Alabama Consumer Law Blog

Here is a new consumer guide that helps explain the violation of the Fair Debt Collection Practices Act (FDCPA) when collectors (as they routinely do) call third parties.

We answer these questions in this short guide:

What is a third party?

What can a collector ask of a third party?

What are some examples of illegal things collectors ask third parties?

If a collector breaks the law in calling a third party, what can I do?

Feel free to contact us through our website or you can call us at 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

I have a profile on Avvo (a legal help website) and I recently wrote a consumer guide "What Is The Difference Between A Non Judicial Foreclosure And A Judicial Foreclosure?"

This is a short, easy to read guide that explains how states differ in their approach to foreclosure.

In Alabama we are a "non judicial" foreclosure state so some of the things that work and don't work in a judicial foreclosure state such as Florida are different here in Alabama.

You can also read our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you like it the Avvo consumer guide on foreclosures, please feel free to comment on it or indicate that it is helpful to you.

Feel free to contact us through our website or you can call us at 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

Our friend Denise Richardson, of givemebackmycredit.com, has posted an article that highlights some of the foreclosure problems that have been happening all over the country, specifically in Florida, which has been hit with above average numbers of foreclosure and fraud. Homeowners in Florida have had to deal with several unnecessary issues, such as bank accounting errors and mortgage board practices, when facing foreclosure.

Florida lenders are looking to speed up the foreclosing process and claim that dragging out the process is "time-consuming and expensive."

If members of the Florida Banker's Association have their way, homeowners facing foreclosure could have as little as three months before having to leave their homes. That isn't much time considering it takes at least that long to modify or refinance a loan -or simply try to clean up erroneous credit reporting caused by mortgage servicing abuses.

This means that homeowners will have a more difficult time and a much smaller time span to prove to lenders that the foreclosure proceedings were started illegally and/or due to error, misinformation or through deceptive practices.

Defaulting homeowners are going to be unfairly pushed through an accelerated foreclosure process. Responsible homeowners who have arranged loan modifications with their lenders, but who have been lost in a sea of red tape, will be at risk of losing their homes if they don't have the proper amount of time to prove their innocence -or that they are in good standing on their loans. This shouldn't happen.

Banks would use a non-judicial method to push foreclosures through so quickly. This type of proceeding bypasses judges, legal courts and also doesn't give enough time for the homeowner to prove that they are being foreclosed on unfairly. This method would take from 90-120 days to completely foreclose.

The Florida Consumer Protection and Homeowner Credit Rehabilitation Act currently being perused by state lawmakers would give lenders the right to go after homeowners for unpaid mortgage debt even after they have been evicted. While banks have that right, they can opt not to exercise it. This is small comfort for the homeowners who can no longer rely on mandatory mediation since the new bill totally bumps that concept right out of the picture.

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

I have a profile on Avvo (a legal help website) and I recently wrote a consumer guide to the growing problem of debt collectors calling cell phones with auto dialers or pre-recorded messages. We hope this short guide is of assistance to you in dealing with this type of situation that so many Alabama consumers are finding themselves in now.

If you like it, please feel free to comment on it or indicate that it is helpful to you.

Feel free to contact us through our website or you can call us at 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

NPR.org has posted an article that discusses the dangers of medical identity theft and how you can better prevent it. Medical identity theft can not only affect consumers' credit scores, but also puts their personal safety at risk. The identity thief can provide false information, like blood type and medications, that can later affect the actual insurance holder

."We've had people who, all of a sudden, their health care record has different blood types," Dixon says. "They have health care records with different genders and ages. Different medications. There are people we've talked with who, their imposter went in and had a hospital stay and put down that they were allergic to one drug, and then the real person is not allergic to that drug, but they're allergic to other drugs."

Health care workers have found that asking patients to tell them their medical history can help throw and identity thief off. Often times, they will stumble over or mess up information on the patient's medical chart.

