As an identity theft lawyer, I have heard accounts from individuals who fall prey to various scams. One of the most widely-spread scams plays out similarly to this: Imagine that you are at home, and a stranger comes to your door. The stranger says that you’ve been chosen, and asks for you to immediately provide your bank account information so that he can wire millions of dollars to your account that same day, for safekeeping. Would you do it?

Free money offers can be tempting, but I don’t know anyone who would say yes to this scenario. However, there are a growing number of consumers who receive emails and faxes with similar requests, to which the consumers provide their bank account and other personal information.

The result is stolen money and stolen identity. It’s one of those “too good to be true” situations; Your friend is not stranded in a foreign country and just sending you an email to wire money. A foreign dignitary in Ghana did not randomly find you and choose you as the trustworthy individual thousands of miles away to entrust with millions of dollars.

Here are some quick questions to ask yourself, before replying to the email:
1. Does the scenario sound legitimate?
2. Do you know the sender? If so, does the email sound like an email they would send?
3. Does the email contain poor use of the English language?
4. Are they asking for personal information or money? You should never email or text bank account numbers, social security numbers, passwords, or other sensitive information.
5. Are they stating that you must submit the information immediately? If it’s a time-sensitive offer, if your “friend” has to receive the money by a certain time, it is most likely a scam.
6. Prior to this email, have you had contact or communication with the sender or the sender’s company? Ask yourself how they received your contact information. If you can not determine that, it’s most likely a scam. Legitimate companies will state in the body of the email or in the footer why you are receiving this email and where they are located.
7. Does the email request that you send money or information outside of the U.S.? Much of this electronic identity theft is happening in foreign countries.

If you suspect the email is a scam, hit delete. Do not reply.

If you find yourself a victim of one of these scams, you are not alone. The con artists pursue this low-cost tactic because of that very reason: there is little expense on their end to send an email, and the payouts can be great when consumers reply with financial information.

It is imperative that you pull your credit reports immediately — http://www.annualcreditreport.com is a trusted website where you are entitled to one free credit report from the three major credit reporting agencies every year. If you find that your identity has been stolen – if accounts that do not belong to you have been opened up in your name, etc. – contact an identity theft lawyer today.

Photo Credit: FreeDigitalPhotos.net
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Stephanie Tatar is the founding attorney of both Consumer Lawyer Network and The Tatar Law Firm. Ms. Tatar has been a consumer advocate since graduating cum laude from DePaul University, College of Law. During her career, she has fought debt collectors, credit reporting agencies, creditors, manufacturers and car dealers, achieving success at every level. Ms. Tatar is a member of the National Association of Consumer Advocates and the Los Angeles County Bar Association, and is admitted to practice in various federal and state courts, including California and Illinois.

Recent research by the Insight Center for Community Economic Development studied the impact of payday lending in the U.S. and found the practice cost the economy nearly $1 billion in 2011, equivalent to the net loss of nearly 14,000 jobs nationwide. California, Texas, and Illinois were among the leaders in states impacted by payday lending, with California alone stomaching a loss of $135 million, or 1,975 jobs lost statewide.

Payday loans, by which consumers borrow small sums for short periods of time, typically two weeks or less, are becoming increasingly popular. Fees and interest add up to annualized interest rates in excess of 300%. According to a Pew Research study on payday lending, only 14% of those borrowers can afford to pay back the loan, resulting in a series of extensions and new loans that ultimately drive a consumer to seek out some alternative cash infusion, like a tax refund, or to declare bankruptcy.

 The Insight study compared the economic impact of the money spent on payday loan interest payments to the impact that same money would have had in the local economy had it not be paid out as interest payments. Insight used IMPLAN to do the economic analysis, a software system used by the federal government, universities, and private organizations to estimate economic impact.

Insight found the economic impact of some $3.3 billion in interest payments was an additional $5.56 billion added to the economy in the form of purchases by payday lending institutions, including employee spending, owner salaries, direct business purchases, etc. That same $3.3 billion would have generated $6.34 billion in economic activity had households simply spent that money in their communities instead of using the money for interest payments. Therefore, the net loss to the economy from payday loan interest payments was $774 million. Private households are more likely to spend money directly in the community, and that likelihood increases dramatically in the lower-income communities typically targeted by payday lending establishments.

Further, the increased number of bankruptcies associated with payday lending cost the economy another $169 million, for a total impact of $943 million in 2011 alone.

Insight translated these economic losses into jobs lost using an IMPLAN model combined with more recent economic data regarding the cost to a household of a worker being away from home more hours per week to pay additional household expenses (e.g. payday loan interest payments). The overall net impact of payday lending interest payments on employment was 14,094 jobs lost. The heaviest hit sectors included offices of physicians, dentists, and other health practitioners, private hospitals, insurance carriers, and nursing and residential care facilities.

Tim Lohrentz, primary investigator and author of the Insight study, hopes the research will inform lawmakers considering limits or outright bans to payday lending. In fact, he writes, the amount of economic loss to any given state is directly related to the average interest rate charged by payday lenders. This has led some legislators, like Senator Dick Durbin (D-IL) to propose legislation capping the interest rate at 36% for all consumer loan transactions, a cap already in place for military families and for consumers in states with usury laws. States with stringent limits on payday lending, including caps on interest, see usage of the product decrease from 6.6% to 2.9%, according to the Pew study.

Alarmingly, the big banks are getting into the game as well, offering “direct deposit advance” loans, featuring annualized interest rates in excess of 400%. The Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC) proposed guidance on April 25th directing banks to stop making predatory loans that trap borrowers in a cycle of debt with 300% interest. The guidance requires banks to assess a borrower’s ability to repay and make loans that borrowers can afford to repay.  The FDIC/OCC bank guidance, if adopted and fully enforced, would address longstanding concerns expressed by consumer advocates.

Last month, the Consumer Financial Protection Bureau issued a report on payday loans that highlights ongoing consumer challenges with high-cost, short-term credit with potentially abusive features. The report confirmed that borrowers who are predominately lower-income, are charged triple-digit interest rates for a short-term loan, and that repeat borrowing is frequent.  The CFPB has the authority to examine payday lenders for compliance with existing consumer protection standards, such as those that govern electronic access to consumer’s bank account.  The Bureau also has the authority to issue new rules that could curtail some industry abuses, such as repeat borrowing.  The findings of its report argue for strong, prompt action.

All of these high interest, short term loans eventually draw impoverished families into a cycle of borrowing and debt repayment that diminishes the amount of money available for household expenses each month. Monies that would have gone into the local economy are instead rerouted to payday lending institutions frequently located out of state, and increasingly, out of the country. Therefore, regulatory institutions like the Consumer Financial Protection Bureau, along with state legislatures and Congress, should place strict limits on payday loan products, including caps on interest rates. “After all,” Senator Durbin said last month, “if you can’t make a living as a banker with 36 percent annual interest rates, then you ought to take up some other profession.” 

About the Author

Michael Wood has been a member of NACA since 2011, when he left Fortune 100 corporate management to attend law school in Chicago, IL. Mike practices as a senior law student under Ill. S. Ct. Rule 711, and is currently working with other consumer advocates to address the debt buyer problem in Cook County, IL, through a new project called Debtors Legal Aid, which provides direct legal services and education to consumers experiencing predatory debt collection. Mike can be found on twitter @mikewoodondebt, or by email: mike[at]michaeljacobwood.com.

The National Association of Consumer Advocates and a coalition of 46 other public interest organizations joined a letter urging Congress to pass the Arbitration Fairness Act of 2013, (AFA), S. 878 and H.R. 1844, introduced by U.S. Sen. Al Franken (D-Minn.) and in the House of Representatives by Rep. Hank Johnson (D-Ga.). This legislation would help reverse a trend of companies using contractual fine print to force wronged workers and consumers out of the courts and into binding mandatory (or forced) arbitration that often favors the company.

Unscrupulous businesses use forced arbitration in student loans, payday loans, credit card contracts, auto deals, rent-to-own and other everyday transactions knowing that they will not be held accountable by an impartial judge or jury, but rather by arbitrators who rely on those very corporations for business.  The contracts typically state who the arbitrator will be, under what rules the arbitration will take place, the state the arbitration will occur in, and the payment terms for the arbitration. Arbitration clauses are often contained in non-negotiable contracts and a person has no choice but to acquiesce or forgo the goods, services and/or employment altogether.

Americans should never have to give up their rights just to do the everyday things like buying a car, using a cell phone, or having a credit card.  No American should have to choose between their right to access our justice system or having a car or a phone.

