Alabama Consumer Law Blog

Business Insider.com has posted an article that discusses how Jefferson County, Alabama has ended up owing JP Morgan billions of dollars for "for crappy interest rate swap deals it entered into to ease the debt burden of a flawed sewer project." The county ended up owing millions in fees alone; JP Morgan settled for $50 million.

The whole thing seems to have started after the sewer system spilled waste into the Cahaba River, which triggered environmentalists to lobby and made the EPA pressure Jefferson County into repairing the sewer system. The county decided to go ahead and repair the whole system. The project was originally slated to cost $250 million, but thanks to politics and corruption the final price tag ended up being about $3 billion. The county went too far into debt and entered into several swap agreements with JP Morgan, hoping to alleviate some of the debt, but that ended up costing more than what was originally owed.

Now that you've got the gist of it, here are some choice points from Taibbi's piece, which is appropriately titled "Looting Main Street":

Birmingham, Alabama resident Lisa Pack had to talk other laid-off coworkers out of suicide. "I'd be on the phone sometimes until two in the morning," she says. "I had to talk more than one person out of suicide. For some of the men supporting families, it was so hard — foreclosure, bankruptcy. I'd go to bed at night, and I'd be in tears."
Total cost: more than $3 billion due to pay-to-play contracts and political padding.
Synthetic interest rate swaps to ease debt repayment ended up costing the county a lot of money. It just ended up postponing the problem rather than actually dealing with it. County officials wanted to make sure they weren't tarnished in the next election year.
A wheeler-dealer named Bill Blount took bribes to allow deals to be pushed through. Compensation from this fiasco netted him about $3 million. Says one JP Morgan banker who worked with Blount: "It's a lot of money, but in the end, it's worth it on a billion-dollar deal."
JP Morgan paid Goldman Sachs $3 million just to "back off" so they could be the sole firm in the county doing business, an apparent violation of pro-competition laws. Blount took in $300k from that deal.
Everyone was in on the bribery and illegality of these deals. A bunch of investment banks including Lehman and Bear, contractors, politicians, city planners.
Advisor on deals was a firm called CDR Financial Products, which came under hot water for signing off on shitty financial products and being a "big-league version of Bill Blount."
Jefferson County at one point had more swap deals than New York City and had done at least 23 of them.
When Jefferson County defaulted on its swap payments, JP Morgan canceled the deal and charged a termination fee of $647 million. The SEC ultimately canceled the fee after charging JPM with fraud. Blount has since been found guilty of bribing officials and is now in jail.

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

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The Indiana Consumer Lawyer Blog has posted an article about a recent development with Carfax. Carfax has put all the vehicle identification numbers (VINs) available on its website to be searched for free.

However, Robert Duff, the author of the blog post, suspects that Carfax might be intentionally making it difficult for consumers to locate the free reports.

...I spent about ten minutes searching for it and could not find it. It wouldn't surprise me if Carfax is making it intentionally difficult to access so that frustrated consumers will just decide to buy a regular Carfax report on the car. I could be wrong. Maybe the website is set up so that no reports are sold on Cash for Clunker vehicles but instead when a person tries to buy a report on such a car a huge warning pops up. I hope so. But knowing what I know about Carfax, I have my suspicions.

Since so many vehicles were "retired" during Cash for Clunkers, it is likely that several will start showing up for sale again as lemons from dishonest dealerships.

If you have had problems with faulty Carfax reports or something similar,and feel you have grounds for a lawsuit feel free to contact us.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:

Associated Press has posted an article about a record decrease in consumer borrowing for the month of July. Economic uncertainty and job losses have "prompted Americans to rein in their debt" by collectively cutting debt by $21.6 billion. Economists expected it to only drop about $4 billion.

The lagging economy is causing consumers to be more careful about the decision to apply for that extra credit card, but banks are also being more particular and are "clamping down on lending."

Still, a report earlier this year by the company that produces the most widely known credit scores found that companies slashed limits for an estimated 58 million card holders in the 12 months ended in April, even though a high percentage had good credit scores when their limits were cut.

The cuts affected about a third of consumers, according to the study by FICO. But most people did not see a big impact on the credit scores because lenders often cut limits on cards that were unused or lightly used.

Ironically, the huge cutback on consumer spending has come at the same time Cash for Clunkers was introduced with the intent to boost spending and borrowing.

