Court Halts Alleged Fake Debt Collector Calls from India, Grants FTC Request to Stop Defendants Who Posed as Law Enforcers

WASHINGTON, April 11, 2012 /PRNewswire via COMTEX/ -- California-based Defendant Ran Phantom Debt Collection Scheme from His Home, FTC Alleges

In response to charges from the Federal Trade Commission, a U.S. district court has halted an operation that the agency alleges collected phantom payday loan debts that consumers either didn't owe to the defendants or didn't owe at all. The defendants' scheme involved more than 2.7 million calls to at least 600,000 different phone numbers nationwide, according to the FTC. In less than two years, they fraudulently collected more than $5.2 million from consumers, many of whom were strapped for cash and thought the money they were paying would be applied to loans they owed, according to FTC documents filed with the court.  Read the full article here

New Site to Calculate Potential Student Loan Debt

By KIMBERLY HEFLING and KRISTI EATON Associated Press

Link to article: http://abcnews.go.com/US/wireStory/site-calculate-potential-student-loan-debt-16117001#.T4X1kFFYvWc

Want to calculate how much you could owe in student loans after graduating from a particular college? A new government website provides tools to help with the math.

The site, by the Consumer Financial Protection Bureau, is in the testing phase, but already includes information from 7,500 colleges and universities.

Users can plug in details such as grant and scholarship offers to compare what they might owe after attending different schools. The site also offers information on graduation and student loan default rates.

A "military benefit calculator" function allows the nation's more than 2 million Iraq and Afghanistan veterans to determine what they could owe after using their GI Bill benefits.

It can be found at http://www.consumerfinance.gov/payingforcollege/costcomparison.

The site is the latest effort by the federal government to make colleges and universities more open about costs.

A separate Education Department web site — http://collegecost.ed.gov — also addresses college cost, with information such as the rate of tuition increases at colleges.

"Choosing a school is a big responsibility — one that is too often made difficult by an inability to determine the impact of student loan debt," said Richard Cordray, director of the Consumer Financial Protection Bureau, at a news conference in Sioux Falls, S.D., with Sen. Tim Johnson, D-S.D., and a gathering of local high school students.

The bureau says student loan debt has reached $1 trillion, surpassing credit card and auto-loan debt. Graduates owe on average about $25,000.

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Hefling reported from Washington.

Unpaid Bills Land Some Debtors Behind Bars

Unpaid Bills Land Some Debtors Behind Bars
by SUSIE AN

Link to article: http://www.npr.org/2011/12/12/143274773/unpaid-bills-land-some-debtors-behind-bars?sc=tw

Although debtors' prisons are illegal across the country, it's becoming increasingly common for people to serve jail time as a result of their debt.

Collection agencies are resorting to some unusually harsh tactics to force people to pay their unpaid debt, some of whom aren't aware that lawsuits have been filed against them by creditors.

Take, for example, what happened to Robin Sanders in Illinois.

She was driving home when an officer pulled her over for having a loud muffler. But instead of sending her off with a warning, the officer arrested Sanders, and she was taken right to jail.

"That's when I found out [that] I had a warrant for failure to appear in Macoupin County. And I didn't know what it was about."

Sanders owed $730 on a medical bill. She says she didn't even know a collection agency had filed a lawsuit against her.

"They say they send out these court notices, and nobody gets them," Sanders says.

She spent four days in jail waiting for her father to raise $500 for her bail. That money was then turned over to the collection agency.

Similar stories have been reported in Indiana, Tennessee and Washington.

Here's how it happens: A company will often sell off its debt to a collection agency, generally called a creditor. That creditor files a lawsuit against the debtor requiring a court appearance. A notice to appear in court is supposed to be given to the debtor. If they fail to show up, a warrant is issued for their arrest.

Beverly Yang, a legal aid attorney with Land of Lincoln Legal Assistance, says most debtors don't know their rights.

In fact, she says, some judges don't even know debtors' rights, which could result in the debtor being intimidated into a pay agreement.

