtors can make collection activities worthwhile. “The economics are pretty simple. For $100 of (old debt), you pay 25 basis points -- a shiny quarter,” said McVity, whose investment banking firm tracks debt-buying trends. “If you get (the debtor) to pay you $1, you got your money and covered your costs.” Opportunity frequently turns into abuse Where some are finding profits, though, others are spotting abuses. Consumer attorneys say the explosive growth of this industry has led to widespread violations of the federal Fair Credit Reporting Act and the Fair Debt Collection Practices Act. “I don’t advocate people not paying their bills,” said Shreveport, La., lawyer David Szwak, who specializes in consumer law. “But there’s an element of the debt collections field that is rabid.” Some collectors, he said, “will go to any lengths to harass people and defraud them.” Among the worst practices attorneys have seen: Suing or threatening to sue over debts even though the statute of limitations has long expired. Illegally “re-aging” debts on credit reports. The collectors tell credit bureaus that an old debt is, in fact, a new one. The goal: To extend the seven-year limit on reporting negative items and put more pressure on the consumer. Promising to delete a negative mark from the consumer’s credit report in exchange for a token payment. Not only does the collector fail to follow through, but the payment can revive the statute of limitations and lead to a lawsuit. Even if the collector does back off, the unpaid debt could be sold to another company that might renew collection activity. Bait-and-switch credit cards. Some credit card companies have offered borrowers low-rate credit cards and then tacked old, charged-off debts -- often purchased from other lenders -- onto the balance. The card issuers typically insist they disclosed that the old debts would come with the cards, Szwak said, but the borrowers say no such disclosure was made. Verbally abusing and harassing consumers. My readers have reported being cursed, berated and called repeatedly despite requests to stop -- all violations of federal laws. Mickey, a Virginia resident, said he was the target of “colorful words” when he told a collection agency to cease bothering him about an old debt. Mickey stopped paying on his $4,000 Discover card balance in 1994; the account no longer appears on his credit report and the statute of limitations ended years ago. “They would usually start out with a normal tone. . . . It went downhill fast,” Mickey said. “They were calling a couple of times a day for awhile.” Sometimes, it’s smarter just to hang up Consumer advocates say this is exactly the kind of behavior Congress and state lawmakers were trying to prevent when they put curbs on collection behaviors such as statutes of limitations, the seven-year credit reporting limit and prohibitions against abusive collection practices. “We don’t have debtors’ prisons,” Szwak said. “We have laws to protect people from being harassed by debt collectors for the rest of their lives.” In fact, paying these old debts -- or even talking to the collection agency about them -- can make a bad situation worse. As mentioned above, the smallest payment can revive the statute of limitations in some states, leading to more aggressive collections and lawsuits. Even acknowledging that the debt is yours can restart the clock in some jurisdictions. That’s why Robin Leonard, author of the “Money Troubles: Legal Strategies to Cope with Your Debts,” advises consumers simply to put the phone down and walk away if collectors call about an out-of-statute debt. (This chart at Bankrate.com summarizes state statutes of limitations, but details can vary by state.) Paying off can hurt your credit score What’s more, paying an old debt potentially can wreak havoc on a consumer’s credit score, as I discussed in “When paying bills can hurt your credit.” Such a payment can update a delinquency so that it looks more recent and takes a heavier toll on a credit score. Paying the debt is also no guarantee that the nightmare will stop. The collector may decide that if you’re willing to pay at all, you could be made to pay more. Settling a debt for a smaller amount than the collectors says you owe could result in another agency trying to collect the unpaid portion. Or the collector might inform the Internal Revenue Service (IRS) that you’ve received “income” in the form of forgiven debt. (Yes, there are tax consequences to forgiven debt. See my colleague Jeff Schnepper’s article "5 truly nasty tax surprises.”) Even if you manage to wrangle written promises from the collector that none of the above will happen, you would have to be willing to go to court if the agency reneged -- and possibly face an unsympathetic judge or one who doesn’t know much about collections law. If you’re being contacted about an old debt, here’s what consumer attorneys advise: Know the statute of limitations. If you racked up a debt in another state, you might want to check the statute of limitations there as well. But generally, it’s the statute of your current state that applies. If the statute has expired, the collection agencies’ legal remedies are limited. Know your rights. Credit and debt collections can be an extremely complicated area of the law. Consider arming yourself with a book such as Leonard’s “Money Troubles” and -- if the amounts at stake are considerable or the level of harassment unbearable -- consider contacting an attorney. The National Association of Consumer Advocates can provide referrals. Consider ignoring the call. If the statute of limitations has expired, Szwak said, put the phone down and walk away. There’s little to gain and a lot to lose if you keep talking. You could inadvertently extend the statute of limitations or find yourself roped into a repayment agreement that might not be in your best interest. “The debt collector is a lot smarter than (consumers) are, a lot more savvy,” he said. “They don’t have any obligation to tell you your rights.” Write them. If ignoring them isn’t working, consider writing a letter demanding the agency stop contacting you. Send it certified mail, return receipt requested. Federal law requires them to comply with your request. Make sure in the letter you specifically say that you aren’t acknowledging you owe the debt. Negotiate carefully. If the statute of limitations hasn’t expired, you may want to negotiate a settlement rather than risk a lawsuit. (Again, a lawyer’s advice could come in handy here.) Read “12 tips for negotiating with debt collectors.” Keep an eye on your credit report. If a collection agency tries to repost an old debt or lie about the date it went delinquent, you’ll need to fight back vigorously. Dispute the entry with the credit bureaus and with the collection agency. If the collector persists in its deception, you can demand that the collector produce a copy of the documentation that created the debt, such as the credit card agreement you originally signed, along with an account history, said consumer attorney Daniel Edelman of Chicago. Chances are the collector won’t have this documentation, and continuing to report the account without providing proof that you owe the money is a violation of the Fair Debt Collection Practices Act, Edelman said. Again, an attorney experienced in debt collection law might prove helpful in particularly difficult cases.