Nearly all cases of this kind of identity theft are "insider jobs." Employees like accountants and receptionists have easy access to patient records. It's a good idea to get a hardcopy of your medical chart, even if a fee is charged, so there is a way to prove what the chart used to look like should it be falsely altered later on.

If you have further questions or concerns about identity theft, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

The New York Times has posted an article that discusses how mortgage modifications affect homeowners' credit scores. Lenders can use special codes to keep track and let credit bureaus know if homeowners are paying on time.

When the loan modification program, which lowers mortgage payments for homeowners who are behind in their payments or in danger of imminent default, was announced in February, lenders used an existing code, called AC, to signal that borrowers were participating in the program.

A problem is that the AC code only shows that a partial payment was made. That can cause a credit score to fall anywhere from 30 to 100 points. The AC is an old code that is just being used until a newer one is developed. Nonetheless, it is responsible for damaging the credit scores of homeowners who "made timely payments before and after agreeing to loan modifications as making only partial payments."

Banks should switch to a code that doesn't damage credit scores. Consumers can also call and request it. They can also file disputes and ask for corrections on credit reports that were affected by the old code.

But shouldn’t people with modified loans who never missed a payment not suffer a credit score decline under any circumstances? Industry experts believe that some mark is necessary. The reason: those getting the modifications in the first place probably pose more risk to future lenders, given that the mortgage modification program was devised to help people whose money problems make them vulnerable to foreclosure. “They are having financial difficulty, so there is some risk involved,” said Mr. Magnuson.

If you would like more information on foreclosures, feel free to check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

We want to give you the text of the FDCPA and our analysis of this important piece of consumer protection litigation which is one of the primary weapons we have to fight back against abusive debt collectors to make them stop abusing us.

This will be a series of posts and the format will be our analysis and then we'll put the actual text of the particular section we are discussing below. We hope you will find this helpful and we look forward to hearing from you.

Section 1692 is the opening section of the law and it gives the reasons and the rationale for why Congress decided, over 30 years ago, that it was necessary to "federalize" debt collection which up until that time was solely and simply a matter of state law. This is a critically important part of the FDCPA as it gives us actual Congressional findings related to the problem of abusive debt collectors.

Subsection (a) tells us that Congress found "abundant evidence" that debt collectors around the nation were using "abusive, deceptive, and unfair debt collection practices" and it says that this was being done by "many debt collectors."

Often when we sue abusive collection agencies, debt buyers, or collection lawyers, they claim that the industry has no problems and they certainly have no problems. Congress found, however, that the problem was so bad that this law was needed.

The next argument from collectors is that "OK so we broke the law - but abusive debt collection tactics don't really hurt anyone." Well, Congress disagrees because it says that these abusive, deceptive and unfair tactics "contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy."

That is a very serious list of problems that often result from illegal debt collection.

Bankruptcies are often condemned by businesses (until they need to file - then that's somehow different) but many bankruptcy lawyers recognize that the primary reason people show up in their office to file bankruptcy is because of abusive debt collection tactics.

Everyone recognizes the value of marriage and the stability of families but do we recognize that abusive debt collectors contribute to homes being shattered and divorces being filed? All debt collectors deny this but Congress found "abundant evidence" that the pressures that can result from illegal debt collection can destroy marriages. Hardly "technical" violations like the debt collectors like to say....

We believe people who have the ability should work, right? Debt collectors like to talk about "dead beats who don't work" but they refuse to take responsibility for destroying people's lives by causing debtors to lose their jobs. Collectors know, especially in this economy, that if they can threaten someone's job, that person is much more likely to pay even debts that they don't owe. Congress found that the "abusive, deceptive, and unfair debt collection practices" contributes "to the loss of jobs." Again, this is not sounding like a minor matter, is it?

Do you value your privacy? Do companies value their privacy? Sure. We have security measures (locks on doors, companies have badges to get access to the building, etc) to protect our privacy. For someone to go through our file cabinet at home is a horrible invasion of privacy. Or for someone to post our medical records on the internet would be an invasion of our privacy. But Congress found that the "abusive, deceptive, and unfair debt collection practices" contributes "to invasions of individual privacy. This is often done through the rampant problem of illegal third party contacts.