Given the current economic situation, debt collection and payment has become an important issue for many Americans. If you have had problems with debt collection, specifically creditor harrassment, feel free to contact us.

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Wall Street played a huge role in creating the economic mess we are in through the securitization of sub prime mortgages and through other ill advised financial products. Now, the NY Times reports that the banks have turned their attention to buying up life insurance settlements and then applying some of the same principles to them that were used on the sub prime mortgages.

Here's the basic gist. Life insurance policies often have a cash surrender value if you want to cancel the policy. But normally this is not a significant amount of money. So what does an elderly or very sick person do if they have a large life insurance policy but need money now? They "sell" their policy to someone who pays money to then keep the policy in force until the person dies.

The idea is that you pay less for the policy and the premiums than you will receive when the elderly or sick person dies.

Until recently, this has been a relatively small market but the big banks that were part of the source of the sub prime problems, and many of whom received a couple of our tax dollars, are planning on making this the "next big thing" in the financial markets.

Here's how it will work:

The bankers plan to buy “life settlements,” life insurance policies that ill and elderly people sell for cash — $400,000 for a $1 million policy, say, depending on the life expectancy of the insured person. Then they plan to “securitize” these policies, in Wall Street jargon, by packaging hundreds or thousands together into bonds. They will then resell those bonds to investors, like big pension funds, who will receive the payouts when people with the insurance die.

The earlier the policyholder dies, the bigger the return — though if people live longer than expected, investors could get poor returns or even lose money.

Either way, Wall Street would profit by pocketing sizable fees for creating the bonds, reselling them and subsequently trading them.

The concern rests in what will happen when investors do not fully understand these risks and the whole market goes down. Will we step up and keep the banks afloat with our tax money again? Or do we let them sink?

Another concern is whether this will raise insurance premiums:

Indeed, what is good for Wall Street could be bad for the insurance industry, and perhaps for customers, too. That is because policyholders often let their life insurance lapse before they die, for a variety of reasons — their children grow up and no longer need the financial protection, or the premiums become too expensive. When that happens, the insurer does not have to make a payout.

But if a policy is purchased and packaged into a security, investors will keep paying the premiums that might have been abandoned; as a result, more policies will stay in force, ensuring more payouts over time and less money for the insurance companies.

“When they set their premiums they were basing them on assumptions that were wrong,” said Neil A. Doherty, a professor at Wharton who has studied life settlements.

Indeed, Mr. Doherty says that in reaction to widespread securitization, insurers most likely would have to raise the premiums on new life policies.

Of course this may be a fantastic new financial product that is good for everyone. It may give elderly and others the opportunity to get the treatment they need or to enjoy their last years rather than their kids getting a big payout on a life insurance policy. It may create more liquidity in the marketplace and help restore the economy.

One thing is for sure - the same characters who were responsible for the good and the bad in the mortgage markets will be bringing their magic to this new area and we all need to be aware of this new trend and how it will affect us.

We'll keep an eye on this and keep you posted....

Update on 9-8-09 --- John Wirzbicki of CT Blue has an interesting take on this development. Read his blog post here.

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We have often sued debt collectors and credit reporting agencies (Equifax, Experian, Innovis, and Trans Union) for working hand in hand to illegally force consumers to pay money they don't owe. It may be because the consumer never owed the debt or that the consumer discharged the debt in bankruptcy - but by "parking" an account on the consumer's credit report, money can be taken from the consumer in order to restore the consumer's credit report.

According to this press release, Trans Union will now offer the listing of Fair Debt Collection Practices Act cases to collectors to see if the debtors in the collectors' database have filed suit.

Here is the heart of the press release:

TransUnion announced today that it will utilize data from FDCPA Case Listing Service LLC to provide an added feature for batch records delivered via TransUnion's Collections Prioritization Engine. The new solution is named FDCPA Case Search and allows TransUnion to alert collectors about accounts that may have previously been involved in FDCPA litigation to assist collectors in determining strategy.

"Consumer lawsuits against collection agencies have become more prevalent and they can prove to be costly for debt buyers and both first- and third-party collectors," said Scott Carter, group vice president of TransUnion's collections vertical. "With an annual subscription to TransUnion's FDCPA service, collectors can utilize the solution for a cost-effective means to help handle debtor accounts that may have potential to result in a legal action."

According to FDCPA Case Listing Service, 5,383 cases were filed in 2008 against collection agencies in U.S. District Court for alleged violations of the Fair Debt Collections Practices Act (FDCPA). This represents a 41 percent increase in FDCPA litigation in 2008 in Federal Court over 2007 case volumes. Case volumes in 2009 are expected to exceed 7,300 for the calendar year.

"This is a great day for agencies, debt buyers, and creditor rights law firms," said Bill Pinkney, founder of FDCPA Case Listing Service LLC. "So many companies have approached us looking for a completely integrated solution to accompany their current work flow strategy. Our product is a perfect complement to TransUnion's Collection Prioritization Engine which is why we've partnered with them. Given the increases in placement volumes, the ability for agencies, debt buyers, and creditor rights attorneys to accurately and systemically identify these accounts is critical."

It will be interesting to see what collectors do with this information and it will provide an interesting area for us to conduct discovery in to see if the collector knew our client was represented or how our client was treated differently because he or she had previously filed suit against an abusive collection agency.

If you are dealing with harassing debt collectors and you live in Alabama call us at 205-879-2447 or fill out our website contact sheet or fill out the contact form to your left on this blog. We look forward to helping you and we can also send you our free reports on debt collectors calling third parties and leaving illegal voicemails - just let us know you would like these.

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While this article by Belinda Luscombe in Time is on Facebook and divorce, the principal holds true for any type of litigation that you are in - understand that what you put on Facebook (or Myspace, etc) can be used against you.

Lawyers love to find inconsistencies - the idea is "If you lied about this thing over here, then you lied about this over here."

Our advice is to never put anything on your Facebook account (or other social media) that has to do with your lawsuit and make sure your lawyer knows about your social websites.

So make sure that you are consistent and honest and never for a moment believe that anything you put up on Facebook is truly private....

Speaking of Facebook - make sure you grab your custom URL - here's mine if you want to connect (as long as we are all being careful that is.....) - http://www.facebook.com/johngwatts

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Here is an interesting post from Consumer Reports about the recent bankruptcy of Chrysler, a first for an American automaker in over 70 years....

Massive changes are taking place around us - now it is even more important to understand your legal rights when dealing with credit reports, debt collectors, or even car companies. If we can help you, let us know.

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Consumer Rights Law Blog has posted an article about an online database where consumers can find records from junk yards, insurance companies, and salvage yards about wrecked cars. The idea is to help consumers "avoid buying patched up junk cars and trucks."

However, not all states are cooperating.

14 states are not participating while 10 more say they are "in development" but federal law requires full participation by 2010. Until then, you still can't be sure if that great looking used car was totaled in an accident Illinois, Kansas, Maine, Oregon, Washington DC or 9 other states that are not telling the truth about their records. You can see the full list above and check car records here: http://www.nmvtis.gov/
It is unbelievable that California, New York and Pennsylvania are providing wrecked car data to the federal government but have blocked the government's ability to release that data to consumers. If you live in one of those three states, write your state governor and ask why they want to keep it secret. Some media reports say private record-keeping companies are paying those states big money to sell the data privately to them so they can keep charging consumers to see the stolen car and wrecked car records before buying a used car in those and other states.

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On page two of the FTC Report, it begins to describe the "Debt Collection Process". First, often times creditors use "in house" or their own collection department to attempt to collect the debt. When this is unsuccessful, the creditor will charge off the account and send it to a third party collector. This can be a collection agency or a collection law firm.

Another option is to sell the debt to a debt buyer. The report contains this interesting and short summary of what debt buyers do with debts they buy:

(1) retains the entire porfolio and collects on it;
(2) retains and collects on part of the portfolio and reselss the remaining accounts: or
(3) resells the entire portfolio.

Debt buyers that keep accounts will either collect them in house (for example Midland Funding often does this) or will assign them out to collectors (LVNV does this).

Here are some interesting facts about the collection process from the report:

1. "Debt buyers usually pay five percent or less of the amount owed on delinquent accounts they purchase."
2. "If the contingency agency [collection agency] is successful in collecting on the debts, it will be paid a portion of the amount collected, with the average contingent fee rate in 2005 reported to be 28%."
3. "Collection law firms generally are paid either on an hourly basis or on a contingent fee basis."
4. "Rather than being paid contingency fees or hourly fees, some collection law firms also purchase debts and derive revenue from collections through judicial [lawsuits] or non-judicial [collection or arbitration] processes."

