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IRS's private debt collectors accused of breaking the law

Four U.S. senators say the firm pushes taxpayers into risky financial moves

After Congress allowed the Internal Revenue Service to hire private debt collectors to handle severely delinquent taxpayer accounts, a number of critics – including the IRS Taxpayer Advocate – warned that it probably wouldn't end well.

Now, four Democratic members of the U.S. Senate have fired off a letter, obtained by The New York Times, to Pioneer Credit Recovery, one of the firms hired by the IRS, suggesting the company has stepped over legal boundaries in its effort ...

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    Florida and feds tag team debt settlement companies

    The settlement puts three companies out of business

    The state of Florida and the Federal Trade Commission (FTC) have reached a settlement with the operator of several debt settlement companies after filing a lawsuit last year.

    The state and federal governments teamed up to bring charges against Chastity Valdes and the companies she controlled, Consumer Assistance LLC, Consumer Assistance Project Corp. and Palermo Global LLC.

    The charges specifically accused the companies of targeting consumers with student loan debt with illegal debt relief offers.

    The suit claimed the companies took up-front fees in return for their promised debt relief and credit repair services. They allegedly promised victims they could reduce the amount of their student loans and repair their credit.

    Tough loan to get out of

    Student loans, of course, are among the most binding of debts and can't even be discharged in bankruptcy.

    Among the laws the defendants were accused of violating are the Florida Deceptive and Unfair Trade Practices Act, the FTC Act, the Telemarketing Sales Rule, and the Credit Repair Organizations Act.

    The settlement essentially puts the companies out of business. Under the terms of the agreement, they cannot sell debt relief and credit repair services, and can't even make any material claims about any products or services.

    They are also prohibited from misrepresenting endorsements, making money from consumers’ personal information, and being careless in the disposal of personal information.

    They would also be required to cough up $2.3 million in damages, if they had it. Since they don't, they have to turn over all of their assets to Florida and federal authorities. If it turns out they weren't being truthful about the amount of the assets, the full $2.3 million judgment will be imposed.

    Avoiding debt settlement pitches

    Debt settlement schemes most commonly target people with large amounts of credit card debt, usually making it sound like it's easy to get credit card companies to agree to accept a fraction of what is owed.

    That's hardly the way it works. When a consumer stops making payments, as advised by a debt settlement company, he or she is besieged by debt collectors. In the process, the consumer's credit score craters.

    The FTC doesn't say you should never try to settle your debt, but it does say you need to be very, very careful. And you should always avoid doing business with a debt settlement firm that charges an upfront fee, which is illegal.

    Remember, you can talk to your credit card company yourself, and will probably have better luck than a debt settlement company will.

    Learn more about what the FTC advises on debt settlement here.

    The state of Florida and the Federal Trade Commission (FTC) have reached a settlement with the operator of several debt settlement companies after filing a...

    Federal, state authorities sue New York debt collectors

    Defendants allegedly ran roughshod over consumers' rights

    There are several ways debt collectors can step over the line when they try to collect money from consumers. A lawsuit claims Buffalo, N.Y. debt collectors tried just about all of them.

    New York Attorney General Eric Schneiderman and the Consumer Financial Protection Bureau (CFPB) have filed a federal court lawsuit against two individuals who Schneiderman alleges were operating a network of “fly-by-night collection shops that harass, threaten, and deceive” consumers so that they would pay money they might not owe.

    The lawsuit seeks to close the debt collection operations and to compensate consumers affected by the debt collection efforts.

    Threats and deception

    “These collection shops inflated debts, threatened victims, and deceived them out of millions,” Schneiderman said.

    CFPB Director Richard Cordray says the debt collectors used fear and intimidation tactics to force consumers to pay debts, without verifying or proving that they actually owed the money.

    The Fair Debt Collections Practices Act sets out consumers' rights when it comes to collecting debts and places strict limits on what collectors can say or do. When collectors violate these rules, they can often force consumers to pay money they do not legally owe.