So when debt collectors dismiss violations of this federal law as "no big deal" remember that Congress said that these violations result in:
1. Personal bankruptcies;
2. Marital instability;
3. Loss of jobs; and
4. Invasions of personal privacy.

OK, well why did Congress have to step in? Why not just allow the state laws to protect consumers around the country? Because in subsection (b) Congress found "Existing laws and procedures for redressing these injuries are inadequate to protect consumers." So, the FDCPA is absolutely necessary to prevent abuses that result in those four negative effects (bankruptcies, marital instability, loss of jobs, and invasions of privacy) as the existing state laws (including Alabama) were and are inadequate.

Well, collectors will say (with a straight face somehow) that if they are not allowed to abuse consumers then they will not be able to collect debts and the whole economy will come crashing down. Is this true?

Subsection (c) says "No" as Congress found "Means other than misrepresentations or other abusive debt collection practices are available for the effective collection of debts."

Congress is saying "Look, you can collect debts. You can be very effective in collecting debts. But there are ways to do this without abusing consumers and lying to consumers."

In what business do you have leaders of companies and the industry saying "Well, we know we break the law but we sure hope that you understand we do this because we have to. Those pesky laws just get in our way and we certainly don't want federal judges holding us to the highest law in this land. That would be unfair!" This kind of attitude is in part the reason why our economy is in the mess that it is in - mortgage companies couldn't be bothered to follow the law and now they want to be able to foreclose on consumers even though they are breaking the law.

Debt collectors then will say this is not worthy of federal court as it is a minor dispute between a consumer and a collection agency. But Congress found that abusive debt collection activites "directly affect interstate commerce." This is one of the major requirements often in place for deciding whether Congress can pass a law on the subject. Since abusive debt collection affects the country, Congress can regulate it.

Finally, these abusive debt collectors say it is unfair that private citizens can sue them for violating the FDCPA and all this does is get consumers money and puts money in the pockets of consumer lawyers.

It is true that consumers can recover damages. And it is true that consumer lawyers can be paid attorney fees by the abusive debt collectors.

But it is critical to understand that Congress had two purposes in mind in passing the FDCPA: Stop abusive collection and make sure that honorable law abiding collectors were not at a competitive disadvantage to the abusive collectors.

Let's look at these.

First, by regulating abusive conduct and allowing not only the government but also private citizens to file suit against abusive collectors, this does begin the process of eliminating abusive collection tactics. When collectors start having to spend money for their illegal conduct, they will evaluate whether it is wise to continue to break the law. When they are sued often enough and hard enough and long enough, they will become compliant out of their own self interest.

Second, and this is fascinating, Congress wanted to make sure that honorable collectors were not going to lose in the marketplace to abusive collectors. "[T]o insure that those debt collectors who refrain from using abusive collection practices are not competitively disadvantaged." We want law abiding collection agencies to not be at a disadvantage to cheating collection agencies.

Years ago I received an odd call from a collection attorney who was furious with his competition. The law requires that when a debt collector starts collecting against a consumer that the collector notify the consumer that the consumer has "30 days" to dispute the validity of the debt. [Note you can always dispute the debt - there are just some special things that happen if this is done within the first 30 days].

A competitor stole his collection client by promising to only give consumers "14 days" to dispute. So, the client (a large hospital) switched to this aggressive and abusive collector. This is exactly what Congress meant when it said it did not want law abiding collectors to be at a competitive disadvantage. Imagine if an abusive collector threatened to kill debtor's children - the collection rate would sky rocket for that abusive collector and that is unfair for the collectors who play within the rules.

We have quoted from the text but here is the full version of Section 1692 which is entitled "Congressional Findings And Declaration Of Purpose":

(a) Abusive practices
There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.

(b) Inadequacy of laws
Existing laws and procedures for redressing these injuries are inadequate to protect consumers.