 

 

 

Did credit-card companies collude to force arbitration?
Thursday, September 01, 2005   By Carrick Mollenkamp, The Wall Street Journal


Many of the largest U.S. credit-card companies require customers to sign away their ability to take disputes to court and instead settle disagreements in arbitration.

Now that practice itself is under attack in court. A lawsuit filed recently in federal court in New York City alleges the credit-card companies held secret meetings where they colluded to promote arbitration, in violation of federal antitrust laws.

The complaint alleges that eight of the nation's biggest card issuers -- Bank of America Corp., Capital One Financial Corp., J.P. Morgan Chase & Co., Morgan Stanley's Discover unit, Citigroup Inc., MBNA Corp., Providian Financial Corp. and HSBC Holdings PLC of the United Kingdom -- "combined, conspired and agreed to implement and/or maintain mandatory arbitration."

Some of the banks named allegedly convened a group in 1999 called the "Arbitration Coalition" or "Arbitration Group," the complaint says.

The suit, which was filed last month and is seeking class-action status, claims that bank representatives spoke or met at least 20 times from 1999 to 2003 to share experiences from arbitration as well as advice on how to set up arbitration agreements with consumers that would withstand challenges in court.

In general, it is illegal under federal antitrust law for competitors in any industry to secretly collude to restrict trade or commerce.

A spokeswoman for Capital One said in a statement that the company doesn't comment on pending litigation but added that its "arbitration clause allows either party involved in a dispute to have the case considered by an impartial arbitrator to determine a final and binding resolution to the problem."

Representatives of the other banks either declined to comment or couldn't be reached. The financial firms named in the case have yet to respond to the substance of the allegations in court.

The case, filed on behalf of seven plaintiffs who live in California, Pennsylvania, New York, Illinois and New Jersey, comes as mandatory arbitration clauses are becoming increasingly common in industries ranging from cable television to Wall Street brokerage firms.

Companies have argued that arbitration provides a speedy and fair alternative to litigation and prevents disputes from escalating into class-action complaints that can cost them and their shareholders dearly.

Consumer-rights advocates claim the practice unfairly removes consumers' right to pursue a class-action complaint or a jury trial over such things as late-payment penalties while also allowing companies to settle claims with little publicity.

A recent study by Ernst & Young, citing criticism of arbitration, reported that while consumers often can opt out of mandatory arbitration clauses, they rarely know such an option exists and that it can be buried in a card agreement's fine print. The study found consumers prevailed more often than businesses in an arbitration. Ernst & Young said it was engaged by the law firm Wilmer Cutler Pickering Hale and Dorr, which has worked with card companies.

The case against the credit-card companies also gives details on the practices of a Minneapolis-based group called National Arbitration Forum, one of several national arbitration panels that hear disputes between companies and customers across a wide range of industries.

According to the complaint, NAF billed itself in one solicitation as "the alternative to the million-dollar lawsuit." The complaint doesn't specify who the solicitation was aimed at, but says: "The clear implication of this appeal to corporate clients is that arbitration through NAF will effectively eliminate any significant remedy in a consumer dispute, whatever the underlying merits."

The complaint also alleges the group said that its rules provided for "very little, if any, discovery" -- the legal term for fact-finding once a case has been filed. NAF isn't named as a defendant in the suit.

Curtis Brown, the general counsel for NAF, said in an emailed response to questions: "Since we are not a party to the lawsuit, I would direct you to the parties and their lawyers for a comment." He said NAF provides unbiased arbitrators and he cited past court decisions establishing that the NAF treated consumers fairly.

The central allegation in the case concerning arbitration clauses is that the defendant banks worked together to create or maintain mandatory arbitration clauses as a way to thwart class-action lawsuits brought by consumers. The plaintiffs, represented by Berger & Montague of Philadelphia and other firms, are seeking to have the mandatory arbitration provisions in the complaint declared void.

According to the complaint, two prominent law firms advised the banks in creating the arbitration group or attended meetings where strategies for discussing arbitration were discussed. Those firms, not named as defendants in the suit, are Wilmer Cutler, of Boston and Washington, D.C., and Ballard Spahr Andrews & Ingersoll of Philadelphia.

Representatives of Wilmer Cutler were unavailable for comment. Ballard Spahr declined to comment.

The complaint alleges that the banks began discussing the issue of mandatory arbitration clauses in the late 1990s, the same time that the clauses were introduced in the industry. The agenda for the first Arbitration Coalition meeting, held in the summer of 1999, outlined how the group could work together on promoting mandatory arbitration, the complaint alleges.

Among the proposed steps were "sharing best practices" and drafting "enforceable arbitration clauses," the complaint alleges. Two additional groups were formed: the "Consumer Class Action Working Group" and the "In-House Counsel Working Group," the complaint says.

For a conference call in the summer of 2001, bank representatives were given the access-code word, "arbitration," the complaint alleges. The agenda, according to the complaint, included seeking ways to protect the banks from plaintiff lawyers and ways to create an informal " 'information please' email network."

 

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Overdue Credit Card Bills Hit Record High
Sep 28   By JEANNINE AVERSA   AP Economics Writer

WASHINGTON

Charge it! That familiar refrain is producing an unwanted response for more Americans: Your bill is overdue! Surging energy prices, low personal savings and the higher cost of borrowing have combined to produce a record level of overdue credit card bills.

The American Bankers Association reported Wednesday that the percentage of credit card accounts 30 or more days past due climbed to an all-time high of 4.81 percent in the April-to-June period. It could grow in the months ahead, experts said.

The previous high of 4.76 percent came during the first three months of the year, in keeping with a generally steady rise over the past several years.

"The last two quarters have not been pretty," said Jim Chessen, the association's chief economist.

Chessen and other analysts mostly blamed high prices for gasoline and other energy products, but said that low savings and higher borrowing costs also played a role.

"The rise in gas prices is really stretching budgets to the breaking point for some people," Chessen said. "Gas prices are taking huge chunks out of wallets, leaving some individuals with little left to meet their financial obligations."