"I've seen this even when I'm standing in the court room as the legal aid attorney," Yang says. "The judge will ask if they can pay, how about $150 a month. How about $75 a month? How come you can't even pay $50 a month? Did you apply for a job last week?"

Leveraging Payments

The Federal Trade Commission received more than 140,000 complaints related to debt collection in 2010. That's nearly 25,000 more than the previous year.

Yang says some creditors are eager to use harsh tactics. "Whatever the creditors or the creditors' attorneys can do to leverage some kind of payment, it will help their profits enormously because they have, literally, millions of these."

Kevin Kelly, president of the Illinois Creditors Bar Association, says members of his organization only issue warrants in extreme situations.

"There's an assumption in what you're saying that we'd rather throw them in jail than work with them," he says. "And I don't find that to be true at all."

Sometimes it's the debtor who's keeping information from the collectors, Kelly says. That prevents important documents from getting to the right place.

He says most collectors want to make reasonable arrangements, but it's difficult when the vast majority don't respond to the notices sent to them.

Illinois Attorney General Lisa Madigan thinks more can be done. It's illegal in Illinois for people to be sent to jail because they're in debt. But Madigan thinks some creditors are abusing the law.

"You wouldn't be in that predicament if you didn't have debt," Madigan says. "But for being in debt, you wouldn't be in prison. And that essentially equates to being thrown in jail, debtors' prison."

She says courts need to be certain they have correct information to serve notices. Madigan also says judges need to be properly educated in these proceedings to prevent a debtor from needlessly going to jail.

The Illinois attorney general also says the state is investigating agencies that it thinks are abusing the law.

As for Sanders, she has a remaining balance of about $160 on her medical bill. But at least she now knows she won't have to go to jail for it.

Bill to Improve U.S. Trustee’s Power To Protect Homeowners in Bankruptcy Revealed

by Elizabeth Brennon on Sep 23, 2011
Link to article: http://www.newsjunkyjournal.com/bill-to-improve-u-s-trustees-power-to-protect-homeowners-in-bankruptcy-revealed/2519663/

Just last year, more than one million Americans lost homes to foreclosure, and the foreclosure crisis is only expected to worsen. Distressed homeowners facing bankruptcy and foreclosure deserve to be treated fairly. Banks should not attempt to profit from these hard times with improper mortgage fees and other types of fraud. Apparently, however, this is exactly what may have been happening.

The United States Trustee Program and Executive Office of the U.S. Bankruptcy Trustee (EOUST) are part of the Department of Justice. The U.S. trustee oversees the administration of federal bankruptcy cases and works to protect the integrity of the system. Recently, EOUST reviewed 10,000 proofs of claim filed with bankruptcy courts by mortgagees or mortgage servicers.

Errors found in the claims included mortgage servicers charging unsubstantiated fees, overstating the amount homeowners owe on properties, and providing inadequate documentation to the bankruptcy court.

The U.S. trustee discovered that the errors in claims submitted by mortgage providers were both more serious and more frequent than the mortgage servicing industry previously asserted. Specifically, mortgage servicers claimed such errors occurred in less than one percent of bankruptcy cases. EOUST, however, discovered errors were occurring at 10 times that rate.

Although the U.S. Trustee Program attempted to combat these patterns of defective and fraudulent filings, those efforts have been slowed by legal challenges to the trustee’s power and authority to take such actions. Mortgage servicers are challenging the trustee’s ability to act on bankruptcy filers’ behalf by asking for additional documents or requesting sanctions for incorrect or fraudulent filings. Essentially mortgage servicers don’t believe the U.S. Trustee has the power to hold them accountable for their actions.

The Fighting Fraud in Bankruptcy Act

These legal challenges by mortgage servicers prompted three Senators, Patrick Leahy (D-Vt), Richard Blumenthal (D-Conn.), and Sheldon Whitehouse (D-R.I.) to sponsor legislation to strengthen and clarify the U.S. Trustee’s power to protect homeowners in the bankruptcy system from fraud. In late May the Fighting Fraud in Bankruptcy Act of 2011 (S. 1054) was introduced on the Senate floor, and the bill has now been referred to committee.

