OK, not all debt collectors are this bad. But some of the worst are from Buffalo.
Here are a couple of stories on a guy charged with illegally operating a debt collection business from prison:
New York Daily News article
New York Post article
Greg Reichenbach
Greg@ReichenbachLaw.com
www.reichenbachlaw.com
Wednesday, August 25, 2010
Sunday, August 22, 2010
What Consumers Can Do When Sued on a Debt
Below is an article I wrote for the Ohio State Bar Association's "Law You Can Use Column". Many people think that if they get sued on a debt, there's not anything they can do. Many times they have questions. Here are some answers.
Q.: I received a summons from a court on a debt. What can I do?
A. It is important to file an Answer to the complaint. To respond to a lawsuit in Ohio state courts, you or your attorney must do so in writing within 28 days of being served, or ask the court for additional time to respond. If you dispute the amount, or if you’ve never heard of the company that is suing you, you may want to consult an attorney. If your debts are overwhelming, and you won’t be able to pay them off in the future, you should find out whether bankruptcy is an option for you. On the other hand, if you know you owe the creditor the amount demanded, and you can afford it, you may want to consider working out a payment plan. If you do, make sure you get any agreement in writing.
Q.: I owed a credit card company money, but now a different company is suing me. How do I know the second company really bought my credit card account?
A.: A number of businesses buy large numbers of older accounts, like credit card debt, for a few cents on the dollar, then attempt to collect it. If a debt buyer sues you, it must prove that it owns the account and that you opened an account. You must follow the court process to force the plaintiff to prove its case. The debt buyer also must provide evidence of the credit terms as well as evidence that you owe the amount claimed due. This sounds easy, but often these debt buyer companies do not have enough evidence to prove their claims in court.
Q.: I do owe the money, but just can’t afford to pay anything now. What will happen to me?
A.: If the company suing you proves their case, a judgment may be entered against you (meaning that the court determines you must pay). Up to 25 percent of your wages may be garnished in Ohio, and the creditor may take money from your bank accounts, unless your bank account contains only exempt funds. Examples of exemptions are Social Security money, student loans and certain other government benefits. Exempt funds will be garnished, however, unless you inform the court and the plaintiff, in writing, that the money in the account is exempt. If the creditor cannot prove its case, the creditor will not get a judgment against you, and will not be able to garnish your wages or bank accounts. You cannot be put in jail for simply owing money.
Q.: I have a dispute with the business that is suing me. How does that affect the lawsuit against me?
A.: If you have a claim against the company suing you, you can bring a counter-claim. In some cases, if you do not bring a counter-claim in response to being sued, you will not be able to bring your claim later. A counter-claim is basically a lawsuit against the creditor, but the creditor’s claim and your counter-claim will be decided by the court in the same case. Examples of counter-claims include claims against a debt buyer for unfair or deceptive methods of debt collection, claims against car dealers for deceptive sales practices, and violations of other consumer protection laws. A company that buys accounts may also be responsible for claims you have against the original business from whom it bought the account.
Q.: I think I need a lawyer, but I can’t afford one. What can I do?
A.: Some attorneys may represent you in your debt case for a flat fee. Some consumer protection laws may force the business to pay your attorney fees if you win. If you have a claim against the company suing you for a violation of certain consumer protection laws, an attorney may represent you without pre-payment of the fees, and attempt to collect your attorney fee from the business. Call your local bar association for a referral. If you make under a certain income, you may qualify for representation by a legal aid organization.
Q.: I received a summons from a court on a debt. What can I do?
A. It is important to file an Answer to the complaint. To respond to a lawsuit in Ohio state courts, you or your attorney must do so in writing within 28 days of being served, or ask the court for additional time to respond. If you dispute the amount, or if you’ve never heard of the company that is suing you, you may want to consult an attorney. If your debts are overwhelming, and you won’t be able to pay them off in the future, you should find out whether bankruptcy is an option for you. On the other hand, if you know you owe the creditor the amount demanded, and you can afford it, you may want to consider working out a payment plan. If you do, make sure you get any agreement in writing.
Q.: I owed a credit card company money, but now a different company is suing me. How do I know the second company really bought my credit card account?
A.: A number of businesses buy large numbers of older accounts, like credit card debt, for a few cents on the dollar, then attempt to collect it. If a debt buyer sues you, it must prove that it owns the account and that you opened an account. You must follow the court process to force the plaintiff to prove its case. The debt buyer also must provide evidence of the credit terms as well as evidence that you owe the amount claimed due. This sounds easy, but often these debt buyer companies do not have enough evidence to prove their claims in court.
