By Paul Kiel – ProPublica
Millions of Americans live with the possibility that, at any moment, their wages or the cash in their bank accounts could be seized over an old debt. It’s an easily ignored part of America’s financial system, in part due to a common attitude that people who don’t pay their debts deserve what’s coming to them.
A couple of years ago, we set out to find out more about the growing use of the courts to collect consumer debts. How many lawsuits are filed? Who is filing them? Who is getting sued?
The suits are filed in state and local courts, and many states rely on antiquated systems or only keep data at the county level. We ultimately collected what details we could from a variety of states and large, urban counties. Then, we wrote a series of stories sharing what we found:
- Four million Americans had their wages garnished over consumer debts in 2013, and workers earning between $15,000 and $40,000 a year were the most likely to experience a garnishment.
- Black communities are hit much harder by debt collection lawsuits than white ones, even in places where black households and white households have similar incomes.
- One subprime lender with stores nationwide was seizing pay from active-duty soldiers when they fell behind on overpriced loans. (The company subsequently went out of business.)
- Some public and nonprofit hospitals use the courts to collect from patients who can’t pay their bills, even when those patients obviously qualify for financial assistance.
- Capital One sues its customers way more than any other bank and filed an enormous number of suits during the 2007–2009 recession.
But there’s a lot more to understand about the rise of this legal tactic — one that continues to alarm judges who see it firsthand. [read more]
By Colin A. Young – The Lowell Sun
After 24 straight months of at least double-digit percentage increases in the number of foreclosures initiated by lenders, Massachusetts foreclosure starts in March were up just 6.4 percent over the same month in 2015, according to a report released last week by The Warren Group.
Mortgage lenders filed 1,179 petitions to foreclose this March, compared with 1,108 filed in March of 2015. So far this year, there have been 3,367 petitions filed with the Massachusetts Land Court, a 29.8 percent increase over the first three months of 2015, according to The Warren Group.
“I wouldn’t call 1,179 foreclosure starts in a single month normal. I’d say a normal month would have just a few hundred starts,” Timothy Warren Jr., CEO of The Warren Group, said in a podcast that accompanied last week’s report. “But we are seeing signs that we have reached a plateau. The plateau is higher than anyone wants to see, but at least the rate of increase has become moderate with a 6 percent increase from March of last year.” [read more]
By Rich McCormick – The Verge
The Federal Communications Commission is moving to limit the number of times government debt collectors can robocall individuals. The commission approved a proposal last week that would only allow collectors to call three times a month — and only in situations when the debtor has not made a scheduled payment, or so the government can suggest plans that would help borrowers not default on their debt. Under the adopted proposal, individuals would also gain the right to ask for the calls to stop entirely. [read more]
By Tim Grant – Pittsburgh Post-Gazette
Losing a home to foreclosure has left such a bad taste with some former homeowners that they have lost much of their will and desire to go through the underwriting process to get approved for a new home loan — even though years may have gone by since the foreclosure episode.
“I’ve seen people spend five or six months working with a mortgage officer only to be denied a loan. They are tired. You can see it on their faces,” said Dan Sullivan, a foreclosure prevention specialist at Action Housing in downtown Pittsburgh. “They find a comfort zone in renting.
“Once the shock of the foreclosure and the move is over, they feel at ease with their current situation,” he said. “They are happy with their landlords, and renting allows more freedom and less stress for them. I had one client say to me, ‘I’ll never own a rake again.’ ”
Data released earlier this month by the Urban Institute’s Housing Finance Policy Center based in Washington, D.C., suggest that the country is still digging its way out of the housing crash and that people who lost homes to foreclosure are still licking their wounds.
The center found 19 million renters now were at one point homeowners in the past 16 years. Additionally, 96 million renters have not had a mortgage in the past 16 years.
The uphill battle that many people who have been foreclosed on face in getting another mortgage can be discouraging. Sullivan said it could take two to four years for them to boost their credit score above 620, the typical credit score threshold for a mortgage. Even if the borrower has been paying utilities and credit card bills on time, that only counts on a normal credit report. [read more]
By KSDK News
Do you have debts that you are struggling to repay? You are not alone. According to a 2014 study from the Urban Institute, 35% of the adults that have a credit file also have debt in collections, with an average amount of $5,178.
Unfortunately, the rise in consumer debt has brought out more aggressive behavior among debt collectors. Many instances of constant harassing phone calls, threats of lawsuits or jail time, and other abusive tactics have been reported to the Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB).
A recent report by the Alliance for a Just Society reviewed just over two years’ worth of data from the CFPB’s files on debt collection complaints and categorized the publicly available complaints to give a clearer picture of the issues with debt collection. (Privacy issues and other concerns excluded some of the data.)
A significant number of the abuses come from third-party debt collectors or debt buyers who have purchased uncollected debt for a few cents on the dollar. Each transfer of debt ownership increases the likelihood that information about the debt will be lost or incorrectly transferred — although truly abusive debt collectors probably do not care whether they are addressing the right party or not.
The most common complaint was that respondents were being asked to pay a debt that they do not think they owe. 42% of the complaints fell into this category, representing mostly debts that were already paid or did not belong to the respondent in the first place. Debts from identity theft or debts discharged in bankruptcy take up the remainder of this category. [read more]