Senator Leahy explained the importance of the bill this way: “As Congress looks at ways to mitigate the foreclosure crisis to reduce its impact on homeowners and the economy, I hope all Senators can agree that the foreclosure process for Americans should be a fair one and one in which there is accountability for fraud or other misconduct. And I hope we can all agree that the integrity of our judicial system is something worth protecting.”

The Fighting Fraud in Bankruptcy Act has four main goals. First and foremost, it clarifies that the U.S. Trustee has the power and duty to take action when abuse of the bankruptcy process by creditors is detected.

In conjunction with this power, the Act authorizes the trustee to conduct audits and investigations to confirm creditors are acting in accordance with the law. If fraud or misconduct is detected, the Act allows the bankruptcy court to correct errors or impose sanctions for misconduct. These actions can be taken in response to a motion by the trustee, or the bankruptcy court may make its own motion.

Finally, the Act mandates that mortgage servicers certify under penalty of perjury that foreclosure actions against deployed and active duty military homeowners comply with the Servicemembers Civil Relief Act (SCRA). The SCRA serves to protect those in the military by staying foreclosure actions if they are currently deployed, and requiring manageable and stable interest rates for military servicemembers. A report by the Government Accountability Office (GAO) found that among only two of the 14 large mortgage servicing organizations that supplied data to regulators, 50 foreclosure cases violated the protections of the SCRA.

If the Fighting Fraud in Bankruptcy Act passes into law it will hopefully clarify and strengthen the U.S. Trustee Program’s power to remedy creditor abuse. This may prevent mortgage servicers from unfairly profiting from homeowners facing bankruptcy and foreclosure by submitting incorrect or fraudulent claims.

If you are overwhelmed by debt, or struggling to keep your home, contact an experienced personal bankruptcy and foreclosure attorney. A knowledgeable lawyer will work to protect your rights and advocate on your behalf throughout any bankruptcy or foreclosure proceedings.

Medical Bills, Debt Sends Many into Bankruptcy

By Cynthia Hsu on August 31, 2011 8:46 AM

Link to article: http://blogs.findlaw.com/law_and_life/2011/08/medical-bills-debt-sends-many-into-bankruptcy.html#more

What would you do if you were saddled with high medical bill debt? Would you declare bankruptcy? With the rising cost of healthcare, it seems that high medical bills and bankruptcy are starting to go hand-in-hand.

About 20% of Americans cite medical bills as the reason behind their bankruptcy when they seek financial consulting, according to a recent study by CredAbility.

This is an increase from just a few years ago, when about 12-13% of Americans cited medical debt as the reason behind their bankruptcy, according to The New York Times.

Why? With the rough economy, more Americans have gone through periods of unemployment, leaving gaps in their medical insurance coverage.

Plus, Americans who purchase insurance themselves might opt for cheaper plans with lower premiums in an effort to save money.

Lower premiums, however, often mean that there are high deductibles, making consumers more vulnerable to incurring high costs before their insurance kicks in, The New York Times reports.

It also seems medical debt is simply the kind of debt that Americans feel obligated to pay off. Some might even turn to opening up a new credit card, according to The New York Times.

This, unfortunately, may only lead to more debt.

Is bankruptcy right for consumers who are weighed down by medical bill debts?

It could be, but consumers should do their due diligence and carefully research their options before considering bankruptcy. There are alternatives, such as debt management plans that allow credit card holders to pay off their debt over a set period, reports The New York Times.

And, consumers looking to erase their medical bill debt through bankruptcy will need to figure out which bankruptcy is right for them. Is it Chapter 7, which erases many debts but may liquidate a consumer's assets? Or Chapter 13? Consulting an attorney to discuss your medical bills and bankruptcy might be a prudent option, as bankruptcy law is complicated and can be difficult to navigate without some expert guidance.