(c) Available non-abusive collection methods
Means other than misrepresentation or other abusive debt collection practices are available for the effective collection of debts.

(d) Interstate commerce
Abusive debt collection practices are carried on to a substantial extent in interstate commerce and through means and instrumentalities of such commerce. Even where abusive debt collection practices are purely intrastate in character, they nevertheless directly affect interstate commerce.

(e) Purposes
It is the purpose of this subchapter to eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses.

In closing this section, if you have any questions or concerns about your rights related to abusive debt collectors, and if you live in Alabama, please feel free to call us at 205-879-2447 or contact us through our website. If you live outside of Alabama, we suggest you look for a local consumer lawyer at the National Association of Consumer Advocates website.

We wish you the best....

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

We recently sued (as we often do) Portfolio Recovery Associates (PRA). This time it was for repeatedly and illegally calling our client's cell phone while using an auto dialer and/or a pre-recorded message. This is illegal under the Telephone Consumer Protection Act (TCPA).

Much to my surprise, PRA claims that it does not have an auto dialer. I find this amazing and frankly not believable.

If you have either experienced an auto dialer from PRA or if you have clients that have, please contact me (205-879-2447) as I would like to see how this plays out at the deposition of the corporate representative.

If it turns out this statement is incorrect (and it can't be an accident - PRA knows whether it has an autodialer system) then it will be very enlightening to us on the credibility of PRA.

We appreciate it your help...

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

Foreclosurebuzz.org has posted an article and a video about the imbalance of high foreclosures and low mortgage modifications. Despite numerous government instigated programs to stave off foreclosures, the numbers of permanent mortgage modifications remain very low.

The Program’s own Loan Modification Report here, shows that as of January 2010 less than 4% of borrowers that are more than 60 days delinquent have received permanent modifications. The first step is obtaining a trial modification, and very few homeowners have been offered one (according to the report it’s about 37.3% of eligible borrowers).

A big reason for this is the conflicting information homeowners receive. Often they are told one thing on the phone doesn't coincide with information they have in writing. Loan servicers tell homeowners not to worry about the written documents because "it is part of the process" but then a few days later may turn around and decide to foreclose because the homeowner failed to submit a document or other information. Loan servicers are also notorious for consistently losing documents, even after being sent multiple copies, so it's a very real possibility that it's the servicer in error and not the homeowner.

As for the second step of the modification process, permanent loan modification, Bank of America was just sued for promising to make modifications to loans at a foreclosure clinic and failing to do so. So far in our office, we have seen one permanent modification. Bank of America and Wells Fargo were sued in Massachusetts for providing trial modifications, but failing to permanently modify the loan. Article here. HAMP guidelines are ridiculously weak. They allow lenders to continue the foreclosure process even when they are considering a modification application. See Supplemental Directive 09-09 here at Page 10. Lenders are prohibited from conducting a sale when they are still considering a modification, but what they say typically is that the borrower is not eligible the day before. Why not make that a clear ban?

If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

The Federal Trade Commission has posted an article about a recent debt settlement. Credit Bureau Collection Services, a nationwide debt collecting company, has agreed to pay more than $1 million to the FTC as a settlement for violating "federal law by inaccurately reporting credit information and pressing consumers to pay debts they often did not owe."

The FTC's complaint was that the company violated the Fair Debt Collection Practices Act by illegally trying to collect invalid debts and then reported the debts to credit reporting agencies and ignored disputes from consumers. Also, they are charged with violating the Fair Credit Reporting Act.

In addition, even after receiving information from consumers that a debt was paid off or did not belong to the consumer, the company continued to assert, no longer with a reasonable basis, that the consumer owed the debt, without trying to confirm or dispute the consumer’s information, in violation of the FTC Act.