Pump prices were high before hurricanes Katrina and Rita hit the Gulf Coast. After Katrina, prices jumped past $3 a gallon. Prices have moderated since but remain high.

The personal savings rate dipped to a record low of negative 0.6 percent in July. The negative percentage means that people did not have enough left over after paying their taxes to cover all of their spending in July. As a result, they dipped into savings to cover the shortfall.

When people have less money available money to pay for energy costs or emergencies such as a big car repair, many resort to credit. That option is getting more expensive, too.

The Federal Reserve has been tightening credit since June 2004. That has caused commercial banks' prime lending rate to rise to 6.75 percent, the highest in four years. These rates are used for many short-term consumer loans, including credit cards and popular home equity lines of credit.

Late payments may be bad news for consumers, but credit card companies do not necessarily mind them because late fees are a source of revenue.

"Credit card companies are increasingly addicted to their fees," said Daniel Ray, editor-in-chief at Bankrate.com, an online financial service. "Six years ago, all fees _ including late fees _ contributed only a minor portion to overall revenue. Today it accounts for more than 30 percent."

About half of all credit problems stem from poor money management. Credit problems due to the loss of a job, sickness or divorce play less of a role, said personal finance expert Susan Tiffany, director of consumer publishing at the Credit Union National Association.

"That tells us people have some ability to do a better job. They are not completely helpless in the situation, and that's good," said Tiffany, whose trade group also is involved in efforts to improve people's financial literacy.

Getting back on the road to financial health takes discipline and hard choices about what can be cut back or eliminated. If credit card problems are plaguing a family, all the members should work together to come up with a plan and pare down spending.

From an economic perspective, the current rise in delinquent credit card payments is not overly worrisome. But if the trend were to continue for a sustained period, it could spell trouble for the overall economy, said Lynn Reaser, chief economist at Bank of America's Investment Strategies Group.

"It's a flashing yellow light that we need to watch," she said.
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On the Net:  American Bankers Association: http://www.aba.com/

 

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Bankruptcy law will hurt victims
September 14, 2005 Molly Ivins

HERE’S a good idea: Consumer groups and progressive congressfolks have joined in an effort to stop hundreds of thousands of victims of Hurricane Katrina from being further harmed by the new Bankruptcy Act, scheduled to take effect Oct. 17. This law was notoriously written of, by and for the consumer credit industry, and is particularly onerous for the poor.

The bill was passed with massive support from the Republican leadership in Congress and from a disgusting number of sellout Democrats. While it was being considered in committee earlier this year, Texas Rep. Sheila Jackson Lee offered an amendment to protect victims of natural disasters. It was defeated, without debate, on a party-line vote.

Now, Congress has a chance to rethink some of the most punitive parts of the bill. Katrina victims who were planning to file before the new law goes into effect are S.O.L. — where they gonna find a lawyer, let alone an open courthouse?

Under the new law, anyone whose income is over the state median must file under Chapter 13, a more restrictive category that requires some repayment of debt. The new law grants no exemption for natural disaster, even though it’s going to be a little tough for some citizen sitting in the Astrodome who no longer has a home to come up with tax statements, pay stubs, and six months of income and expense data. Let’s see if Congress can manage to open its marble heart on this issue.
 

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Hurricane Victims Pile Up Credit Card Debt
September 14, 2005  By  DAVID KOENIG AP Business Writer

(AP) - PLANO, Texas-Jerry and Deborah Alciatore fled New Orleans with nothing but a couple of overnight bags, an ice chest and their credit cards. The bags emptied quickly, but two weeks after Hurricane Katrina hit, the balance on the credit cards is mounting fast.

Their first week on the road, they charged $1,600 in food and hotel bills in Houston, about $400 worth of clothing, mostly from discount stores, and a couple hundred more on gasoline.

Jerry Alciatore splurged $1,200 on a laptop to keep in touch with employees of his small architectural firm, pushing the credit card bill to about $5,000. They'll soon have to make another mortgage payment on their house in Metarie, which was damaged but not destroyed by 3 feet of floodwater.

"I'm worried. We have about a one-month gap where my income will be cut off and so will my wife's," he said. "I have to see if my business is still going to be OK. We're going to be out of our house for maybe three months, but I have a mortgage payment every month, and now we have to rent an apartment."

The Alciatores are quick to say they are lucky compared to others who suffered so much more. They consider themselves middle class, maybe upper middle class.

Still, financial experts say the couple is right to be worried. The Alciatores and other Katrina victims who thought they were financially secure must keep their debt in check while facing huge relocation costs and uncertainty about their income. It's not easy.

"People in a crisis are not thinking clearly. Their emotions take over, and that's not a good place to be when it comes to your finances," said Deb Outlaw, a CPA and financial planner in Dallas. "Sometimes they feel like they have to get back to what they had before the disaster, but they need to be patient."

Like much else surrounding Katrina, the financial aftermath is a story of haves and have-nots.

Helen Salazar-Realini, a financial planner in Miami, said most of those who left the Gulf Coast early will be fine. Insurance, after a deductible that can run several thousand dollars, will cover their homes and cars and living expenses while they are uprooted.

Renters will be in far worse shape, she said. They may have lacked insurance to cover their belongings and have difficulty recovering security deposits.

Salazar-Realini said people in such a dilemma should seek consumer credit counseling offered by familiar agencies such as United Way.

"They will expect that you'll cut up all your credit cards. They'll put you on a budget," she said. Most helpfully, those agencies can negotiate a repayment plan with creditors that ideally should waive additional interest, the planner said.

Critics say credit card issuers are making it harder for people to dig out of debt by increasing penalty rates for late payments. Nearly half raise interest rates for customers who are late paying other bills.

Credit card companies now say they will waive penalties for Katrina victims who are unable to pay on time. Credit card giant MBNA Corp. will give hurricane victims a two-month payment holiday and a break from cash advance and late fees.