“With nearly no oversight or accountability, businesses or their chosen arbitration firms set the rules for the secret proceedings, often limiting the procedural protections and remedies otherwise available to individuals in a court of law,” the coalition letter says. “For example, the ability to obtain key evidence necessary to prove one’s case is restricted or eliminated. In addition, the exorbitant filing fees, continuous fees for procedures such as motions and written findings, and ‘loser pays’ rules in arbitration are prohibitive to many individuals, particularly in this weak economy when so many Americans are struggling just to make ends meet.”

The AFA would ban forced arbitration in consumer and employment contracts, although it would not affect collective bargaining agreements. Voluntary arbitration and other forms of dispute resolution would remain intact. The legislation is designed to restore the congressional intent behind the 1926 Federal Arbitration Act (FAA), which provided for parties of similar power to resolve disputes through arbitration

The U.S. Supreme Court’s interpretation of the FAA was broadly expanded to permit corporations to prevent consumers and employers from joining together in class actions. On April 27, 2011, the court ruled in AT&T Mobility v. Concepcion that companies can use arbitration clauses to ban class actions in the fine print of contracts. As a result, thousands of valid legal claims by consumers and employees that expose corporate abuses have been suppressed and prevented from having their day in court. A 2012 NACA survey of hundreds of consumer lawyers found that the vast majority were much less likely to represent consumers in arbitration than they would be to represent consumers in court.

“The Concepcion ruling makes it all the more vital for Congress to pass the AFA to provide individuals with a choice to arbitrate a claim rather than forcing them into arbitration,” says the letter. “The AFA would eliminate use of these pre-dispute clauses in consumer and employment contracts, returning the FAA to its original intent to facilitate private arbitration between sophisticated parties on equal footing.”

“By being forced into binding mandatory arbitration, an estimated 30 million non-union workers have lost essential protections established by our nation’s civil rights laws,” the coalition writes, providing a long list of fundamental legislated protections that are threatened by forced arbitration:

“Other laws at risk include provisions of the Civil Rights Acts of 1964 and 1991, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Family and Medical Leave Act, the Fair Labor Standards Act, the Equal Pay Act, USERRA, the Sherman Antitrust Act, the Securities Act of 1933, the Securities Exchange Act of 1934, the Sarbanes-Oxley Act, the Dodd–Frank Wall Street Reform and Consumer Protection Act, the Servicemembers Civil Relief Act, the National Defense Authorization Act for Fiscal Year 2013 (amending the Military Lending Act), the Lilly Ledbetter Fair Pay Act of 2009, the Telephone Consumer Protection Act, the Fair Debt Collection Practices Act, the Credit Repair Organizations Act, the Electronic Fund Transfer Act, the False Claims Act, the Fair Credit Reporting Act, the Right to Financial Privacy Act, the Real Estate Settlement Procedures Act, the Truth in Lending Act, and the civil provisions of the Racketeer Influenced and Corrupt Organizations Act.”

The organizations sending this letter are:

9to5

Association of University Women (AAUW)

American Federation of Labor-Congress of Industrial Organizations (AFL-CIO)

Alliance for Justice

American Association for Justice

American Civil Liberties Union

Americans for Financial Reform

Center for Justice & Democracy

Center for Responsible Lending

Citizen Works

Committee to Support the Antitrust Laws

Consumer Action

Consumers for Auto Reliability and Safety

Consumer Federation of America

Consumer Watchdog

Consumers Count

Consumers Union

DC Consumer Rights Coalition

Every Child Matters Education Fund

Empire Justice Center

Homeowners Against Deficient Dwellings

Home Owners for Better Building

Lawyers’ Committee on Civil Rights under the Law

Leadership Conference on Civil and Human Rights

Maryland Consumer Rights Coalition

NAACP

National Association of Consumer Advocates

National Association of Shareholder and Consumer Attorneys (NASCAT)

National Community Reinvestment Coalition

National Consumer Law Center (On behalf of its low income clients)

The National Consumer Voice for Quality Long-Term Care (formerly NCCNHR)

National Consumers League

National Council of La Raza

National Fair Housing Alliance

National Employment Law Project

National Employment Lawyers Association

National Partnership for Women & Families

National Women’s Health Network

National Women’s Law Center

New Jersey Citizen Action

People for the American Way

Public Citizen

Union Plus

U.S. Public Interest Research Group

West Virginia Association for Justice

West Virginia Citizen Action Group

Woodstock Institute

The National Association of Consumer Advocates (NACA) is known throughout the country as the premier association for veteran and less experienced consumer attorneys alike.  However, we would like to expand our reach to include more law schools and law students.  In many law schools across the country, a law student can earn her JD without ever hearing the term consumer law. NACA believes that consumer advocacy, whether done in a legal services organization, a firm, a government sector position, or as a solo-practitioner, offers students a wealth of career possibilities that will allow them to both do good work and do well financially.