In addition to imposing the $1.1 million civil penalty on the company, the settlement order:

-Bars the defendants from further violations;
-Prohibits them from making unsupported statements to collect a debt or obtain information about a consumer;
-Bars them from making claims that a debt is owed or about the amount, without a reasonable basis;
-Requires the defendants, when a debt is questionable or a consumer questions it, to either close the account and end collection efforts or investigate the dispute. If they cannot show that the consumer owes a debt, they cannot sell the debt or provide it to any business other than the original client; and
-Bars the company from re-reporting information to credit reporting agencies that it had voluntarily deleted from credit reporting before December 2008.

If you have had problems with debt collector harassment or faulty credit reports, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

The Associated Press has posted an article about mortgage walk-aways. Tishman Speyer Properties in New York City was facing the same problem that many homeowners are...they were paying more on mortgage payments than their property was worth. The real estate group paid $5.4 billion for an 11,232 unit apartment building and the current value has dropped to $1.8 billion. Tishman did what many homeowners are tempted to do and they walked away from the mortgage. Ironically, Tishman Speyer Properties experienced no repercussions.

Tishman said last week that it was turning the property back over to creditors to avoid filing for bankruptcy protection. In recent weeks, Tishman failed to restructure $4.4 billion in debt, and couldn't find another buyer, according to a statement from the company.

However, homeowners face a very different scenario; namely, there will be consequences, when thinking of walking away from a mortgage. It may be tempting, but doing so can severely damage your credit score for as long as seven years. Also, the effect can be economically devastating if large numbers of people begin to do it. Home prices will go even lower and banks will give fewer loans and have more bad loans to contend with.

Walking away from your mortgage is never a good plan and we certainly don't recommend it. If you would like more information on foreclosures, please check out our articles The Three Stages Of Foreclosure In Alabama and Wrongful Foreclosures In Alabama.

If you have further questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below:

Our friend Denise Richardson, of givemebackmycredit.com, has posted an article about new regulations placed on credit card companies. However, creditors aren't willing to back down so easily and are finding creative ways to bypass losses of revenue that the new rules, that came into effect on February 22 of this year, might cause.

The new regulations include:

Unfair rate increases and the universal default clause have been eliminated. This means that if you are late on one bill, a different creditor cannot use that to justify an increase in your interest rate. It also means that creditors cannot hike up the interest rate on a whim.

Limits on credit issued to the under-21 crowd are now in effect. This one protects college kids -those most sought after by creditors, from getting heavily into debt before the truly understand the repercussions and how the credit industry operates.

Fee calculations are more structured eliminating inconsistent payment cycles, over-the-limit charges without the consumer's consent, and extra interest charges due to pesky double-cycle billing practices.

Favorable interest rates must stay in effect for new credit cards for at least 12 months unless they have been issued as a promotional rate. In that case, they must stay in effect for 6 full months unless the consumer has been 60 days or more late with his payment.

Creditors are now required to use understandable language in all documentation and fine print including applications, billing, and notices. Statements must show how long it will take to pay off the debt incurred if the consumer only makes the minimum payment due.

Any changes to a consumer's credit card account cannot take place until he has been given at least 45 days notice.

To replace lost revenue because of the above revisions, many credit card companies are going to start charging $1 for paper credit card statements. To avoid this, you have to sign up for electronic statements. Creditors are also adding on "inactivity fees," increasing annual fees and reducing rewards or requiring card holders to request rewards that used to come automatically and placing expiration dates on rewards.

Creditors can also request that their customers agree to over-the-limit charges. This means consumers can exceed their monthly limit and if consumers don't read the fine print and don't pay attention, they can agree to this without realizing it. Credit cards with variable interest rates instead of fixed rates allow the creditor to raise the interest rate every time the primary rate goes up.

To protect yourself from any unwanted credit card surprises, be sure to read all documentation (including the fine print) the credit card companies send to you. Also, you can shop around for the best interest rate and other reward incentives.

If you have credit questions or concerns, feel free to contact us through our website or by calling 205-879-2447.

You can also sign up for our free email newsletter sent out every Thursday morning - we cover topics such as the one in this post. We would love to include you! Just fill out the form below: