California Credit Law Blog

Debt collectors are harassing individuals to pay the debts of deceased family members. Many of the targeted survivors are elderly. A WSJ article gives an example of a debt collector retained by Bank of America to collect $16K on a credit card debt from a retired 68 year widow. She received up to 10 calls a day from West Asset Management, Omaha, NE about the debt. The widow was not legally responsible for the debt, but that did not stop the debt collector.

The WSJ article has two recorded calls between the harassed widow and the debt collector. The caller starts with expressions of sympathy (really sincere!) and then goes into a discussion about how she could "get this taken off your plate."

Mrs. Long, of Cape Coral, Fla., told the debt collector she had "lost everything." She had sold the their motor home to help cover medical bills and funeral costs leaving only $2K from some life insurance. She offered to pay that "just to get this off of my head."

Debts don't survive one's death unless surviving family members co-signed on the obligation.

One debt collector focuses exclusively on deceased debts. DCM Services brags it "manages collections on more than $1 billion in deceased accounts per year with an extremely low complaint rate."
To target survivors, DCM Services built a massive database of the recently deceased.

Debt collectors often tell surviving family members that they aren't personally responsible for paying the debts of the deceased. But those words barely register with grieving relatives, according to interviews with a dozen lawyers who represent about 60 families pursued for money owed by dead relatives.

Debt collectors misled some people into believing they are required by law to pay the debts of dead relatives.

A federal jury in New Mexico awarded $1.26 million to a woman against collection law firm for twice trying to garnish her wages for a debt she did not owe. The case started when Target National Bank assigned a credit card debt to a debt collector law firm.

Ms Lucinda Yazzie told the law firm she never had a Target credit card and she often received collection calls looking for another persons with the same name. Nevertheless, the law firm sued her and obtained a garnishment order. Yazzie's employer interceded and the law firm withdrew the order. But two years later, the law firm obtained another garnishment order. This time Yazzie sued the law firm and the bank based on violations of the Fair Debt Collections Act.

The evidence showed that a law firm employee changed the Social Security number in the company’s system to that of the Yazzie named in the suit. The bank had provided the social of the Lucinda Yazzie that actually owed the money.

The jury awarded Ms Yazzie $161,000 in actual damages for emotional distress and $1.1 million in punitive damages.

With exceptions, the Fair Credit Reporting Act requires credit reporting agencies to limit access to consumers credit files to persons with whom the consumer has a credit relationship. A credit relationship is one in which the consumer and a creditor agreed the consumer could defer payment. Persons who do not have a credit relationship with the consumer have no right to look at the consumer's credit files.

If a person's car is towed and stored off the street without his or her consent, the tow company will typically give the owner a notice to pay the tow and storage bills. If the owner does not pay the charges, the tow company sells the car in a lien sale. After the sale, the tow company is often owed some hundreds to thousands of dollars. The tow company then turns the debt over to a collection agency that specializes in attempting to collect tow bills.

The question is whether a debt collector attempting to collect such debts has a right to access the owner's credit files. In a case handled by Andrew Ogilvie of this office, in 2007 the 9th Circuit Court of Appeals ruled that debt collectors attempting to collect debts arising from involuntary towing and storage of vehicles may not access Experian's files on the owner.

In spite of the court's ruling, we allege in a new class action that Experian has continued to allow debt collectors seeking to collect on tow bills to access vehicle owners' credit files. The case is Holman v Experian, No. CV-11-000180-JF and is pending in the Northern District of California.

Frequently people ask me how they can get the credit bureaus to correct inaccurate information on their credit reports. I always tell them to dispute inaccurate credit reports via letter sent Certified Mail, Return Receipt. Why do that, you ask, when I can dispute on-line or by phone? If you look at their websites, you know the credit bureaus encourage consumers to phone or email. It is almost impossible to find an address to mail a written dispute letter to.

There are COMPELLING REASONS to do your disputes in WRITING, Certified Mail, Return Receipt. If you have put it in writing and kept a copy and obtained a receipt you can prove exactly what information you provided and that they received it.

You want to provide the credit bureau with as much information as possible so it can conduct a thorough investigation. If you have names and phone numbers of people they should contact, provide them. If you have documents that prove your claims, enclose copies.

Sending a written dispute letter does not guarantee that they will fix your report, but if they don't you at least have solid evidence to support your lawsuit. Phone conversations and emails are hard to prove. You don't have as good a record and the credit bureaus can dispute what you said. Emails get lost. You don't get any proof that they received them.

Please keep copies of everything you sent with the dispute letter, including all enclosures and a copy of your signed letter. (Sometimes it is important for them to have your signature so they can compare it to the signature on the fraudulent account you are disputing.) Your file copy of the dispute letter should be an exact duplicate of what you placed in the envelope to the credit reporting agency.

If Experian, Equifax or TransUnion are reporting accounts that are not yours -- either mixed files or fraudulent accounts -- and they will not correct it, give me a call. Those are good cases.