Jim Donahue, an MBNA spokesman, acknowledged that some people will take on more debt than they can repay. He said it was too early to tell what the credit card company would do then.

Rhonda Bentz, a spokeswoman for Visa USA Inc., said most banks that issue Visa cards are expected to offer more lenient terms to hurricane victims.

"There are some who are going to be staying in hotels, putting that on their credit cards," she said. "The displacement is going to be much longer and cover many more people" than other recent hurricanes or the Sept. 11 terror attacks. "It's hard to tell what the impact might be."

Katrina has renewed the debate over changes to the bankruptcy code set to take effect next month.

The Consumer Federation of America and other groups are lobbying Congress to delay the new bankruptcy law, which they opposed all along. A delay would help Katrina victims file for Chapter 7 bankruptcy protection under the old law, making it easier for them to wipe out most kinds of debt rather than set up a 3- or 5-year repayment plan.

"They turned the bankruptcy courts into collection agencies for credit card companies. That means there's less protection for victims of Katrina," said Elizabeth Warren, a bankruptcy law professor at Harvard and a critic of the new law.

The American Bankers Association is opposed to delaying the new law. Floyd Stoner, the group's executive director for congressional relations, said creditors and bankruptcy judges will treat hurricane victims sympathetically.

"If you lost all your assets, you're not going to have to repay part of your debt ... that will be even more true in a natural disaster like Hurricane Katrina," Stoner said.

At a job fair near Dallas, Shannon Miller and her fiancé, Darin O'Connor, said they charged $200 for gasoline, $300 for four nights in a Dallas hotel, and are still using credit cards for frequent trips to Wal-Mart and Target to buy everything from an iron to the clothes they wore when they lined up for interviews at the job fair.

"We have to get jobs to support ourselves," Miller said. "We can't sit around for six months like it's vacation."

Kimberly Rogers, 26, and Julian Ford, 23, who lost their rental apartment in New Orleans, said they were spending cautiously to avoid financial trouble.

They have received money, food, clothes and shelter from friends and relatives. They have avoided using credit cars, with help from Rogers' family.

"They don't want us to spend any money right now, and I don't want to create any debt," Ford said. He paid off the balance on two credit cards just before Katrina and is confident about finding a job and paying off the $400 on the remaining card.

The Alciatores and about 40 other Katrina victims are staying in a suites hotel in Plano, a Dallas suburb. The Red Cross is paying for up to 28 days of lodging. Many have applied for $2,000 in aid from the Federal Emergency Management Agency.

"I'm not going to line up for food stamps," Alciatore said, "But when you're cut off from your income and your bank account, you look around and say: 'I'm not too proud to take a couple grand to help get back on my feet.'"
 

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Debt Lawyer Could Face 25 Years
September 9, 2005  By Joe Swickard, Free Press Staff Writer

One of Michigan's largest debt-collection lawyers could face more than 25 years behind bars and fines of $77,000 for filing allegedly fraudulent court documents and affidavits, a Lincoln Park district judge ruled Thursday, drawing nodding approval from a portion of the courtroom gallery.

Judge David Bajorek rejected defense arguments in a pretrial hearing, saying that attorney Howard Alan Katz could be sentenced up to 30 days in jail and fined $250 for each of the 308 counts of criminal contempt if he is convicted.

Katz faces a jury trial Sept. 29 before Bajorek.

Defense attorney David DuMouchel said it was improper to stack the sentences: "This is not how things are done."

But special prosecutor John Gillooly said Katz, 60, is engaged in "a continuing practice. ... It's got to stop."

Bajorek agreed, saying serving all the sentences at the same time would not match the scope of the alleged actions.

Bajorek brought the contempt charges in July after finding what be believed were numerous fraudulent documents in collection cases.

The documents were filed to support the collection of overdue bills, garnishment of salaries and the seizure of other property to pay off interest, costs and fees that could double or triple the debts.

Since the contempt charges were brought, dozens of people have come forward claiming that their wages were garnisheed without notification or chance to fight the assessment.

Others said that Katz -- who brings about 2,000 debt collection cases a year-- levied excessive fees, costs and interest with little or no explanation.

Attending the hearing were three people sued by Katz whose cases now are on hold. "I hope we get some justice," said Richard Stewart of Lincoln Park.

Mary McLaughlin said she had tried to tell Bajorek she was never notified by Katz. "Obviously, he didn't believe me then," said McLaughlin, also of Lincoln Park.
The Michigan Court Administrative office had all the state's district and circuit courts review their records for cases brought by Katz.

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Suit Alleges Credit Card Companies Colluded
- WSJ Thu Sep 1, 2005 NEW YORK, Sept 1 (Reuters) –

A lawsuit filed in New York federal court alleges eight leading credit card companies violated U.S. antitrust laws by colluding to promote arbitration of customer disputes, the Wall Street Journal reported on Thursday.

It said the complaint alleges Bank of America Corp., Capital One Financial Corp. J.P. Morgan Chase & Co, Morgan Stanley's Discover unit, Citigroup Inc., MBNA Corp., Providian Financial Corp and Britain's HSBC Holdings plc "combined, conspired and agreed to implement and/or maintain mandatory arbitration."

Many of the largest U.S. credit-card companies require customers to sign away their ability to take disputes to court and instead settle disagreements in arbitration, the newspaper said. Now that practice itself is under attack in court.

The suit was filed on behalf of seven plaintiffs who live in California, Pennsylvania, New York, Illinois and New Jersey.

Some of the banks named allegedly convened a group in 1999 called the "Arbitration Coalition" or "Arbitration Group," the complaint says, according to the Journal.

The suit, which was filed last month and is seeking class-action status, claims that bank representatives spoke or met at least 20 times from 1999 to 2003 to share experiences from arbitration as well as advise on how to set up arbitration agreements with consumers that would withstand challenges in court.

In general, it is illegal under federal antitrust law for competitors in any industry to secretly collude to restrict trade or commerce, the Journal said.