This year, NACA has already started offering more regular Free Public Interest webinars open to NACA members, legal services attorneys, and law students.  These free webinars average one per month and have covered a wide range of topics including Federal Trade Commission Updates, Private Practice Legal Services Partnerships, What You Need to Know about the Attorneys General Mortgage Settlement, and many more.  However, NACA isn’t content to stop there.

The National Association of Consumer Advocates is striving to meet the educational, professional development, and networking needs of tomorrow’s attorneys. Later this year, once we cultivate interest, NACA plans on launching a series of interactive, web-based learning opportunities for law students.  These webcasts will feature successful, well-known NACA attorneys who will share a bit about their career trajectory; how they rose to the level they are now in their field, why NACA has been an important resource for them.  If you are a NACA attorney willing to share about your career as a consumer advocate with law students and up-and-coming attorneys, please email Chelsea Langston at chelsea@naca.net.

NACA already has a few pockets of involvement from law students and law schools around the country. However, we are working to expand our presence among law students as individuals and among law schools as a potential student organization. You can help us with these efforts.  If you have a connection to a law school, whether as a professor, lecturer, alumni, clinical faculty, volunteer, or in any other capacity, we want to hear from you. Please email Chelsea Langston at chelsea@naca.net to help us connect with your law school. Let NACA provide the law students you know with the resources you know they need to succeed in today’s workforce.

That’s what we’d like to know.  In February 2012, State Attorneys General, working with the Department of Justice and HUD, announced a 49 state, $26 billion National Mortgage Settlement (NMS) with the 5 largest mortgage servicers (Ally Financial, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo).  The settlement establishes nationwide servicing standards for the 5 mortgage servicers to follow. While they are far from perfect, the servicing standards are designed to better protect homeowners and prevent foreclosure process abuses.  But now over a year into the settlement we want to know—are the NMS servicing standards actually helping homeowners?

The NMS establishes a Monitor position, held by Joseph Smith, and the Office of Mortgage Settlement Oversight (OMSO) whose job it is to oversee the servicers and to identify patterns or practices in violation of the settlement.  According to the settlement, assessment of the servicers’ compliance with the servicing standards is measured using 29 predefined metrics put together by the OMSO.  Unfortunately, these metrics do not incorporate all of the settlement servicing standards. However, Monitor Smith is permitted to add 3 discretionary metrics as well as create additional metrics as needed should he and the OMSO find patterns of noncompliance “reasonably likely to cause harm to consumers.” The Monitor’s website hosts online complaint forms where homeowners and advocates of homeowners can report noncompliance by the servicers with the terms of the settlement.  By submitting these reports of noncompliance to the OMSO, consumer advocates and attorneys could demonstrate that there is a need for new metrics to conduct a more thorough and transparent review of the banks’ compliance with the settlement.  However, the specifics of the noncompliance data submitted to OMSO by homeowners and advocates are not available to the public.

On April 17th, Smith admitted in his testimony before the U.S. Senate Banking Committee that problems with servicing standards, including single points of contact, dual tracking, and the loan modification process in general, are still occurring “all too often.” Smith acknowledged concerns that the banks are discriminating against poorer communities and not targeting the homeowner relief, specifically principal reductions, required under the settlement to those areas.

California consumer advocates report that mortgage servicers are violating several of the consumer protection provisions mandated in the settlement, according to a recent survey by the California Reinvestment Coalition.  One of the top problems that persist for CA homeowners is dual tracking, which occurs when a bank fails to stop the foreclosure process while borrowers are negotiating in good faith for a loan modification. Over 60% of counselors reported that Bank of America, Citibank, JPMorgan Chase and Wells Fargo still dual track “sometimes,” “often,” or “always,” even though this practice should have ended months ago under the NMS and the California Homeowner Bill of Rights (HBOR) legislation.

