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.

Friday, June 14, 2013

American Debt Settlement Solutions

The Consumer Financial Protection Bureau (CFPB) has settled the claims asserted in its recently filed complaint against American Debt Settlement Solutions, Inc. (ADSS) and Michael DiPanni, owner of the Florida debt relief company. The complaint alleges that American Debt Settlement Solutions, Inc. misled consumers and charged illegal fees for its services. DiPanni charged consumers “enrollment” fees for work that was never allegedly performed or completed.

In the complaint, American Debt Settlement Solutions, Inc. is accused of violating the Federal Trade Commission’s Telemarketing Sales Rule (TSR) and the Dodd-Frank Act by charging the illegal fees upfront and not performing the services promised. The company is charged with misleading consumers by stating that it would settle their debt within three to six months, collecting upfront enrollment fees, and then failing to settle the debt within the timeframe originally promised. This was considered “abusive” because ADSS targeted consumers ADSS knew could not afford the debt relief program offered. CFPB believes that these deceitful tactics caused the consumers to fall further into debt and receive no benefit from the “enrollment” fee they paid.

Under the terms of the settlement, ADSS will be required to halt operations, pay a $15,000 fine, and will no longer be able to provide debt relief services to consumers. The proposed consent order would award a judgment against the company of approximately $500,000 (the amount consumers paid to the company for services).

In a press release, CFPB Director Richard Cordray, states, “Today we are taking action to halt a debt-relief company we believe has been preying on financially vulnerable consumers. Consumers struggling to pay off a debt are among the most at risk and deserve better. We will continue to crack down on this type of harmful behavior.”