A spokeswoman for Capital One said in a statement to the newspaper that the company does not comment on pending litigation. But she added that its "arbitration clause allows either party involved in a dispute to have the case considered by an impartial arbitrator to determine a final and binding resolution to the problem."

There was no immediate comment from any of the other banks named in the suit. The firms named in the case have yet to respond to the substance of the allegations in court, the newspaper said.
 

For Release: August 16, 2005    

Marketer of "Free Credit Reports" Settles FTC Charges

"Free" Reports Tied to Purchase of Other Products; Company to Provide Refunds to Consumers

Consumerinfo.com, Inc., doing business as Experian Consumer Direct, has settled Federal Trade Commission charges that it deceptively marketed "free credit reports" by not adequately disclosing that consumers automatically would be signed up for a credit report monitoring service and charged $79.95
if they didn't cancel within 30 days, in violation of federal law. The settlement requires Consumerinfo to pay redress to deceived consumers, bars deceptive and misleading claims about "free" offers, requires disclosure of terms and conditions of any "free" offers, and requires the defendant to give up $950,000 in ill-gotten gains.

According to the FTC complaint, the defendant drove consumers to their www.freecreditreport.com and www.consumerinfo.com Web sites with radio, television, e-mail and Internet ads that promised free credit reports and a bonus - free trials of a credit-monitoring service. Ads made claims such as:

FREE! FREE! FREE! Get Your FREE Credit Report Online in Seconds!!!!
Click here to get a FREE copy of your online Credit Report Instantly!
And that's not all. . . along with your INSTANT credit report, we'll give
you 30 FREE days of the Credit Check Monitoring Service at no obligation.

 

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Payday Loan Scams

Being in the position I am, I have the advantage of talking to many people across the nation with regard to credit and debt issues. Something that is beginning to really concern me is the growing trend of consumers falling into the trap of the "Paycheck Advance" trap. If you are not aware of these places, they advance you a loan prior to getting your regular paycheck. The problem is they charge you an exorbitant amount of interest which could put you in a worse situation the following month trying to pay it back.

No one knows more than I that there are a lot of consumers out there that live paycheck to paycheck and sometimes your back is against the wall and this option might seem like the light at the end of the tunnel...it's not...just behind that bright light is a cliff that will take you deeper in debt than you were before.

The other major problem with these agencies is the measures they take if we default. They utilize the services of lower-than-dirt collectors to hunt you down for what they say you owe, which only adds to the already mounting stress on you, not to mention the hit to your credit score. It is not worth it, please, please think really hard and exhaust all other options before being ruined by these places.

- Bud Hibbs

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MBNA Turns Up the Heat

http://www.consumeraffairs.com/news04/2005/mbna_interest.html

April 26, 2005
MBNA's surging profits may make it popular with investors but its propensity for self-surging interest rates isn't going over so well with its cardholders.

Consumers writing to ConsumerAffairs.Com complain that their MBNA interest rates have jumped from a reasonable 5.99% fixed rate to a 15.99% variable rate, from 18.99% to 26.99% and even from 7.99% to 26.99%. That unlucky customer, Kevin M. from Hamden, CT, was outraged.

"It's just plain robbery. I went from being able to comfortably pay my bills to an overnight crisis situation," he said.

MBNA claims to offer written advance notice any time an interest rate changes for any reason, yet consumers repeatedly claim they received no notice about their rate changes. It's only upon opening their monthly statement that they learn of the increase.

In July 2004, Jason M. of Ridgecrest, California opened his MBNA bill to find his rate had increased from 7.9% to 17.98%, "claiming that the increase was the result of information gained from my credit report and was unrelated to my payment history with their company."

When Jason contacted MBNA's customer service department, he was told that written notification had been sent out to consumers, advising them of the potential rate increase.

"I was told that the notification was mailed with my July statement. As luck would have it, my July statement was still unopened in the kitchen as I recently moved and paid my bill online. When I opened the statement there was no notification in it," he said.

Asked to comment, MBNA representatives did not return calls and e-mails.

Dale B. of Minneapolis, Minnesota received MBNA's Gold Option account, a personal installment loan with a fixed rate of five years, and a fixed payment amount. Although MBNA's Gold Option website states that "Your APR is not guaranteed for any period of time and may be changed by MBNA," Dale was nonetheless surprised to find his loan rate had jumped from 18.99% to 27.98% after applying for an auto loan.

"MBNA now sees me as a risk and has drastically increased my APR and extended the term of the loan," he stated. "I have never been late with a payment, and have not defaulted in any way with this or any other credit account that I have ... MBNA claims I received a mailing telling me about the rate increase, and that it was due to me taking on additional credit. I do not recall such a mailing."

The MBNA representative offered Dale the chance to pay the loan off in full and close the account, which he was unable to do, leaving him saddled with a 72-month installment loan at a much higher rate.

Customer Service
MBNA is generally considered the leading credit card issuer. Most other companies follow its lead. But MBNA's reputation for customer service appears to be in steep decline, judging by the complaints received by ConsumerAffairs.Com.

Dutch B., from Marana, Arizona, missed a payment on his MBNA card when he moved circa October 2004. He was shocked to find that his interest rate had jumped to 25 percent, and that he owed MBNA another $112. He tried to dispute this charge but to no avail.

"In the meantime, they are phoning me all hours of the day and night, not showing up on the caller ID, then [when I call], I'm asked to wait for the next operator. The operators are very nasty, threatening, overbearing and extremely rude," he said.

Other consumers have complained of continual calls at their workplace, MBNA representatives asking co-workers for customers' cell phone numbers, and of offering deliberately false terms of rates and loans.

Jeff Stroman, of Norridgewock, Maine, a former MBNA call center employee, describes an atmosphere of constant pressure to push cards and "encouraging representatives to 'bend' the rules in order to make a sale."

"You are competing against your peers, constantly trying to outsell them. If your stats fall below a certain measure -- and they will when representatives don't (bend the truth to make a sale) -- you will be placed on probation and lose your incentive for a time no matter what your performance," he said. "If you don't improve your statistics, you will be let go."

