Apr 14

By insideARM

A federal judge this week decided to allow a potential class action lawsuit against a debt collection agency to move forward that claims violations of the FDCPA due to the presentation and positioning of validation notice language on a collection letter.

U.S. District Judge Gene Pratter, in the Eastern District of Pennsylvania, denied the collection agency’s motion to dismiss Tuesday in Harlan v. TransWorld Systems.

In October 2012, TransWorld (d/b/a North Shore Agency) sent Ms. Harlan a debt collection letter with a text box asking her to “PLEASE RESPOND” to its attempt to collect a $46.39 debt on behalf of its client, Disney Movie Club. A second text box contained a mini-Miranda warning under the heading STATEMENT OF RECOVERY, and a third – labelled “STATEMENT OF INTENTIONS” – read:

Without your response, diligent collection of your account may continue. Govern yourself accordingly. Make your check for the full amount owed payable to our client, Disney Movie Club, and mail it in the enclosed reply envelope. If necessary, you may contact our client directly at 1-877-336-2337.

Under the text boxes, the letter states “NOTICE-SEE REVERSE SIDE FOR IMPORTANT INFORMATION.” On the reverse side of the letter was the required validation notice in smaller text, along with notices required in various states (which did not include the consumer’s home state of Pennsylvania).

Pratter’s opinion contains samples of both the front and back of the letter.

Harlan claimed that the letter violated the FDCPA “by placing the validation notice inconspicuously on the reverse side of the collection letter, without spacing or indenting, along with a cadre of other, inapplicable state notices, such that it is difficult for a consumer to notice.” [read more]

Apr 14

By ACA International

The Federal Trade Commission alleges that the companies sold consumer data but neglected to comply with the Fair Credit Reporting Act.

Two data brokers have agreed to settle Federal Trade Commission charges that they violated the Fair Credit Reporting Act by providing reports about consumers to users such as prospective employers and landlords without taking reasonable steps to make sure that they were accurate, or without making sure their users had a permissible reason to have them.

In separate cases, the two companies—Instant Checkmate Inc., and InfoTrack Information Services—have agreed to pay civil penalties and will be prohibited from continuing their alleged illegal practices.

Instant Checkmate and InfoTrack sell public record information about consumers. According to the FTC’s complaints, both companies operated as consumer reporting agencies under the law but failed to abide by the FCRA.

The FTC charged, among other things, that in many instances InfoTrack provided inaccurate information suggesting that job applicants potentially were registered sex offenders, possibly causing employers to reject their job application. According to the complaint against Instant Checkmate, that company failed to require that users of its reports identify themselves or certify the purpose for which they were seeking consumers’ information. [read more]

Apr 11

By Paul Samakow – Communities Digital News

Do you owe some institution money from a long time ago? “Zombie” debt is debt that has come back from the dead to haunt you. Collection groups find and buy old debt in bulk from credit card companies, gyms, public utilities, cellphone providers and other creditors, and the business is growing steadily. Those collection grounds can be very aggressive.

The downturn in the economy in the recent past expanded what was once primarily an industry seeking to collect credit card debt to one that now targets delinquent mortgages, auto loans and medical debts.

Despite that the organization you owed “wrote off” your indebtedness, there is a good chance another organization will purchase the debt and try to collect from you. Typically a collection agency will pay the original creditor a few cents on the dollar for millions, or billions of dollars in bad debts, hoping to cash in on just more than it paid. At some point, if the collection effort is unsuccessful, the collection company may give up and sell the debt to another collection company, recouping the original investment, making it a “no loss” endeavor that has an accompanying lack of financial incentive to play by the rules.

“Very old debt can haunt consumers for a long time,” says Ira Rheingold, the executive director of the National Association of Consumer Advocates, an organization containing more than 1,500 consumer attorneys. “It’s a debt that never dies — it just keeps coming back in many different forms with different owners, and you can’t kill it.”

Zombie debt can even strike the wrong person. With the advent of identity theft and the similarity of many names, often collection companies’ efforts are misdirected.

Many collection companies go beyond sending letters and making telephone calls demanding payment. They are actually filing lawsuits. These lawsuits pose troubling issues for both attorneys and judges because documentation issues abound.

