Nov 19

By Les Christie – CNN

They thought losing their home was bad enough.

Now, years later, collectors are coming after them for thousands of dollars in back debt.

Ben McLarin lived near Jacksonville, Fla., until he lost his job and got divorced in 2007. His wife kept the house, but then couldn’t keep up the payments, spurring the bank to foreclose in 2009.

This year, a debt collector informed him he was being sued for $115,000, the difference between what was owed on the house and the amount the lender managed to recoup after it sold the home, said McLarin, an IT worker, who now lives in California.

His attorney, Chip Parker, with Parker & DuFresne in Jacksonville, said McLarin is one of thousands.

Parker estimates that one debt collector alone, Dyck O’Neal, has filed more than 10,000 suits in Florida this year, involving roughly $1 billion in foreclosure debt.

“There are people who lost their homes to foreclosure five to seven years ago, took the credit hit, repaired their score and, just as they were recovering, they take another hit,” said Parker.

Dyck O’Neal declined to comment. [read more]


Nov 18

By DL Cade – PetaPixel

For photographer Brittany M. Powell, debt isn’t just the subject of a personal portrait project, it’s a harsh reality that she’s had to face herself.

Inspired by her own experience with debt and bankruptcy after the financial crisis in 2008, she set out to expose the truth about debt and how it impacts both our society and our personal identity in The Debt Project.

At its core, The Debt Project is as much for the subjects as it is for the photographer and the ultimate viewers. A mixed-media project, each portrait is attached to a video interview and a short written statement in which each of the subjects writes down the amount of debt they’re in and the story behind it.

“In a state of Social Darwinism, (which we basically live in) the people who have less are seen as weaker… no one wants to consider themselves as lesser or weaker, but when you live in a culture that worships wealth, how can that be avoided?” she told Feature Shoot recently in an interview. “The shame is self-perpetuating and it consistently fuels the stigma.”

Her photographs and the project as a whole gives her participants the opportunity to discuss their troubles, and reminds them that they are not alone. Many found it “liberating… to discuss their experiences,” she writes, and each exhibition helps to shed more light on a pervasive problem that, according to CNN, is only getting worse. [read more]


Nov 18

By Patrick Lunsford – insideARM

The U.S. Treasury Department is readying a pilot program to take over the collection of some defaulted student loan accounts from the Department of Education, essentially removing the work from contracted private debt collection agencies.

There is no official confirmation of the program yet, but multiple unnamed sources within ED and Treasury have discussed the plan with numerous media outlets. The Huffington Post had the story first and The Wall Street Journal independently verified some of the information.

According to media sources, the plan would involve moving defaulted student loans to Treasury’s fiscal service bureau. The intent is to put more focus on helping struggling borrowers, most likely in the form of rehabilitating defaulted loans into current status.

It is unclear whether the initial loans would involve more recent direct federal loans or legacy guaranteed loans, or a combination of the two. Currently, ED contracts with private debt collectors to recover defaulted loans.

There is also a separate plan to do the same with student loans that are current. ED also uses private companies to service those loans under a separate contract.

The internal debt collection pilot program could begin early next year, according to sources.

Although there has been no official confirmation, at least one member of the Administration recently acknowledged that federal agencies are concerned with some of the incentives in the debt collection contracts. [read more]


Nov 14

By Jessica Silver-Greenberg – The New York Times

In the netherworld of consumer debt, there are zombies: bills that cannot be killed even by declaring personal bankruptcy.

Tens of thousands of Americans who went through bankruptcy are still haunted by debts long after — sometimes as long as a decade after — federal judges have extinguished the bills in court.

The problem, state and federal officials suspect, is that some of the nation’s biggest banks ignore bankruptcy court discharges, which render the debts void. Paying no heed to the courts, the banks keep the debts alive on credit reports, essentially forcing borrowers to make payments on bills that they do not legally owe.

The practice — a subtle but powerful tactic that effectively holds the credit report hostage until borrowers pay — potentially breathes new life into the pools of bad debt that are bought by financial firms.

Now lawyers with the United States Trustee Program, an arm of the Justice Department, are investigating JPMorgan Chase, Bank of America, Citigroup and Synchrony Financial, formerly known as GE Capital Retail Finance, suspecting the banks of violating federal bankruptcy law by ignoring the discharge injunction, say people briefed on the investigations.

The banks say that they comply with all federal laws in their collection and sale of debt.

Still, federal judges have started to raise alarms that some banks are threatening the foundations of bankruptcy. [read more]


Nov 13

By Bob Sullivan – Credit.com

Debt collectors have been known to use dirty tricks to get consumers to pay, but those collecting student loans have an especially powerful tool on their side. Unlike most other debt, student loan debt cannot be routinely discharged in bankruptcy. And depending on the type of loan, the debts can be collected through wage garnishments or even as deductions from Social Security checks. Student loan borrowers suffer from a decided lack of leverage when dealing with lenders and collectors.

This position of power emboldens student loan debt collectors. Perhaps that’s why, when the Consumer Financial Protection Bureau examined student loan servicing recently, it found a company that routinely called debtors at odd hours, violating federal law. In fact, one borrower received 48 such calls.

The massive student loan problem (there’s now more outstanding student loan debt than credit card debt) is an anchor that is severely hampering some young Americans from starting their adult lives. Roughly one-third of adults aged 18-31 live with their parents. Of course, it’s not the amount of the debt that’s the problem, it’s the number of former students who can’t pay the debt. Earlier this year, the Government Accountability Office said that about $94 billion — more than 11% of the federal student loan volume in repayment — was in default.

Most of those in-default consumers will end up in the hands of a debt collector. In fact, The Department of Education contracts with private debt collectors in an attempt to recover the debts. The agency estimates that in 2014, taxpayers and student loan borrowers will pay over $1 billion in commissions to student loan debt collectors, growing to over $2 billion by 2016.

For years, advocacy groups like the National Consumer Law Center having been trying to get student debt collectors, particularly those working for the Department of Education, to clean up their act. Advocates say that many do a poor job of explaining options to borrowers who fall behind, for example. A report issued by NCLC in September was heavily critical.

“The government’s use of debt collection agencies is short sighted in that promoting paths to success for struggling borrowers, especially those who are low income, is ultimately less costly for taxpayers than hammering them … the rest of their lives with draconian collection tools,” said National Consumer Law Center attorney and co-author Persis Yu. [read more]


Nov 12

By Elizabeth Weise – USA Today

In classified briefings Oct. 22 and Nov. 7, the U.S. Postal Service told members of Congress that it had been hacked.

The service made the information public Monday.

The Washington Post reported China may have been involved in the cyberattack, citing anonymous sources. USA TODAY was unable to confirm the report.

Postal Service spokeswoman Sue Brennan told USA TODAY the “issue is still under investigation.”

In its statement, the post office said some USPS computers were hacked and some employee information was compromised.

Information about people who called in to the post office’s Customer Care center was also compromised.

The service’s customer website, usps.com, was not affected, the statement said.

“The intrusion is limited in scope, and all operations of the Postal Service are functioning normally,” said David Partenheimer, media relations manager for the U.S. Postal Service.

In a letter sent Monday, Rep. Elijah Cummings, D-Md., cited the classified briefings, which were made to the House Committee on Oversight and Government Reform. He asked for more information from Postmaster General Patrick Donahoe.

Cummings asked for a description of the cyberattack and how it was first discovered, as well as what actions Donahoe took after learning about it. [read more]