"When the management 'team' at MBNA in Farmington was comfortable around you they joked about targeting the elderly and young adults," Stroman said in an interview.

Stroman noted the willingness of other employees to be less than truthful about interest rates in order to clear a sale and earn their incentive pay.

"It is amazing to me that I lasted there for nearly two years. I can only wonder how many hundreds of customers opened a credit card from MBNA believing the rate was 9.99%, because that's what they were told, but in reality were stuck with 19.99% or higher."

Universal Default
Even in a sluggish economy and amid reports of losses by other credit and financial companies, MBNA continues to turn a healthy profit. The company reported a gain of $432.5 million, or 33 cents per share, as its first quarter earnings this year. This was an increase from $369.9 million, or 28 cents per share, for the same period last year.

One analyst credited this to MBNA attracting "a higher class of consumer than the rest of the market," and company spokespeople said that the average MBNA customer earned over $70,000 a year. MBNA has also backed away from offering zero-percent interest loans in order to attract consumers, whereas competitors such as Capital One and Citigroup have faced rising loan defaults.

Further improving profits, MBNA was also one of the first creditors to adopt the "universal default" policy, raising the interest rates on a consumer's debt if they are late with any kind of payment on any bill, regardless of whether they pay their credit card balance on time every month.

In Jeff Stroman's words, "MBNA is so big now, and in their minds they are such 'fearless innovators,' that they are willing to be the first to use such a dragnet as 'universal default,' while Citigroup and Capital One will wait and watch to make sure they get the green light in Washington."

MBNA's continued success has earned it unrivaled clout in the political arena. As has been widely reported, it was one of the biggest financial backers of President George W. Bush's 2004 campaign, and a leading supporter of the recent tightening of bankruptcy laws.

Consumer Affairs.Com's special report on the bankruptcy legislation details how high credit card debt and inability to pay back the rapidly ballooning interest and fees often leads consumers to bankruptcy. These are the circumstances facing many credit card users, even those who have never missed a payment or used their card irresponsibly, or -- as in the case of Teresa W. from Madison, Tennessee -- never used at all.

Teresa's husband had suffered many hospitalizations, was forced to declare bankruptcy, and died, leaving her with a $12,000 debt on an MBNA card she didn't know he had. Evidently not MBNA's preferred class of customer, she was forced to deal with abusive collection agents constantly, and had her formerly low interest rate increased to 27.9% after missing two payments.

"I was a widow, no money, tired, at the point of wishing for my last breath, and now I am sending them the last of my husband's insurance death benefit of $6,000," she said in a complaint to ConsumerAffairs.Com.

In fact, it is very possible that Teresa had no obligation to pay MBNA. If the credit card was in her husband's name, she had no personal obligation to pay even one dime to MBNA. The proceeds from her husband's life insurance policy were presumably hers, not his estate's.

MBNA would have a legitimate claim against her husband's estate but not against any of Teresa's personal assets. Teresa should consult an attorney, as she may be able to recover some or all of the funds in court.

Unfortunately, credit card companies and other creditors routinely demand payment from the families of deceased debtors, knowing full well that in many cases the families have no obligation whatsoever to pay any of the deceased's debts.

"It's very sad that many have died fighting for freedom in this country, only to find they can never truly be free because the corporations that supply you with food, electricity, water, they can ruin your air if they wish, poison your water, take every penny you have and reduce you to nothing," Teresa said.

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FTC Moves to Freeze Assets

AmeriDebt Founder Transferred Money to Offshore Trusts, Agency Says

www.washingtonpost.com/wp-dyn/articles/A57613-2005Apr15.html

By Caroline E. Mayer
Washington Post Staff Writer
Saturday, April 16, 2005; Page E01

The founder of AmeriDebt Inc., the now bankrupt Maryland credit-counseling firm, took $70 million from its operations between 1999 and 2003 and spent lavishly on his wife, girlfriend and himself, including paying $179,000 to an interior decorator, $13,500 to a yachting company and $2,500 on a restaurant tab.

That's what the Federal Trade Commission said in court papers as it sought to freeze the assets of Andris Pukke. A hearing on the matter was held yesterday in federal court in Greenbelt. Those assets included $18.3 million transferred to domestic and offshore trusts, and $2 million sent to an account in Latvia for his father, the agency said.

In 2003, the FTC sued Pukke, his wife, the nonprofit AmeriDebt, and DebtWorks Inc., the for-profit private firm Pukke set up to process AmeriDebt customer accounts. The suit alleged that the Pukkes and their companies deceived financially struggling consumers seeking help with their debts by charging high fees -- hiding them by calling them voluntary contributions. They operated falsely as a nonprofit organization while siphoning off money through DebtWorks to make money for the Pukkes, the suit said.

A recent filing in a related class-action lawsuit alleged that Pukke and his girlfriend traveled to Tahiti, Bora Bora, San Tropez, Las Vegas, Aspen, the Cayman Islands and Cabo San Lucas, that he gave her a new Mercedes, and that he spent $15,000 for a mattress and $8,000 for sheets for his Malibu mansion. He sold a Miami Beach home for $7 million, that suit said.

AmeriDebt, based in Germantown, was once one of the nation's largest and most aggressively marketed debt-management firms, advertising heavily on cable TV and the Internet. Also the target of several lawsuits by state attorneys general, AmeriDebt is now bankrupt and its accounts have been taken over by a third-party firm.

AmeriDebt is one of more than 50 nonprofit credit counseling firms under investigation by the Internal Revenue Service for misusing their tax-exempt status for the benefit of their operators. There is little federal regulation of the firms. The bankruptcy bill that passed Congress this week contains a provision that requires debtors to seek debt counseling before filing for bankruptcy protection.

Last month, the FTC settled its lawsuits with AmeriDebt, but its case against Pukke and his wife continues, with the agency seeking $170 million in consumer refunds.