    List of charges

    The suit makes a number of accusations. It claims the defendants violated the Fair Debt Collection Practices Act in its interactions with consumers. It also claims they ran afoul of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which bars unfair and deceptive acts or practices in the consumer financial marketplace.

    The suit claims “repeated fraudulent acts and deceptive acts or practices” in violation of New York law, which also has provisions covering debt collection.

    The specific charges provide a laundry list of things a debt collector is not supposed to do: inflating the amount owed by taking on fees they aren't allowed to collect; threatening legal action against the consumer when there were no grounds to do so; and telling consumers they would be arrested immediately if they didn't pay up.

    The suit is a good reminder that consumers have options when a debt collector is trying to collect a dubious debt. Among the key provisions is the right to see verification of the debt.

    The Federal Trade Commission spells out consumers' rights here.

    There are several ways debt collectors can step over the line when they try to collect money from consumers. A lawsuit claims Buffalo, N.Y. debt collectors...

    Student loan borrowers are paying for free services

    Consumer groups urge for a federal crackdown on the debt relief industry

    Back during the foreclosure crisis, debt relief companies took to the cable TV airwaves to promise consumers help getting out from under debt – for a fee.

    The foreclosure crisis is now pretty much history, so the pitch now is to help students get out from under crushing student loan debt – for a fee.

    Student Debt Crisis, a consumer advocacy group, warns consumers to ignore these pitches while pushing the U.S. Department of Education to crack down on them.

    According to the group, student loan borrowers are the targets of aggressive marketing by companies that promise debt relief. The group says clients of these firms pay on average $600 for debt relief services.

    But according to Student Debt Crisis, these same services are free. It's calling on the Department of Education and the Consumer Financial Protection Bureau (CFPB) to issue cease and desist letters to these companies, establish policies that educate borrowers and protect them from scams, and use available enforcement tools to shut down companies that are found guilty of misleading borrowers and violating federal law.

    'Rein in these private companies'

    “It is time for the federal government to rein in these private companies that take advantage of thousands of distressed student loan borrowers across the country,” the group said in a blog posting. “Companies that advertise student debt relief, forgiveness, and consolidation services that are completely free of charge need to be closely monitored and shutdown if found guilty of misrepresenting themselves or violating federal consumer protection laws.”

    The Department of Education is already on record warning student loan borrowers not to pay for free services. In a recent blog posting, the department cautioned consumers paying back student loans not to fall for pitches that sound too good to be true. As examples, it pointed to internet ads claiming President Obama could easily forgive student loan debts.

    The government agency says that, while it is true there are some programs available to assist student loan borrowers, there is no fee for applying.

    Want to find out more? Here's the link for information about a legitimate way to reduce your debt. Here's the link to information about how to reduce payments.

    And it bears repeating – there is absolutely no charge for accessing these programs.

    Back during the foreclosure crisis, debt relief companies took to the cable TV airwaves to promise consumers help getting out from under debt – for a fee....

    Debt collectors face tighter regulation by feds

    Rules would shift burden of proof from consumer to collector

    There are an estimated 6,000 debt collection firms in the U.S., making it a huge industry. According to the Consumer Financial Protection Bureau (CFPB), it affects around 70 million consumers who have some debt in collection.

    Some of this debt is legitimate, some is not. Currently the burden of proof to show which is which falls on the consumers. Under proposals outlined by the CFPB, much of the burden would shift to the debt collection industry.

    “Today we are considering proposals that would drastically overhaul the debt collection market,” said CFPB Director Richard Cordray. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

    Under the proposed rules, debt collectors would be required to limit their communications, clearly disclose the details of the debt, and make it easier for consumers to dispute the debt. When a consumer disputes a debt, a debt collector would not be able to continue collection efforts without providing sufficient evidence that the debt is real.

    Sea change for the industry

    If enacted, these proposals could bring about a sea change in the industry. Some of the biggest problems occur when a debt collector purchases an old debt from a bank or credit card company. Because the debt is old and has changed hands, the paper trail may be thin or missing.

