Wednesday, August 13, 2014

The Consumer Financial Protection Bureau Takes Action Against Debt Collection Law Firm

The Consumer Financial Protection Bureau (CFPB) filed a lawsuit against a debt collection law firm, Frederick J. Hanna & Associates (Frederick Hanna).  The suit alleges that the debt collection firm spent less than a minute reviewing each of the credit card collection cases.  More than 350,000 cases were filed by the law firm, and many of the individuals targeted owed nothing or less than the amounts claimed.  Individuals targeted in similar suits as those filed by Frederick Hanna, often do not appear for the court cases.  As a result, many cases end in a default judgment, which can be difficult to correct, allowing the debt collector to garnish wages or put a lien on property.
The lawsuit filed by CFPB indicates that CFPB may be looking into other debt collection law firms, where claims are out of date, have incorrect amounts, and do not include the necessary documentation to back up the claims. 

Tuesday, August 12, 2014

ACE Cash Express

The Consumer Financial Protection Bureau (CFPB) found that ACE Cash Express (ACE) used illegal debt collection practices to pressure borrowers who were overdue on their payments.  The illegal debt collection practices included false threats of lawsuits or criminal prosecution and harassment.

ACE offers payday loans, cash advances, check-cashing services and other consumer financial services.  The debt collectors at ACE were harassing consumers with collection calls, and telling borrowers that they would be sued or criminally prosecuted if they did not make payments.  In addition, ACE’s debt collectors told consumers that they would be reported to credit reporting agencies and charged additional fees, even though ACE’s debt collectors are not authorized to do so.  The debt collectors used these tactics to coerce consumers into borrowing more money and paying more fees.

The CFPB has the authority to take action against debt collectors under the Dodd-Frank Wall Street Reform and Consumer Financial Protection Act.  ACE is required to end its deceptive collection practices and will pay a $5 million penalty and $5 million in refunds to borrowers.

Friday, November 15, 2013

Law Firm Poses as Debt Collector

Law firms cannot pose as debt collectors, without making a bona fide effort to collect the debts from consumers. The Money Store hired the law firm of Moss Codilis Stawiarksi Morris Schneider & Prior LLP (Moss Codilis) in an attempt to collect debts from thousands of borrowers.  The Second Circuit ruled that the law firm was not the debt collector because the Money Store actually controlled the process.  The law firm did not review each collection matter and simply printed the mass mailings to borrowers on the law firm’s letterhead.
For clarification purposes, the Second Circuit added a false name exception to the Fair Debt Collection Practices Act (FDCPA).  It ruled that consumer creditors are not immune under the FDCPA when using a third party to appear to be the debt collector.
The law firm allegedly sent 88,937 letters between 1997 and 2002 and collected $3 to $4.5 million in fees.  The court found that recipients of the letters were tricked into thinking that an attorney had reviewed their loans and feared legal action if they did not pay.
The plaintiffs had filed a claim against Moss Codilis for the misleading representations, and are now eligible to file against The Money Store because of the ruling by the Second Circuit.

Tuesday, July 23, 2013

Abusive Debt Collectors

The Fair Debt Collection Practices Act restricts debt collectors from harassing consumers who are behind on their bills. However, the Act may not apply to banks and lenders that are trying to recoup money that they lent directly to consumers. At a recent hearing, the Consumer Financial Protection Bureau stated that it has the authority to regulate debt collection practices of banks under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Dodd-Frank Act bars firms like Capital One and Macy’s from employing “unfair, deceptive or abusive acts.” Consumers still have rights, even if they owe money to the creditor.

The New York Times recently printed an article regarding abusive debt collectors. Click here to read the article.