"An individual profiting $70 million on a fraudulent promotion is certainly among the largest we have seen," said Joel Winston, the agency's associate director for financial practices. "The question is where did it go? We're trying to freeze whatever money and property he has, seek repatriation of the money he has put overseas and have a receiver appointed by the court to audit his affairs and determine where all of his money and assets are."

John B. Williams, Pukke's attorney, did not return phone calls. Previously he has said that evidence shows that AmeriDebt benefits to all consumers far surpassed the $170 million that consumers paid the credit-counseling firm because it was able to reduce interest rates and get rid of late fees and interest charges for many of its customers.

In court papers opposing the freeze, Pukke's lawyers said the FTC and the class-action plaintiffs have failed to prove consumers were injured.

In 2003, the FTC sued Pukke, his wife, the nonprofit AmeriDebt, and DebtWorks Inc., the for-profit private firm Pukke set up to process AmeriDebt customer accounts. The suit alleged that the Pukkes and their companies deceived financially struggling consumers seeking help with their debts by charging high fees -- hiding them by calling them voluntary contributions. They operated falsely as a nonprofit organization while siphoning off money through DebtWorks to make money for the Pukkes, the suit said.

A recent filing in a related class-action lawsuit alleged that Pukke and his girlfriend traveled to Tahiti, Bora Bora, San Tropez, Las Vegas, Aspen, the Cayman Islands and Cabo San Lucas, that he gave her a new Mercedes, and that he spent $15,000 for a mattress and $8,000 for sheets for his Malibu mansion. He sold a Miami Beach home for $7 million, that suit said.

AmeriDebt, based in Germantown, was once one of the nation's largest and most aggressively marketed debt-management firms, advertising heavily on cable TV and the Internet. Also the target of several lawsuits by state attorneys general, AmeriDebt is now bankrupt and its accounts have been taken over by a third-party firm.

AmeriDebt is one of more than 50 nonprofit credit counseling firms under investigation by the Internal Revenue Service for misusing their tax-exempt status for the benefit of their operators. There is little federal regulation of the firms. The bankruptcy bill that passed Congress this week contains a provision that requires debtors to seek debt counseling before filing for bankruptcy protection.

Last month, the FTC settled its lawsuits with AmeriDebt, but its case against Pukke and his wife continues, with the agency seeking $170 million in consumer refunds.

"An individual profiting $70 million on a fraudulent promotion is certainly among the largest we have seen," said Joel Winston, the agency's associate director for financial practices. "The question is where did it go? We're trying to freeze whatever money and property he has, seek repatriation of the money he has put overseas and have a receiver appointed by the court to audit his affairs and determine where all of his money and assets are."

John B. Williams, Pukke's attorney, did not return phone calls. Previously he has said that evidence shows that AmeriDebt benefits to all consumers far surpassed the $170 million that consumers paid the credit-counseling firm because it was able to reduce interest rates and get rid of late fees and interest charges for many of its customers.

In court papers opposing the freeze, Pukke's lawyers said the FTC and the class-action plaintiffs have failed to prove consumers were injured.

U.S. District Judge Peter J. Messitte said he would rule next week on the request to freeze his assets.

According to the FTC filing, "Mr. Pukke has dissipated assets" by transferring money to the trusts, close friends and relatives and by a "lavish lifestyle." The commission said that DebtWorks transferred $200,000 to Pukke's girlfriend although she never worked at DebtWorks. The girlfriend also used a DebtWorks credit card to pay $215,000 in charges, including a $1,688 bill at a clothing store and a $2,165 three-night stay at the Viceroy Hotel in Santa Monica, the lawsuit said.

Pukke's wife received $250,000 from DebtWorks although she never worked for the firm, either, the FTC said, and another $150,000 through the company's credit card.

The agency said that Pukke established the domestic and offshore trusts, including one in Nevis and another on Cook Islands in 2002, shortly after the FTC notified AmeriDebt and DebtWorks that they were under investigation. "Clearly," the agency said in legal papers, "Mr. Pukke created these trusts in an effort to put his assets out of reach of the FTC and other creditors." As of June 2004, the trusts were valued at $18.3 million.

The class-action lawsuit said Pukke "has hardly been skimping on his domestic lifestyle. . . . His primary residence cost him $27,906 per month, including over $24,500 for mortgage, property taxes and utilities and $1,400 for domestic help. This pales in comparison to the monthly cost of operating his secondary home, which is $84,699."

In July 2004, the lawsuit said, Pukke spent $8,119 for dining and $6,583 for travel. His monthly car payment was $10,653. With other personal and professional expenses and taxes of $75,000, Pukke claims to spend more than $390,000 a month, it said.

In opposing a motion by the class-action lawyers to appoint a receiver, Pukke lawyers argued that the plaintiffs were citing old spending habits and were not likely to succeed on the merits of the claim.

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West Virginia Sues New Jersey Bill Collector

Congress may have severely toughed bankruptcy laws, to the detriment of consumers, but state officials in West Virginia say bill collectors can't threaten and harass debtors. State Attorney General Darrell McGraw is taking an out of state collection agency to court, saying it may have violated West Virginia law.

McGraw has filed suit to compel Phillips & Cohen Associates, Ltd., a New Jersey collection agency, to comply with the Attorney General's investigative subpoena.

The Attorney General began investigating Phillips & Cohens' debt collection practices after receiving complaints from consumers that it was threatening consumers with jail, discussing the alleged debts with persons other than the consumers, and attempting to collect money for debts that have already been paid.

Phillips & Cohen is not registered to do business in West Virginia and has not posted a bond, a requirement for all collection agencies doing business in the state.

"Rogue collection agencies will not be allowed to harass and threaten West Virginia consumers," McGraw said. "Any consumers who receive repeated telephone calls from debt collectors or have debt collectors threaten them with jail or criminal prosecution should contact my Consumer Protection Division."