    Nonetheless, there have been instances where debt collectors have hammered away at consumers, even hauling them to court, over debts they insist are not legitimate. A case in point occurred in May 2015, when Portfolio Recovery Associates LLC, one of the largest buyers of written-off debt in the U.S., tried to collect a $1,000 credit card debt from Maria Guadalupe Mejia, who insisted the debt wasn’t hers.

    The jury decided the evidence showing the debt was not hers was so clear and overwhelming, it not only dismissed the case but awarded Mejia an $83 million judgment. In its blog, the CFPB says debt collection complaints outnumber all other types it receives.

    250,000 debt collection complaints

    “We have handled about 250,000 debt collection complaints since 2011 and have handled about 85,000 in 2015 alone,” the agency said. “We have ordered creditors and debt collectors to refund hundreds of millions of dollars through our enforcement actions against unlawful debt collection practices since 2011.”

    Among complaints about debt collection, CFPB says the majority concern continued attempts to collect a debt that the consumer said was not owed, either because it wasn't their debt or had already been repaid or discharged in bankruptcy.

    CFPB says consumers sometimes pay a debt that isn't theirs just to get rid of the debt collector. Other times, consumers spend time and money to dispute the debt. The proposed CFPB rules would shift the burden of proof from the consumer to the debt collector.

    In the meantime, CFPB says that if you're having trouble with debt collection, you can submit a complaint to the CFPB online or call (855) 411-CFPB (2372).

    There are an estimated 6,000 debt collection firms in the U.S., making it a huge industry. According to the Consumer Financial Protection Bureau (CFPB), it...

    Debt collector calling? Here's what to do

    First, know your rights under the Fair Debt Collection Practices Act

    Some consumers are caught off guard when a debt collector calls and may take actions or make statements that are damaging to their position. The law, after all, gives consumers rights when it comes to dealing with creditors.

    The law in question is the Fair Debt Collection Practices Act, which spells out clearly what debt collectors can and can't do. That's why consumers should be familiar with the law, especially when an account is turned over for collections.

    No one is arguing that consumers should try to weasel out of paying legitimate debts, but there is also no reason to allow yourself to be exploited by a debt collector who is skirting around the law.

    Under the law, you do not have to talk to a debt collector, but the Federal Trade Commission (FTC) says you might want to, at least once, to see if you can resolve the issue.

    Stopping contact

    But at any time, you can request the debt collector stop contacting you. Here's how:

    Write a letter instructing the collector not to make further contact. Send a copy to the collector by certified mail and pay for a return receipt. After that, a debt collector may contact you only to tell you there will be no further contact, or to tell you the creditor plans to file a lawsuit.

    Keep in mind, cutting off communication with a debt collector increases the likelihood of litigation. If the debt is illegitimate, maybe that's not a concern. Remember, cutting off contact does not make a legitimate debt go away.

    If a debt collector calls about a debt that you know you do not owe, you can stop the calls by sending a letter – again by certified mail – stating you don't owe the money and asking for verification of the debt. You must send it within 30 days of receiving a validation notice. The collector may resume contact if it can prove you owe the money.

    Old debt can be new again

    In recent years debt collectors have purchased old debt from credit card companies for pennies on the dollar and attempted to collect it, even though in many cases the statute of limitations had expired and the credit card company had written off the debt.

    The credit card site Credit.com warns consumers they should be very careful should they receive one of these debt collector calls. By saying the wrong thing – like admitting to owing the money – or making even a small payment, can start the clock again. 

    Sometimes a debt collector will hound a consumer over a debt that doesn't exist, or belongs to someone else. When that happens, the consumer should consider legal action if the hounding persists.

    Last year a debt collector sued a Missouri woman for a debt she insisted was not hers. When the jury heard her story, it not only dismissed the case, it awarded her $83 million from the debt collection company in punitive damages.