NACA is also investigating whether the settlement servicing standards are working on a national scale. Given the unavailability of detailed noncompliance data collected by OMSO, NACA, along with Southeastern Ohio Legal Services, designed the NACA National Mortgage Settlement Survey Database, located at www.nacamortgagedatabase.org, for attorneys from all over the country to submit instances of servicer noncompliance with the servicing standards.  Beginning May 15^th, NACA will be collecting client-advocate reports of noncompliance from NACA attorneys and approved legal services attorneys into a central database repository until the completion of the settlement. The database will also track whether fair lending violations are occurring, a feature not currently tracked in complaints being submitted to the OMSO.  All responses to the survey database will be forwarded regularly to the OMSO and the Consumer Financial Protection Bureau (CFPB).  This will allow advocates to see what noncompliance is still occurring around the country on a more specific basis while reporting to OMSO and CFPB at the same time.

The NACA database will be accessible to participating advocates to support claims and defenses based on abusive servicing behavior.  In addition, if our database responses show sufficient patterns of noncompliance, we hope that the Monitor Smith and the OMSO will act accordingly to determine that additional metrics are needed to adequately assess servicers’ performance in a more transparent and fair manner for homeowners.  NACA’s data could also encourage better enforcement by the CFPB and the state attorneys general against mortgage servicing abuses.

On May 15^th, NACA goes live with the NACA National Mortgage Settlement Survey Database, located at www.nacamortgagedatabase.org.

NACA’s Military Consumer Justice Project (MCJP) has been selected for the honor of presenting at this year’s Equal Justice Conference, put on by the American Bar Association (ABA) and the National Legal Aid and Defender Association (NLADA). The Equal Justice Conference will take place May 9-11, 2013 at the Hyatt Regency St. Louis at the Arch, in St. Louis, Missouri.  NLADA and the ABA’s Standing Committee on Pro Bono and Public Service provide this educational forum for those in the legal services and pro bono community.

The Military Consumer Justice Project’s proposal for a session on consumer justice for service-members was chosen through a competitive selection process. NACA’s MCJP is joining forces with the Tarrant County Bar Association to offer a joint session focusing on developing relationships to advocate for both active service-members and veterans. This workshop is titled: Building Strong Partnerships to Promote Justice for Service-Members and Veterans.

This joint session between the National Association of Consumer Advocates’ Military Consumer Justice Project and the Tarrant County Bar Association will begin with an introduction from both organizations and brief explanation of why it is important to advocate for current miltitary service-members and those who served our country in the past (veterans).  We will explain how although we are using different methods, both of our organizations are striving towards the common goal of furthering justice for those associated with the military.

Two members of NACA’s Military Consumer Justice Project will describe establishing contacts with military bases, understanding military command structure and culture and how to work effectively within it, the type of consumer education and litigation trainings that will benefit the military base, how to tailor the presentation to the audience, and how to access educator resources. The session will also explore how to establish working relationships with JAG and military legal assistance officers to best serve military servicemembers.

NACA’s presentation will enhance legal services and pro-bono attorneys’ cultural aptitude regarding the military.  Participants will be able to identify the key features of military culture and specific areas where service members face consumer challenges.  Additionally, participants will learn strategies for establishing connections with military base/servicemembers.  The interactive lecture format will help garner audience feedback for the diversity of knowledge that currently exists among the legal community with respect to military culture and rank structure.

The second half of the session will illustrate  how a small/medium size bar association, such as Tarrant County Bar Association, can create a sustainable pro bono program to help veterans.  The course studies how a statewide program was adapted to meet the needs of the community; and, how by creating partnerships, the program has run with a low budget and mostly on volunteer hours. The session will further equal justice for the veteran’s community by highlighting the unique legal needs of that community and the challenges that the legal community faces when reaching out to that population.

The joint session will conclude with one speaker from the Tarrant County Bar Association and one speaker from NACA’s Military Consumer Justice Project discussing 3-5 key tactics that apply to building strong partnerships in both programs.  The workshop will also conclude with the comparison of the two organizations’ techniques and experiences of helping veterans and service-members and the rewarding results from their programs.

NACA’s Education Committee is currently accepting new committee members.  NACA’s Education Committee formed more than two years ago.  From its inception, the committee’s mission has been to provide NACA members with the learning opportunities they need to reach their potential as successful consumer advocates.  Since its founding, the committee’s focus has grown and changed.  As NACA’s webinar program grew from a pilot program two and a half years ago to at least one webinar per week , the committee’s vision has also expanded.

