California Credit Law Blog

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.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Debt Collection

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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.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Debt Collection

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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.

Posted by Mark F. Anderson | Permalink | Email This Post

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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.

Posted by Carol McLean Brewer | Permalink | Email This Post

Posted In: Debt Collection

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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" »

Posted by Andrew J. Ogilvie | Permalink | Email This Post

Posted In: Consumer Debt , Credit Cards , Credit Reports , Debt Collection , Identity Theft

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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.

Posted by Mark F. Anderson | Permalink | Email This Post

Posted In: Debt Collection

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