    Some consumers are caught off guard when a debt collector calls and may take actions or make statements that are damaging to their position. The law, after...

    Missouri AG suggests abusive debt collectors target minorities

    Seeks reforms to reduce "serial" debt collection lawsuits

    Aggressive and abusive debt collection practices persist, despite laws and court rulings affording debtors more protections.

    Missouri Attorney General Chris Koster says he's troubled by the fact that racial minorities appear more likely to be on the receiving end of these abuses. While it is impossible to determine who is getting the harassing phone calls, it is possible to tell who gets hauled into court.

    Koster says his state has witnessed a dramatic increase in debt-collection litigation in recent years. Charged-off debt, or debt that has been deemed uncollectable by a creditor, is often sold for pennies on the dollar. If the buyer is able to collect, the profit is huge.

    Serial law suits

    To collect the debt, Koster says these companies engage in what he calls the serial filing of debt-collection lawsuits in state court.

    Worse, he says these debt collectors file suit without bothering to find out whether a debt is even owed, what it was for, and how much it is. He says he has seen cases where the same companies sue for debts more than five or ten years old, even though the statute of limitation would normally preclude recovering a debt.

    Koster cites research which demonstrates that these litigation abuses disproportionately target racial minorities, creating “devastating long-term impacts for those who already struggle economically.”

    He says recent studies from ProPublica and other sources have shown that debt-collection lawsuits in Missouri have obtained judgments in communities with predominately minority neighborhoods.

    Missouri court takes a stand

    Earlier this year, a Jackson County, Mo., court took a firm stand on the issue of debt collectors suing consumers without finding out first if the debt was legitimate.

    Portfolio Recovery Associates LLC, one of the largest buyers of written-off debt in the U.S., tried to collect a $1,000 credit card debt from Maria Guadalupe Mejia, who insisted the debt wasn’t hers. She tried to explain that the person they were looking for was actually a man with a name that was similar, but not the same, as her name.

    In May, the judge threw out the debt collector's case, but not before the jury awarded Mejia damages of over $82 million. Despite that lesson, Gregg Lombardi, Executive Director of Legal Aid of Western Missouri, says the debt collection abuses persist.

    "Zombie debt collection agencies file thousands of cases in Missouri every year, and in virtually every one our attorneys see, they cannot prove their case in court,” Lombardi said. “They get default judgment after default judgment that they don't deserve by targeting low-income consumers who they know cannot afford to defend themselves. Then they are ruthless in collecting on those judgments.”

    Proposed reforms

    Koster has proposed reforms aimed at curbing abusive debt collection lawsuits in the state. He's proposed changes to state court rules that he said would end unscrupulous collection practices.

    The changes would require debt collectors to produce documentary proof of the debt, stop debt buyers from manipulating court procedures with stalling tactics, and strengthen the proof needed before creditors can recover for attorneys’ fees and litigation costs.

    Furthermore, consumers who want to reduce exposure to potential debt collector issues may consider consolidating their debt. Here is a link to our best debt consolidation companies resource.

     

    Aggressive and abusive debt collection practices persist, despite laws and court rulings affording debtors more protections.Missouri Attorney General C...

    Debt-relief scheme lands World Law Group in federal hot water

    The firm is accused of charging illegal fees and making false promises

    The Consumer Financial Protection Bureau (CFPB) is cracking down on an operation that allegedly runs a debt-relief scheme that charges consumers exorbitant, illegal, upfront fees.

    In announcing it obtained a preliminary injunction against World Law Group and its senior leaders, the CFPB claims the debt-relief scheme falsely promised consumers a team of attorneys to help negotiate debt settlements with creditors, failed to provide legal representation, and rarely settled consumers’ debts.

    Additionally, World Law is accused of taking $67 million from at least 21,000 consumers before providing any debt-relief services. The order, obtained in U.S. District Court, halts World Law’s operations and freezes defendants’ assets while the case is pending.