Q.: I do owe the money, but just can’t afford to pay anything now. What will happen to me?
A.: If the company suing you proves their case, a judgment may be entered against you (meaning that the court determines you must pay). Up to 25 percent of your wages may be garnished in Ohio, and the creditor may take money from your bank accounts, unless your bank account contains only exempt funds. Examples of exemptions are Social Security money, student loans and certain other government benefits. Exempt funds will be garnished, however, unless you inform the court and the plaintiff, in writing, that the money in the account is exempt. If the creditor cannot prove its case, the creditor will not get a judgment against you, and will not be able to garnish your wages or bank accounts. You cannot be put in jail for simply owing money.
Q.: I have a dispute with the business that is suing me. How does that affect the lawsuit against me?
A.: If you have a claim against the company suing you, you can bring a counter-claim. In some cases, if you do not bring a counter-claim in response to being sued, you will not be able to bring your claim later. A counter-claim is basically a lawsuit against the creditor, but the creditor’s claim and your counter-claim will be decided by the court in the same case. Examples of counter-claims include claims against a debt buyer for unfair or deceptive methods of debt collection, claims against car dealers for deceptive sales practices, and violations of other consumer protection laws. A company that buys accounts may also be responsible for claims you have against the original business from whom it bought the account.
Q.: I think I need a lawyer, but I can’t afford one. What can I do?
A.: Some attorneys may represent you in your debt case for a flat fee. Some consumer protection laws may force the business to pay your attorney fees if you win. If you have a claim against the company suing you for a violation of certain consumer protection laws, an attorney may represent you without pre-payment of the fees, and attempt to collect your attorney fee from the business. Call your local bar association for a referral. If you make under a certain income, you may qualify for representation by a legal aid organization.
Greg Reichenbach
Tuesday, August 3, 2010
Debt Settlement Company Scams
The company tells you that you pay them a setup fee, stop paying your debts, and eventually they will negotiate with your creditors for lump sum settlements at reduced rates. They tell you they have a 95% success rate. It sounds good. The setup fee is paid in monthly installments for maybe six months or so.
After the setup fee is paid, they start negotiating with your creditors, and maybe they actually get you a deal of 50% off or so on one account. At this point, you have paid the company $5,000 in fees, but if they cut all your debts by half, it's still a good deal, so you hope....
Then reality sets in: you get your first collection law suit from a creditor who refuses to deal with the debt settlement company. The DSC says they don't practice law and therefore cannot defend you against the collection suit (maybe contrary to what they implied when they were convincing you to sign up), but they "help" you write your own response to the law suit. Your "response" is not sufficient, and the creditor gets a judgment against you and begins to garnish your bank account and wages. Eventually, you realize that the DSC is not going to solve your financial problems and you end up filing bankruptcy, which costs less than what you've already paid to the DSC.
I have seen this pattern over and over again in my practice. Yesterday a smart young woman called to get my help on a collection law suit. At the end of the conversation, she happened to mention something about a debt settlement company. It turns out she has paid them over $10,000 over several years, and they have not settled a single account of hers. These predators are so good at scamming people that she still didn't realize how badly she had been taken.
The bad news is that there are a lot of these companies out there, doing a lot of marketing to vulnerable consumers. The companies tend to hide their identity and create multiple corporations to make it hard to find out who they even are and to discourage law suits against them. They typically require payment of their fee first, and also take a percentage of money saved in any settlements. They prey on working people.
The good news is that Ohio law protects consumers, outlawing the kind of payments these companies charge. But the law does not stop them. They are willing to break the law because they make so much money in the process. In some cases, a law suit against the debt settlement company is appropriate, to recover the money lost, including attorney fees and court costs. I have found that with a proper investigation into who took my client's money, most DSC's will settle the claims against them.
So, what should you do instead of signing up with one of these horrible predatory corporations? You may want to consult with a bankruptcy attorney. Many do not charge for the initial consultation, or may charge a small fee. (I'll make bankruptcy the topic of a future blog.) Another option is consulting with a legitimate, non-profit, credit counseling service. How do you tell the difference? The legitimate credit counseling services charge a very low fee (maybe $25/month), or are free.
I'm amazed at the scope of advertising these companies do on "legitimate" media. Don't fall for the scams.
Greg Reichenbach
Bluffton, Ohio
Greg@ReichenbachLaw.com
Further reading:
West Virginia attorney general
Texas attorney general
New York attorney general
Vermont attorney general
Illinois attorney general
Ohio attorney general asks the FTC for stronger regulation of DSC's
FTC to issue new rules for debt settlement companies
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