A collection lawsuit requires proper documentation. Many of the collection lawsuits brought by second or third generation buyers of these debts lack this documentation.Typically the original loan agreement is missing; it contains important and required details about the loan, including term, interest rates, and possible attorney’s fees. Ethically, how can an attorney file a lawsuit knowing that this type of vital information, or proof is lacking? [read more]

Apr 10

By Ben Sutherly – The Columbus Dispatch

High-deductible insurance helps feed bottom-line issue

Some local hospitals now arrange loans for patients swamped by significant medical debt – debt that is increasingly attributed to high insurance deductibles and co-payments.

Since February 2013, Mount Carmel Health System has set up loans for as long as five years at an annual interest rate of 4 percent for patients with a minimum balance of $300.

Ohio State University’s Wexner Medical Center, whose bad debt swelled 31 percent to $118.6 million in the last fiscal year, also is considering a loan program, said Debra Lowe, the hospital’s administrative director of revenue cycle.

A recent report issued by Moody’s Investors Service warned that bad debt is becoming a hot spot for hospitals, in part because of the proliferation of high-deductible health plans that make consumers foot a greater portion of their health-care bills.

In fiscal year 2013, local hospital systems reported $357?million in bad debt, a 14?percent increase from the previous year.

The Affordable Care Act is benefiting hospitals by expanding the number of people with health insurance; an estimated 5.4 million U.S. adults who had not been insured as of September now have health insurance, according to Urban Institute research released on Thursday.

But that windfall might be tempered by the fact that about 80 percent of people signing up for private health coverage through government-run marketplaces are choosing plans with high deductibles, Moody’s said.

“Today’s high deductibles are tomorrow’s bad debt,” the report states. [read more]

Apr 9

By Jessica Glazer – NPR

When Kristine Leighton graduated from a private college five years ago with a degree in hospitality, she owed $75,000 on student loans. Each month, she paid the minimum amount of $450 and lived at home with her parents on Long Island, N.Y.

At first, she was working at a hotel for $10 an hour; money was tight. Even after she got a job in Manhattan making $75,000 a year, she still couldn’t afford to move out. She funneled her earnings into car payments, credit card bills and debt, and a monthly commuter train pass. The loan payments left little extra money for things like an emergency fund.

At one point she upped her monthly student loan payments to around $1,800 for almost a year, in an effort to chip away at her debt as much as she possibly could. To prepare for the future.

“I was trying,” Leighton says. “I had this great job, this great career, but I still couldn’t afford to move out of my parents’ house.”

Women have made gains in the workplace but there’s still a wage gap. Although attending college costs the same for both genders, women are more burdened by student loan debt after graduating. They spend a higher proportion of their salaries on paying off debt because, well, they have lower salaries to work with than men — from the very start.

A study by the found that one year after college, nearly half of women working full time, and 39 percent of men, were devoting more than 8 percent of their income toward their debt. That may seem small, but when you are fresh out of college, the combination of living expenses, credit card bills or debt, a 401(k) and a little left over for savings — if you can hack it — adds up.

It does so more quickly for women. College-educated women made 82 percent of men’s salaries one year after graduating in 2009, according to the AAUW study.

“For many young women, the challenge of paying back student loans is their first encounter with the pay gap,” the study says.

It might seem like the wage gap would be minimal at that point, since graduates of both genders are typically young, single, childless and relatively inexperienced in the workplace. Not so. [read more]

Apr 8

By Michael Muckian – Credit Union Times

A recent study by the National Consumer Law Center showed that big data providers are causing big headaches when it comes to both access to and accuracy of consumer information.

Given that this data may be considered fair game for scoring consumer credit risk among economically disadvantaged individuals, those headaches can be a big deal for financial institutions and consumers alike, the researchers said.

“Big Data: A Big Disappointment for Scoring Consumer Credit Risk,” released March 18 by the Boston-based NCLC, a nonprofit committed to economic justice for low-income and other disadvantaged people, was based on the efforts of 15 NCLC employees to obtain their personal information from four big data gathering firms: eBureau in St. Cloud, Minn.; ID Analytics in San Diego; Intelius in Bellevue, Wash.; and Spokeo in Mountain View, Calif.

In addition, study authors Persis Yu and Jillian McLaughlin requested their own information from the data firm Acxiom in Little Rock, Ark.

The reports, comprised of information culled from various Internet sources, were riddled with inaccuracies, and several included very little information, the authors said.

The errors ranged from mundane reporting of inaccurate phone numbers or email addresses to more serious errors and omissions about the subjects’ education and income. [read more]