    Action was taken against World Law, according to CFPB Director Richard Cordray, “for an alleged debt relief scheme that lured consumers with false promises of help from lawyers and collected millions in illegal upfront fees. We are seeking to put an end to this scheme and prevent more consumers from being harmed.”

    The lawsuit names Derin Scott, David Klein, and Bradley James Haskins, who control World Law Group. The lawsuit alleges that the defendants operate through an interrelated maze of companies, including Orion Processing, LLC, d/b/a World Law Processing, WLD Credit Repair, and World Law Debt; Family Capital Investment & Management LLC (a.k.a FCIAM Property Management); World Law Debt Services, LLC; and World Law Processing, LLC. The companies comingle funds and share functions, employees, and office locations to operate the debt-relief scheme.

    The charges

    According to the complaint, World Law promised to help consumers reduce their debts using a “team of attorneys,” including “local attorneys,” that would provide legal representation and negotiate debt settlements directly with consumers’ creditors. The firm allegedly told consumers to stop paying their debts and instead make a single monthly payment to the company, which its lawyers would use to negotiate debt settlements with creditors.

    According to the complaint, World Law unlawfully kept many of these payments as fees before providing debt-relief services. As a result, consumers paid millions of dollars in illegal fees and suffered additional harms, including being subjected to collection calls, lawsuits, late fees, and lower credit scores.

    The CFPB complaint is not a finding or ruling that the defendants have actually violated the law. The Court issued the preliminary injunction because it found that the agency is likely to prevail and that the public interest is served by granting the order. The case will proceed until the court makes a final determination or the parties settle the matter.

    The Consumer Financial Protection Bureau (CFPB is cracking down on and operation it says runs a debt-relief scheme that charges consumers exorbitant, illeg...

    Debt buyers dinged for their collection tactics

    Nation's two biggest debt-buying firms used deceptive tactics, feds charge

    The nation’s two largest debt-buying firms are being accused of using deceptive tactics to collect bad debts and of trying to collect debts that the consumer doesn't owe.

    The Consumer Financial Protection Bureau charged that Encore Capital Group and Portfolio Recovery Associates bought debts that were potentially inaccurate, lacking documentation, or unenforceable.

    Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents, the CFPB charged.

    The CFPB has ordered the companies to overhaul their debt collection and litigation practices and to stop reselling debts to third parties. Encore must pay up to $42 million in consumer refunds and a $10 million penalty, and stop collection on over $125 million worth of debts. Portfolio Recovery Associates must pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts.

    “Encore and Portfolio Recovery Associates threatened and deceived consumers to collect on debts they should have known were inaccurate or had other problems,” said CFPB Director Richard Cordray. “Now, the two biggest debt buyers in the market must refund millions and overhaul their practices. We will continue to take action to protect consumers from illegal and obnoxious debt collection practices.”

    Subsidiaries named

    Encore Capital Group, Inc. is headquartered in San Diego, Calif. Its subsidiaries also named in today’s action are Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp. Together, they form the nation’s largest debt buyer and collector.

    Portfolio Recovery Associates is the nation’s second largest debt buyer and collector. Portfolio Recovery Associates is a Delaware for-profit corporation headquartered in Norfolk, Va. and is a wholly-owned subsidiary of PRA Group, Inc.

    As debt buyers, Encore and Portfolio Recovery Associates purchase delinquent or charged-off accounts for a fraction of the value of the debt. Although they pay only pennies on the dollar for the debt, they may attempt to collect the full amount claimed by the original lender.

    Together, these two companies have purchased the rights to collect over $200 billion in defaulted consumer debts on credit cards, phone bills, and other accounts.

    Inaccurate or uncollectible

    The CFPB found that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers, or consumer disputes.