The committee has helped to develop the concept of NACA’s webinar program as one which offers members a wide range of legal substance subjects and professional development forums.  The committee has helped to shape the current webinar schedule, where we aim to cover webinars on legal substance, trial practice, hot topics in policy and case-law, and business-pragmatics subject-matter. Within the category of substantive consumer law webinars, the committee has helped to flesh out a diverse roster that includes FCRA, FDCPA, Auto Fraud, Foreclosure and Mortgages, TILA, TCPA, Arbitration, the UCC, Class-Actions, and more.

Last year, the committee also provided the necessary feedback to develop two new “tracks” for our webinars.  Up until that point, NACA had primarily been creating webinars aimed at NACA members in private practice.  With the committee’s help, this year we are launching a track of “Free Public-Interest” webinars on a wide variety of topics relevant to legal services and non-profit sector advocates.  NACA is also in the process of launching a track of free webinars for prospective NACA members, such as law students, legal assistants, and new attorneys.  This track of webinars will feature well known NACA attorneys providing advice on consumer law basics within a specific field, as well as the resources and benefits NACA provides for consumer law beginners.

We are currently seeking both new and veteran NACA members interested in the educational future of NACA to consider joining the newly named Education and Outreach Committee.  The Education and Outreach Committee (EOC) will continue the work it has undertaken for the last two years, but with greater involvement, authority and purpose.  The EOC will play an integral role in shaping the 2014 NACA webinar schedule for members, prospective members, and legal services attorneys. It will also help us cultivate a wider audience and develop NACA’s educational brand, so any NACA members with marketing know-how are especially encouraged to join.  Please contact Chelsea Langston at chelsea@naca.net for more information.

“Help! I’ve Been Sued For My Credit Card Debt!”

I suspect that, other than the news that a loved one has been hurt or injured, there aren’t many things more frightening to most people than being served a Summons & Complaint in a lawsuit.

You are already aware that you haven’t been paying your credit card bill, and it’s likely for a good reason. After all, it’s a pretty rare person who intentionally ignores their bills. Most likely, you or your spouse has lost a job, or your circumstances have changed. Faced with a choice between feeding your kids or paying your credit card, the kids win – and rightfully so. Your family should be your first priority when triaging your bills.

Months pass, you ignore the daily phone calls from your credit card company, then you ignore the calls from the collection agency who buys your account from your credit card issuer. You may even forget about the credit card bill, or at least, push it to the back of your mind.

And then, you answer a knock at your door. A process server hands you papers and walks off.

You’ve been served. Oh, smack.

The papers are almost incomprehensible because of the convoluted language, the disclosures, the fine print – but you understand the gist of the message: someone is suing you, and now you don’t know what to do.

This is the point where panic sets in for most people. You call a couple of local attorneys, and they quote you outrageous rates for defending a lawsuit, so you make one of two choices:

• You ignore the lawsuit, or
• You try to defend it yourself.

Each of these choices is terrible for you, and will cause you more grief down the road.

Ten Reasons Why You MUST Answer, But Why You Should NEVER Defend, Your Own Debt Collection Lawsuit:

1. The Lawsuit Will Not Go Away. You cannot afford to ignore a lawsuit. This is what the debt collectors want you to do. They know that most of the suits they file (and they file them by the thousands, clogging up the courts) will result in a default judgment. Once a debt collector obtains a default judgment, the judgment will earn interest every year (10% in California, where I practice), it will haunt you for years, and you will never know when your wages will be garnished or your bank account will suddenly be emptied by a levy placed by your creditor.

 2.  You Are An Untrained Warrior, Up Against Professionals. It doesn’t matter how bright you are, or whether you took Business Law 101 in college, or what your Friend Who Practices Divorce Law tells you. Debt collection defense, like any area of law, requires specialized knowledge and skills. Your adversary does nothing, all day long, but sharpen their teeth, twirl their moustache, and intimidate & harass debtors like you. I guarantee you’re probably smarter, more charming and better-looking than me, but I do know more about this narrow area of life than you.

 3. Even Though Collection Agencies & Collection Law Firms Are Pros, They Tend To Be Lazy. Debt Collectors operate a volume business, depending on default judgments and people representing themselves. When faced with serious opposition from an attorney who will force them to prove every element of their case, and who will create work for them, it’s not uncommon for the collection agency to simply drop out, and move on to easier prey, much like hyenas will do in the jungle.

 4. The Internet is a Big Pack of Lies and Misinformation. If you decide to defend yourself, you will naturally turn to Google to get help. There is some valuable and wildly useful information available on the intertubes to help you, if you take this route. Unfortunately, the gold is mixed in equally with the dross. There is a lot of terrible and even dangerous information available, which could hurt or even destroy your case.

