Jun 10

By John Rossman – insideARM

The Consumer Financial Protection Bureau (CFPB) recently began a more aggressive approach to the debt collection industry, bypassing the larger market participant examination process and issuing Civil Investigative Demands (CIDs) to a number of debt collectors focused on specific complaints and alleged practices.

The demands are not benign; they typically require time and resources to prepare the response and can often lead to shelling out real money for defense. [read more]

Jun 9

By Kenneth R. Harney – The Columbian

Is partisan warfare on Capitol Hill over taxation of medical devices crushing thousands of homeowners’ plans to do short sales this year?

Medical devices? What connection could heart pacemakers, dentures and LASIK eye surgery machines possibly have with short sales?

More than you’d probably guess.

Just talk to Geoffrey Brencher, a high school teacher in Weston, Conn. For the past nine months, Brencher and his wife have been negotiating a short sale on their home, which has an underwater mortgage: the loan balance exceeds the property value.

The Brenchers recently received final approval from their bank to proceed with the sale provided the closing can occur no later than June 27. As part of the deal, the couple would get $75,000 of their mortgage debt canceled by the lender.

But here’s the complication: If they close and accept the debt cancellation, there is a serious risk under federal law that the Brenchers could face a $20,000-plus income tax demand from the Internal Revenue Service. That’s because the Mortgage Forgiveness Debt Relief Act expired Dec. 31, and its reauthorization is stuck in Congress.

First enacted in 2007, the law allows qualified homeowners who receive debt cancellations from lenders through short sales, foreclosures and loan modifications to be exempt from the federal tax code’s standard requirement: Any amount of debt that is forgiven by a creditor generally is treated as ordinary income to the borrower and is taxable at regular rates. During the housing bust and its aftermath, the mortgage debt forgiveness exemption has proved invaluable to large numbers of homeowners who ended up — often through no fault of their own — with underwater mortgages.

With the expiration of the debt forgiveness statute, owners who do short sales in 2014 cannot be certain that they will avoid taxation on their forgiven mortgage debt. In the absence of a reauthorization by Congress retroactive to Jan. 1, there is a real possibility that short-sellers in most parts of the country will face hefty income tax hits next year. (California residents are exempted on short sales because of an IRS interpretation of state law.) [read more]

Jun 9

By Barry M. Benjamin and Jeremy A. Schachter – Lexology

Connecticut recently passed S.B. 209, a new law aimed at aggressive telemarketing tactics. The law, which goes into effect on October 1, 2014, strengthens Connecticut’s already existing “Do Not Call Registry” by banning unsolicited commercial text and media messages and “robocalls” without prior affirmative consent by the consumer. Thus, regardless of whether a consumer has already requested to be placed on the Do Not Call Registry, the law prohibits traditional text messages; messages that contain audio, photographic, or video content; and automatically dialed calls that play prerecorded content when answered, unless the consumer has first assented to their receipt. [read more]

Jun 5

By Hunter Stuart – The Huffington Post

People with overdue bills have long complained of harassment from debt collectors, from late-night phone calls to frightening in-person visits. Now it appears the industry has found far more troubling strategy: Filing lawsuits against debtors — often, consumer advocates say, on the theory that they won’t ever show up to court to defend themselves.

The consequences are dire when the debtors don’t appear in court. A judge can put a lien on someone’s home, garnish wages, even freeze bank accounts — all without a person ever getting a chance to fight their case. And at times, collectors file suit in error. Consumers interviewed for this story described cases where they were never told they were being brought to court, or were sued for debts on credit cards they never had.

“Over the years we’ve heard from thousands of people who’ve found themselves at the end of one of these default judgments,” said Susan Shin, a senior staff attorney at the New Economy Project, a consumer advocacy group. “And most of the people we talk to haven’t received any kind of notice that they were going to be sued.”

Willie Wilson, a 69-year-old retired veteran from Elgin, Texas, lost his late mother’s home because he never received notice that a debt collector had sued him. Wilson learned when he had the house appraised in 2009 that a collection agency had filed suit against him earlier that year over an unpaid $2,500 MasterCard bill.

Wilson was troubled on two accounts: While normally Wilson would have been “served” a summons to appear in court, he said he never got one. And, he said, he never had a MasterCard.

But since he had been found liable in court, it was too late. He didn’t have the $3,500 he now owed. The law in Texas allows a debt collector to force the sale of a home if it’s not someone’s primary house. Wilson, who inherited the three-bedroom bungalow from his mother, figured he would sell it himself first.

“I really didn’t want to sell it,” Wilson said. “I was gonna fix it up and eventually pass it on to my kids.”

As the debt industry has ballooned over the past decade, collectors’ lawsuits against consumers have skyrocketed. A study published last year found there were more than 200,000 cases filed in New York in 2011 alone. [read more]

Jun 5

By Barbara Fernandez – Lexology

The Eleventh Circuit reversed the lower court’s decision granting summary judgment to defendant bank in a TCPA claim, finding there were factual disputes regarding whether plaintiff had consented to receive the calls. Plaintiff sued under the TCPA after receiving 327 autodialed debt collection calls from the bank over a six-month period. The calls stemmed from a credit card debt owed to the bank by Betancourt, who has a child with plaintiff and shared a home and cellphone account with him, but is not married to him. Plaintiff Osorio was the subscriber of the cellphone account shared with Betancourt.

The Eleventh Circuit focused on the TCPA language requiring express consent of the “called party” for automated calls received on a cellphone. The bank argued that the “called party” was the “intended recipient” of the call, in this case Betancourt. Citing the Seventh Circuit’s 2012 decision in Soppet v. Enhanced Recovery Co. LLC, the appellate court rejected this argument, noting that plaintiff had the right to revoke Betancourt’s consent to receive the calls. [read more]

Jun 4

By Steve LeBLANC – Associated Press

Attorney General Martha Coakley has sued the Federal Housing Finance Agency and mortgage giants Fannie Mae and Freddie Mac for refusing to comply with a state law designed to stem the tide of foreclosures in Massachusetts.

The lawsuit was filed Monday in Suffolk Superior Court.

Coakley said Fannie Mae and Freddie Mac violated a 2012 Massachusetts law that allows the sale of homes in foreclosure to nonprofit organizations who intend to restructure the loan and sell the property back to the homeowner.

Coakley said the law has worked in Massachusetts.

‘‘It just makes sense to take action that will continue to keep people in their homes,’’ Coakley said. ‘‘It makes commercial sense. It makes financial sense and it’s frankly the law and not to do it is really unfair.’’

Fannie Mae and Freddie Mac are under the control of the federal housing agency. A spokeswoman for the FHFA declined to comment on the lawsuit.

The 2012 state law explicitly forbids banks and lenders from refusing to consider offers from legitimate buyback programs merely because the property will be resold to the former homeowner. [read more]