    The companies also allegedly filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves.,

    Other Illegal Collection Practices

    • Encore disregarded or failed to adequately investigate consumers’ disputes:,If a consumer disputed their debt more than 45 days after Encore started collecting, Encore would require the consumer to produce specific documents or other “proof” to support their dispute or it would not conduct the legally-required investigation of the issues raised by the consumer.
    • Encore farmed out disputed debts to law firms without forwarding required information:,In numerous instances, Encore assigned disputed debt to law firms and third-party debt collectors without informing them that the debt was disputed. As a result, law firms evaluating Encore accounts for litigation did not know which accounts were disputed.
    • Encore made harassing collection calls to consumers:,Encore called consumers repeatedly or continuously with the intent to annoy, abuse, or harass them into paying. Encore’s subsidiary, Asset Acceptance, made thousands of calls to consumers before 8 a.m. or after 9 p.m. and called hundreds of consumers more than 20 times in a two-day period.
    • Portfolio Recovery Associates misled consumers into consenting to receive auto-dialed cell phone calls:,For approximately a year, and ending in August 2013, Portfolio Recovery Associates told consumers that they could only prevent collection calls to their cell phones before 9 a.m. if they consented to receive calls on their cell phones from a dialer. The company penalized representatives who failed to adhere to this policy.

    Enforcement Action

    Under the terms of the CFPB orders released today, Encore and Portfolio Recovery Associates are required, among other things, to:

    • Stop reselling debts;
    • Refund millions of dollars to consumers;
    • Cease collections on millions of dollars of debt;

    • Stop collecting debts they can’t verify;,

    • Ensure accuracy when filing lawsuits;,and
    • Provide consumers information before filing suit.
    The nation’s two largest debt-buying firms are being accused of using deceptive tactics to collect bad debts and of trying to collect debts that the consum...

    Medical debt collector hit with hefty penalty

    The company prevented consumers from exercising debt collection rights

    Syndicated Office Systems is being ordered by the Consumer Financial Protection Bureau (CFPB) to provide over $5.4 million in relief to harmed consumers, correct its business practices, and pay a $500,000 penalty for causing consumers “distress and confusion.”

     

    “Syndicated Office Systems mistreated consumers and prevented them from exercising critical debt collection rights,” said CFPB Director Richard Cordray. “These violations are particularly egregious given the challenges many consumers already face who are attempting to navigate the medical debt maze.”

     

    High consumer impact

     

    The company, which does business as Central Financial Control, is a debt collection agency that primarily collects medical debt on behalf of hospitals, doctors and other healthcare providers. It's an indirect subsidiary of Conifer Health Solutions, which provides billing and other services to more than 600 hospitals nationwide.

     

    Tenet Healthcare Corporation, a publicly traded healthcare services company based in Dallas, Texas, is the parent company of Conifer Health Solutions.

     

    Companies that collect medical debt and supply this information to credit reporting agencies have a significant impact on consumers’ credit scores. More than 43 million consumers have medical debt adversely affecting their credit reports, and more than half of all overdue debt on consumer credit reports is from medical debt.

     

    A recent CFPB report found that the complex processes by which medical bills are incurred, collected by a wide range of debt collectors, and reported to credit reporting agencies can create unique challenges for consumers. The agency also found that medical debt can overly penalize consumer credit scores.

     

    A CFPB investigation revealed that Syndicated Office Systems failed to send debt validation notices to thousands of consumers. It also found that the company mishandled consumer credit reporting disputes by failing to investigate and respond to consumers within the 30-day timeframe required under the law. Because the company furnishes information related to past-due medical debt, the information consumers seek to dispute or validate has the potential to lower credit scores.

     

    The CFPB order charges the company with violating the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The violations specifically include:

    • Mishandling consumer credit reporting disputes
    • Preventing consumers from exercising important debt collection rights

    Together, these violations had the potential to harm thousands of consumers and in some cases, negatively impact their credit scores, the CFPB said, which can hinder consumers’ ability to obtain credit or increase the rates they may pay for credit.

     

    In some cases, the company reported inaccurate information to the credit reporting agencies and then failed to provide a timely response to consumer disputes about the errors. Some consumers may also have been able to avoid negative information on their credit reports if they had known about their right to assess and dispute the debt in question.