 5. You May Have Valid Defenses to the Suit. Often, when I defend collection cases, my adversary (the opposing lawyer) begins to get upset and says, “Look – the only question here is whether your client owes the money or not.”

 I have news for you: they’re wrong. Spectacularly, devastatingly wrong. The question is far more than whether you owe the money or used the credit card; the questions are:

• Can this particular plaintiff prove that they have the right to sue you? In other words, do they actually own the debt?

• Can they prove that you owe the money?

• Can they prove that, even if you DO owe the money, that you owe it to them or their client?

• Did they bring their suit in a timely and proper manner?

Most of the time, the answer to one or more of these questions is a resounding “NO.” And if that’s true, you win your case.

6.  You May Have Valid Counterclaims Against The Collector Or Their Client. There are a multitude of laws which protect you, the consumer, from harassing behavior, or from bad behavior in general, from your creditors. There are federal laws, as well as laws in every state, which exist for your protection. Your attorney will be aware of these laws, and of how to use them to your advantage.

 7. You Are Emotionally Involved. Your Attorney Is Not. There’s a reason even skilled attorneys will hire another attorney to represent them in legal matters: emotions. It’s much easier to make accurate decisions when you have some distance from an issue.

 8. Debt Defense And Consumer Rights Attorneys May Be More Affordable Than You Think. Often, you can find someone to represent you for a flat fee in a credit defense case, and that fee will almost always be less than what you will be paying to the creditor once they begin garnishing your wages. You can locate a highly skilled consumer attorney by looking at the listings at the National Association of Consumer Advocates website.

9. Bankruptcy May Be A Better Option For You. Many consumer attorneys are also bankruptcy practitioners, or can refer you to a skilled bankruptcy attorney. Depending on your circumstances, you may find that a bankruptcy filing will be both affordable and the best solution to your issues. Bankruptcy literally provides a ‘fresh start’ to someone who is suffocating under a mountain of debt.

10. Many Attorneys Offer Free Consultations. Take advantage of the free consultation offered by most consumer and bankruptcy attorneys. You’ll learn a lot, and have a chance to make an informed decision about your best course of action.

California Consumer Rights Attorney Eric Ridley helps good people in Ventura & Los Angeles counties who are having bad times, by providing bankruptcy, debt defense, and consumer rights services. You can reach him by email: ridley.eric@gmail.com, or at (805) 244-5291.

I had the pleasure of attending the Loyola Consumer Law Review’s symposium, Debt Collection in the Modern Economy, interestingly featuring advocates from both sides of consumer law. Representing consumer advocates were Dan Edelman, Rand Bragg, and NACA Executive Director Ira Rheingold, among other distinguished advocates (see program here). I will include some takeaways from some of the sessions below. All proceedings will be published by the Loyola Consumer Law Review this summer.

Ira Rheingold delivered an impassioned luncheon address on the plight of the consumer in the face of growing income inequality. He addressed the previous middle class model of one earner earning enough to support a household,  and contrasted it with the increasingly common two-income household. While today’s middle class households earn more money, they have far less discretionary income as housing and education costs have skyrocketed. Further, consumers have more financial companies pressuring consumers with sub-prime and predatory loan products, often trapping consumers in a cycle of debt repayment. He urged the audience to read The Two Income Trap by Elizabeth Warren and Amelia Tyagi.

Dan Edelman gave update on the debt buyer industry. He expressed particular concern with the amount of charge-offs nationwide being two-three times the amount of debts purchased each year, meaning that debt is being sold multiple times. Financial institutions that sell debt are not getting the full average purchase price of four cents on the dollar as they do not profit when debt buyers resell debt downstream. This cuts against the argument that debt buyers play a meaningful role in the bottom lines of the companies from which they purchase debt. Even at 4%, the effective charge-off rate in 2009 was 9.02% instead of 9.4%, a nominal decrease. The paltry sums credit grantors get for selling debt do not justify the severe impact on consumers of debt collectors attempting to collect 100% and more on charged off debts.  Multiple sales of debt also exacerbate the problem of missing information and documentation. Mr. Edelman said, citing the recent 2013 FTC Report on the debt buying industry, “[i]n purchase and sale agreements obtained in the study, sellers generally disclaimed all representations and warranties with regard to the accuracy of the information they provided at the time of sale about individual debts — essentially selling debts, with some limited exceptions, ‘as is.’” Overall, Mr. Edelman expressed deep concern over the divorce of the social cost of collecting from the credit granting process. Creditors’ need to protect their reputation with consumers at one time tempered their collection tactics, so as not to drive consumers to other providers once consumers were back on their feet. Debt buyers are not burdened with concerns about reputation and therefore collect far more aggressively with fewer consequences. Mr. Edelman’s report is extensive and will be available when  the symposium is published by the Loyola Consumer Law Review. The FTC report is available here.