Some 250 "debt settlement companies" pray on consumers who are overwhelmed by debts. Consumers are lured by Internet and TV ads promising consumers their debt problems will cease if they just sign up. Typically, the companies require the consumer to make payments to the company while not making payments on their debts. The companies promise that once a pot of money accumulates in the consumer's account, the company will settle the debts with the creditors by paying a percentage of the debt.

In their sales pitches, the companies omit over the fact that they deduct outrageously high fees, that the accounts rarely get to the point there is enough money to settle any debts in large part because of their fees, and that creditors often sue the consumer while all this is going on. The net result is the consumer ends up worse than when he or she started.

At an industry convention in Palm Beach, FL, those present were warned the new federal Consumer Financial Protection Agency may put them all out of business. Here's hoping.

The NY Times front page article includes comments from state and federal officials and representatives of consumer organizations who agree the industry is a scam. For example, Andrew Pizor of the National Consumer Law Center said that when consumers top paying on their bills collectors start calling the creditors file lawsuits. Another observer, the industry is akin to a Ponzi scheme with consumers paying thousands of dollars with no positive results.

Merchants sometimes contract with check guaranty services that pay the merchant for dishonored checks. These services then attempt to collect the face value of the dishonored check. California Civil Code 1719 allows collectors to add a $25 service fee for the first check dishonored and treble the amount of the check if the check writer does not pay within 30 days after notice. Certain collectors add prejudgment interest to the debt. However, the California Supreme Court has decided these debt collectors have no right to add interest. Any debt collectors that have been adding interest to bounced check claims are vulnerable to class action lawsuits. The case is Imperial Merchant Services v Hunt, No. S163577.

The American Arbitration Association has announced it was dropping its arbitration program for consumer debts. This comes only a few days after the National Arbitration Forum announced it was dropping its consumer debt arbitration program. Most of the cases involved credit card and cell phone debts.

This is great news for consumers who could not get a fair hearing at AAA or NAF. Both had rigged their procedures in favor of the banks and corporations that paid their fees. Consumers lost 94% of the 214,000 cases processed by NAF in 2006.

Most of the time, survivors are not liable for the debts of their deceased relatives. If Uncle Waldo dies and leaves a $10,000 credit card debt, Niece Lauren is not obligated to pay it. The usual exeption is when Uncle Waldo has assets, his estate is probated, and the credit card company makes a timely claim against the estate assets.

But the New York Times reports that several debt colletion companies, including Minneapolis-based DCM Services, are specializing in collecting deceased people's debts, despite that usually there is no obligation to pay them.

According to the article, collecting on the debts of the dead is one of the healthiest parts of the debt collection industry. Maybe the survivors feel the deceased will rest easier if his debts are paid; maybe the survivors are concerned they will need the creditor's services in the future.

To help ease the survivors' minds, these debt collectors are even trained in the five stages of grief. One company explained that if a survivor was still in the denial or anger stage rather than advancing to the bargaining stage, the collector will offer to transfer him to a human resources company. There, “master’s level grief counselors” are available. After a week--presumably enough time for the survivor to recover somewhat--they are contacted again.

People pay for things they are not obligated to pay, all the time. But if you have a death in the family and are contacted by a collector, you should first ask whether you are liable for the debt. If you are making a voluntary payment, you should appreciate that it's voluntary and not something you'll be dunned for later if left unpaid.

Capital One Bank and the credit reporting agencies (Equifax, Experian and TransUnion) recently settled with our client who was the victim of identity theft. It took years for the identity theft victim to get Capital One to stop trying to collect on the account it opened for an imposter.

The story began when Capital One sent a pre-approved credit card application to our client at her former college apartment. Someone in the building got the application from the mail and used it to get a VISA card from Capital One in our client's name. The imposter took $500 from the account, but Capital One quickly learned the account was fraudulent--a law enforcement agency told it that professional identity thieves had opened the account--so it closed the account and charged off the account balance.

That should have ended the matter, but it didn't. A year later, Capital One sent another credit card application to our client at the same old address. The imposter again used the application to apply for credit in our client's name and again Capital One issued the imposter a VISA card. This time it gave the imposter a $20,000 credit line and sent "convenience" checks that the imposter used to withdraw almost $18,000. When the imposter failed to make the payments, Capital One located and began to dun our client. She disputed the account, retained a different lawyer, wrote lots of letters. Nothing worked. Capital One sued her to collect on the account.

Then she contacted us.

Continue reading "Capital One Settles With Identity Theft Victim" »

Debt collector Rickenbacker Collections, Morgan Hill, California, collects debts for auto towing companies. Nothing wrong with that except Rickenbacker sometimes targets persons who do not owe the debt. When that happens and the person protests, Rickenbacker does not go away. Instead, at least in some cases Rickenbacker's debt collectors keep harassing the innocent individuals.

Once Rickenbacker thinks it has the debtor's identity, it obtains a copy of the person's credit report from Experian which it has no right to do without there having been a debtor-creditor relationship. The Experian report gives Rickenbacker information on where he lives and how to contact the person. Rickenbacker also reports the debt on the innocent person's Experian credit report thereby damaging that person's credit.

Person victimized by Rickenbacker and Experian may wish to contact KABOB to discuss their legal rights against these companies.