     

    Enforcement action

     

    To address these violations, the CFPB consent order requires Syndicated Office Systems to take the following actions:

    • Provide over $5 million in relief to harmed consumers
    • End illegal credit reporting and debt collection practices
    • Establish consumer safeguards
    • Pay a civil monetary penalty of $500,000

     

     

    Syndicated Office Systems is being ordered by the Consumer Financial Protection Bureau (CFPB) to provide over $5.4 million in relief to harmed consumers, c...

    Feds target servicemember auto lender

    The company is accused of using aggressive debt collection tactics

    Security National Automotive Acceptance Company (SNAAC) -- an auto loan company -- is being accused of using a combination of illegal threats and deceptive claims in order to collect debts from servicemembers.

     

    The Consumer Financial Protection Bureau (CFPB) has filed a complaint in federal court seeking compensation for harmed consumers, a civil penalty, and an order prohibiting the company from committing future violations.

     

    “Security National Automotive Acceptance Company took advantage of military rules to put enormous pressures on servicemembers to pay their debts,” said CFPB Director Richard Cordray. “For all the security they provide us, servicemembers should not have their financial and career security threatened by false information from an auto loan company.”

     

    Unfair, deceptive and abusive practices alleged

     

    SNAAC, an Ohio-based auto finance company that operates in more than 2 dozen states, lends money primarily to active-duty and former military to buy used motor vehicles.

     

    The CFPB claims the company violated the Dodd-Frank Wall Street Reform and Consumer Protection Act’s prohibitions against unfair, deceptive, and abusive acts and practices by using aggressive collection tactics that took advantage of servicemembers’ special obligations to remain current on debts.

     

    Both active-duty and former servicemembers could encounter trouble with the company if they missed or were late on payments. Once consumers defaulted, they became subject to repeated threats to contact their chain of command. In many other instances, the company exaggerated the consequences of not paying. Thousands of people were victims of the company’s aggressive tactics.

     

    The CFPB alleges that the company has:

    • Exaggerated potential disciplinary action that servicemembers would face: The company told customers that their failure to pay could result in action under the Uniform Code of Military Justice, as well as a number of other adverse career consequences, including demotion, loss of promotion, discharge, denial of re-enlistment, loss of security clearance, or reassignment. In fact, these consequences were extremely unlikely.
    • Contacted and threatened to contact commanding officers to pressure servicemembers into repayment: The company would repeatedly contact commanding officers to disclose the debts in an effort to force payment, and suggest that the servicemembers were in violation of military law and other regulations. These company’s tactics, the CFPB claims, took advantage of the servicemembers’ inability to protect their interests in their transactions with the company and was unfair.
    • Falsely threatened to garnish servicemembers’ wages: The company implied to consumers that it could immediately commence an involuntary allotment or wage garnishment. But such consequences could not or would not occur because -- through the military pay system -- involuntary allotments are only processed once a judgment by a court is obtained. The company would threaten to pursue an involuntary allotment before they had even determined whether the servicemember would be sued.
    • Misled servicemembers about imminent legal action: In many instances, the company threatened to take legal action against customers when, in fact, it had not determined whether to take such action. In fact, in numerous instances, the company did not intend to take such action at the time.

    Through its lawsuit, the CFPB seeks to stop the alleged unlawful practices of the company. It has also requested that the court impose penalties on the company for its conduct and require that compensation be paid to consumers who have been harmed.

     

    The complaint is not a finding or ruling that the company has actually violated the law.

     

     

    Security National Automotive Acceptance Company (SNAAC) -- an auto loan company -- is being accused of using a combination of illegal threats and deceptive...

    Woman sued by debt collector awarded $83 million verdict

    It all started over a $1,000 credit card bill

    Many a consumer has tried to explain to a debt collector that the debt he or she is calling about belongs to someone else. Of course, it’s often like talking to a brick wall because the debt collector has heard it all before.