Rang Bragg discussed the No Lawyer Involvement Disclaimer, which is an unsigned letter on law firm letterhead that states “at this time, no attorney with this firm has personally reviewed the particular circumstances of your account.” Consumer advocates are concerned that consumers will not understand the disclaimer, and believe they are being contacted by an attorney instead of a debt collector. There is a circuit split as to whether suggesting law firm involvement, even with the disclaimer, deceptively sends the message to the consumer that the “price of poker has gone up” when it has not. The least sophisticated consumer may believe that the law firm is acting as an attorney and that therefore, their “property and interests are in some potential jeopardy.” The disclaimer may not be enough to convince the consumer that the lawyer is only acting as a debt collector at that time. The Second Circuit held such a letter did not violate the FDCPA in Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360 (2d Cir. 2005). But the Fifth Circuit and the Third Circuit have held that an unsigned collection letter on letterhead of a law firm disclaiming any attorney involvement violated the FDCPA. Lesher v. Law Office of Michell N. Kay, P.C., 650 F.3d 993 (3d Cir. 2011); Gonzalez v. Kay, 577 F.3d 600 (5th Cir. 2009). Mr. Bragg described the use of survey data to establish the violation in those cases, expressing concern that such survey evidence may not be admitted in the Seventh Circuit, where the Symposium was held, and where no such case has reached the Court of Appeals.

The state of debt collection in the modern economy is poor. Consumers face economic pressures from both ends as disposable income drops while predatory lending grows by way of new products like internet direct deposit loans. As more players enter the chain of debt purchasers, more companies need to remove a profit, whether they are attorneys or debt collectors, or both. That profit comes directly out of the pockets of struggling consumers who would otherwise spend that money in their local economy. As Ira grimly pointed out, consumer advocacy continues to be a growth industry.

About the Author

Michael Wood has been a member of NACA since 2011, when he left Fortune 100 corporate management to attend law school in Chicago, IL. As a law student, Mike served as a legal extern for the Honorable Ruben Castillo in the Northern District of Illinois, a law clerk for the Attorney Registration and Disciplinary Commission, and has clerked with several legal aid organizations in the Chicago area. Mike practices as a senior law student under Ill. S. Ct. Rule 711, and is currently working with other consumer advocates to address the debt buyer problem in Cook County through a new project called Debtors Legal Aid, which provides direct legal services and education to consumers facing debt buyer issues. Mike can be found on twitter @mikewoodondebt, or by email at mike@michaeljacobwood.com.

One of NACA’s most well-known and successful consumer attorneys, O. Max Gardner, recently wrote a blog post on his website, http://www.maxbankruptcybootcamp.com/, that we thought was worth sharing. If you want to learn more about Bankruptcy Discharges from Max, make sure you order Max Gardner’s Bankruptcy Bootcamp Webinar from NACA’s Training Library by logging into the Members Only section of www.naca.net and clicking on Training and Education, then selecting Training Library.

Protecting Your Client’s Discharge

Written by Editor, Uncategorized

Discharge violations are rampant, and if not addressed those violations prevent a bankruptcy client from receiving the full benefit of the bankruptcy discharge.  In most cases, the consumer bankruptcy client won’t receive the fresh start bankruptcy law is meant to provide without aggressive prosecution of discharge violations.  Tackling those violations improves client satisfaction and the likelihood of referrals from past clients, but there’s another reason to aggressively pursue discharge violations as well:  most consumer bankruptcy attorneys are leaving money on the table in every bankruptcy case by ignoring those violations.

Discharge violations are the single biggest source of revenue in Max’s bankruptcy practice.  Max discusses discharge violations at length during the Bankruptcy Boot Camp, but now there’s another option:  if you’re not quite ready for the full Boot Camp experience or want a jump start on discharge violations, check out NACA’s webinar recording on Max Gardner’s Bankruptcy Bootcamp: Discharge Violations in the Members Only Training Library.