Story from www.consumeraffairs.com

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Profile of a Debt Collector

I catch a lot of criticism for the stance I take against debt collectors and the firms they work for, but I have to tell you that every day I come to work something happens that convinces me that I am doing the right thing. If there weren't so many crooked agencies breaking the law, there would be no need for me to stay on this soap box...but there is. Less than a month ago we implemented a new feature on this web site that allowed visitors to submit their own personal experiences with collectors and the response has been phenomenal. Already we have amassed more information on these agencies than I have been able to collect in the over twenty years I have been doing this. My staff and I sit at our desks reading the comments being submitted with our jaws on our spacebars. One would think that twenty plus years of being exposed to these slime balls I would not be easily surprised...think again...I am appalled at the way some of these people have been treated. If you have read much of my web site you know how I feel about debt collectors so I will not re-hash that in this editorial. However, I would invite you to read through the "Consumer Comments" left on the various agencies so you can form your own opinion about the depths this industry has sunk to. Here is a letter to get you started. My office received this recently, concerning a debt collector from Rodney Anthony Giove's firm, a firm associated with the Lenahan Group, in Buffalo, NY;

Giove Law Offices' legal representative BOB COLEMAN is not an attorney or a paralegal. But he'll tell you he is when he calls, just as sure as he'll tell you his name is Bob Coleman. He is a high school dropout and a racist. He is known for being proud of refusing (nor could he pass) a drug test. And he has access to your credit history and personal information. As a professional telemarketer, he has been known to steal numbers out of another company's trash for leads. He is also a con - he preys on people in vulnerable situations. He earns their trust. He makes people feel that they owe him something for being such a good friend to them. Then he convinces them to put things in their name for him and skips out on the bill. He claims that Rodney Giove will defend him if you try to seek restitution. One more thing - BOB COLEMAN is not his real name. How many more people like him work for Giove? Is Rodney Giove a real attorney? Should his unscreened employees have access to the kind of personal info that collection agents have? Would you want him knowing your address, social security number, credit history, work address and number, you relatives' and neighbors' address and phone numbers?

Don't let people like this take control of your life, and don't volunteer any information...ever. If you are being harassed by an agency and need help, call or email me, I can help you. Take care

Bud Hibbs

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Consumers Blindsided by Arbitration Clauses in Credit Card Contracts

Tens of thousands of consumers are being forced into one sided arbitration proceedings to settle disputes with their credit card companies. According to a new report by NCLC and Trial Lawyers for Public Justice, certain corporate lenders, most prominently MBNA and First USA Bank are blindsiding consumers by fast-tracking disputes over credit card debt into arbitration with the National Arbitration Forum.

The practice, as disclosed by industry data from several lawsuits, is designed to allow creditors to pursue large numbers of claims against consumers in an industry-friendly process. According to the NAF’s own documents, in cases involving First USA, the consumer prevailed in just 87 (.44 percent) of 19,705 arbitrations NAF steered to an outcome.

“Only a tiny percentage of consumers read the terms of credit card agreements, which are typically send out as bill stuffers (statements stuffed in with monthly bills), printed in tiny font and filled with dense legal jargon that’s often incomprehensible even to highly-educated consumers,” said Paul Bland, an attorney with Trial Lawyers for Public Justice. “And very few consumers understand that they’ve supposedly given up their constitutional rights and agreed that the NAF is the sole forum for any legal claims they may have involving their bank. So when consumers receive notices from our about the NAF they often believe these are junk mail or some mistake and throw them away,” said Bland.

By pushing consumers into arbitration, victims of credit-card fraud are being forced to pay debts they clearly don’t owe. By definition, arbitration says a consumer can’t go to court to have his or her story heard, even if the alleged “debt” is a result of someone else’s criminal fraud and in no way a result of the dunned consumer’s actions.

The experience of Patricia Meisse illustrates how even the most sophisticated consumer is vulnerable to this practice. Meisse, a Maryland resident and physicist at the Nuclear Regulatory Commission, was forced to submit to arbitration and abide by the resulting default judgment even though she was a victim of identity of identity theft and had nothing to do with the charges that fraudulently were run up in her name. Despite having disputed the $40,000 bills from the start, MBNA was able to obtain three default arbitration awards against her without ever proving that she had opened the accounts. The company then filed separate claims in Maryland district court to enforce the awards.

“In essence, what the credit card companies are trying - so far successfully - to achieve is access to the full power of the judicial system without any meaningful due process rights for the consumer,” says Steve Tripoli, an NCLC consumer advocate. “They’re using the arbitration process to get uncontested decisions awarding the credit card company the amount of the alleged outstanding debt, plus fees, costs, and more. It’s a neat pathway to turbo-charged profits for both the card issuer and the arbitrator.”

Story used with permission from the "OUTLOOK", spring 2005 edition, a newsletter published for the National Consumer Law Center (NCLC). Visit their website at www.nclc.org

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<<<<<<   UPDATE Mar 29, 2005   >>>>>>
 

Pompey Scam Is Back!

Desperate debt collectors do desperate things and the scam at Lenahan continues. A debt collector using the name of “Mr. Pompey,” “Officer Pompey,” “Investigator Pompey,” “Attorney Pompey” and other alias is calling consumers from the offices of Daniel & Danielle Lenahan.

The scam is the same. He threatens you with pending litigation in your county unless monies are sent immediately to the Lenahan law Offices. Attorney Danielle Lenahan has stated repeatedly that Pompey was ‘fired’ yet despite her claims we are receiving a lot of complaints of this latest scam to extort money from consumers.

The number he is calling from is: 866-645-9009 ext. #3596, which traces back to the Lenahan Law Office in Buffalo, NY.

Do not fall for this scam to steal your money. Record all conversations with anyone calling from Lenahan and affiliates. STOP payment on any checks, contact your bank and cancel credit card agreements. You do not want to be added to the list of Lenahan extortion victims.

Report all illegal debt collection activity to:

New York Sate Attorney Grievance Committee

8th Judicial District

295 Main Street, Room 1036

Buffalo, NY 14203

(716) 858-1190

 

Visit www.lenahanlawofficeexposed.com for the back story on Pompey

<<<<<<<<<<<<<<>>>>>>>>>>>>>>

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