    But many times the consumer is right. A Jackson County, Mo., Circuit Court jury has delivered a not-so-subtle message to one debt collector that in situations like that, it had better do a little more thorough investigation before it hauls an alleged debtor into court.

    $1000 debt

    Portfolio Recovery Associates LLC, one of the largest buyers of written-off debt in the U.S., tried to collect a $1,000 credit card debt from Maria Guadalupe Mejia, who insisted the debt wasn’t hers. She tried to explain that the person they were looking for was actually a man with a name that was similar, but not the same, as her name.

    The company didn’t believe her and took her to court. In court, the debt collector could not or would not provide requested information, so the judge struck its pleadings. But the jury wasn’t finished.

    Acted maliciously

    After 5 days of deliberation, it returned a verdict, finding Portfolio Recovery Associates acted maliciously in its pursuit of Mejia. The defendant was awarded $250,000 in actual damages for violation of her rights under the Fair Debt Collection Practices Act. The jury then added $82,990,000 in punitive damages.

    Remember, it was the debt collector who brought the suit in the first place.

    In a statement to Credit.com, Portfolio Recovery Associates called the verdict “outlandish” and defying all common sense. It says it expects the judge to set aside the verdict.

    Still, any consumer who has ever been on the receiving end of repeated phone calls about a non-existent debt can’t help but get a vicarious thrill.

    Fair Debt Collection Practices Act

    More importantly, the case underscores of knowing your rights under the Fair Debt Collection Practices Act (FDCPA).

    While the law does not protect you from people to whom you owe money, it does provide a number of protections when the creditor turns the debt over to a third-party debt collector.

    A collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.

    Within five days after you are first contacted, the collector must send you a written notice telling you the amount you owe; the name of the creditor to whom you owe the money; and what action to take if you believe you do not owe the money.

    If you are contacted about a debt you think you owe, then you should pay it. But if you do not owe the debt, tell the debt collector you need to receive the written statement you are entitled to under the FDCPA. Additionally, consumers who want to consolidate their debts can utilize ConsumerAffairs' debt consolidation resource. Consolidating debts may reduce exposure to debt collection agencies.

    Many a consumer has tried to explain to a debt collector that the debt he or she is calling about belongs to someone else. Of course, it’s often like talki...

    Court muzzles "phantom" debt collector

    Collectors allegedly used illegal tactics to collect payday loan debts

    The Federal Trade Commission and the Illinois Attorney General’s Office have obtained a court order temporarily halting a fake debt collection scam located in Aurora, Illinois, a western suburb of Chicago.

    The defendants are charged with illegally using threats and intimidation tactics to coerce consumers to pay payday loan debts they either did not owe, or did not owe to the defendants.

    The FTC’s case against K.I.P., LLC, Charles Dickey, and Chantelle Dickey is the agency’s seventh ‘phantom’ debt collector matter.

     “This company scared and tricked people into paying debts they didn’t owe,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We will keep going after phantom debt scams like this one and shutting them down.”

    “The defendants have threatened and intimidated their way into stealing hundreds of thousands of dollars from unsuspecting people all across the country,” Illinois Attorney General Lisa Madigan said. “Between our two offices, we have hundreds of complaints. It is clear they must be stopped.”

    According to the complaint, since at least 2010, the defendants used a host of business names to target consumers who obtained or applied for payday or other short-term loans, pressuring them into paying debts that they either did not owe or that the defendants had no authority to collect. 

    Often armed with sensitive financial information, the defendants would call consumers and demand immediate payment for payday loans that were supposedly delinquent.  To pressure consumers to pay, the defendants threatened that they would:

    • Garnish consumers’ wages;
    • Suspend or revoke their drivers’ licenses;
    • Have them arrested or imprisoned; or
    • File a lawsuit against them.

    In response to the defendants’ repeated calls and alleged threats, many consumers paid the debts, even though they may not have owed them, because they believed the defendants would follow through on their threats or they simply wanted to end the harassing phone calls.

    ...

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