In our first post in this series, we looked at the purpose of the report and in our second post we looked at the overall summary of what the FTC proposed and what it found as areas in the law that needed to be changed. In our next post we will discuss the "Legal Framework" of debt collection - that is the laws that apply, particularly the federal laws that govern debt collectors.

Remember if you are dealing with an abusive debt collector, educate yourself and if you live in Alabama, contact us for a free consultation.

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This continues our series on reviewing and summarizing the FTC Report issued last month about changes needed to the Fair Debt Collection Practices Act (FDCPA). In our first post we addressed the purpose of the report and in this post we will look at the Executive Summary of the report that deals with the five conclusions and proposals of the FTC.

Here is the ultimate conclusion of the Federal Trade Commission - "the debt collection legal system needs to be reformed and modernized to reflect changes in consumer debt, the debt collection industry, and technology."

There are five basic conclusions and proposals as follows:

1. "Major problems exist in the flow of information within the debt collection system." The FTC proposes and concludes that debt collectors (collection agencies, collection lawyers, and debt buyers) must have better information so that they will only collect from the correct people and only collect the correct amounts. The commission also found that debt collectors must do a better job of educating consumers of their rights under the FDCPA. Unless we know our rights under the law, we are at a serious disadvantage and are vulnerable to falling prey to abusive debt collectors.

2. "Debt collection laws need to be modernized to take account of changes in technology." It makes sense that debt collectors should be able to contact consumers through a variety of means as long as the collectors don't cost consumers by contacting them (i.e. text messages, cell phone calls, etc) and payments should be allowed through newer technology as long as the debt collector has "express verifiable consent from consumers before accessing their accounts."

3. "Certain debt collection litigation and arbitration practices appear to raise substantial consumer protection concerns." We see this widespread problem in Alabama where debt buyers are filing suits without any proof and showing up to court with no proof. Arbitration, particularly in the National Arbitration Forum (NAF) appears to be very unfair to Alabama consumers. The FTC stated it does not have enough information to make a decision but will be meeting with all concerned parties including state officials. We trust that the FTC will learn the extent of the epidemic of frivolous lawsuits filed by debt buyers.

4. "Debt collection law must evolve to include a regulatory process that ensures that legal requirements keep pace with changes in the marketplace." The FTC wants the ability to issue regulations to implement the FDCPA without having to wait for the entire congress to act. This makes sense.

5. "Debt collection law enforcement must be pursued aggressively to deter collectors from engaging in conduct that harms consumers." This is critical - the FTC writes "Private actions [consumer lawsuits], not FTC actions, were intended to be and should continue to be the main means of promoting industry compliance with the FDCPA." We agree - consumer lawsuits are the best and most efficient way of forcing collectors to comply with the law. One way to increase the effectiveness is to increase the statutory damage amount from $1000 to the equivalent amount in today's dollars, adjusted for inflation since 1977. A thousand bucks is not what it was in 1977.... The FTC also stated it will be more aggressive in suing abusive debt collectors which is an excellent idea.

We will continue this summary of this very important report released by the FTC on the FDCPA and the collection industry. Contact us if you have any questions or comments.

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Debt collection is a changing industry that is influenced by technological changes and changes in the method of debt being transferred - more and more it is by debt being sold to debt buyers. In October 2007 the FTC held a workshop to discuss these changes and how the law, particularly the Fair Debt Collection Practices Act (FDCPA), should be amended to keep up with the numerous changes since it was enacted in 1977.

After compiling the data and sifting through the arguments, the FTC released its report last month. This document is over a 100 pages long and is packed full of interesting information for consumers, consumer lawyers, collection agencies, debt buyers, and collection attorneys. We highly recommend you read this if you have any interest in the debt collection industry. In order to help, we will release a series of blog posts related to this report summarizing and providing our commentary on it.

We trust this will be helpful to you and look forward to this new series. Dealing with abusive debt collectors is a growing problem in Alabama and the best way to protect yourself is to educate yourself on your rights. If you have any questions about debt collectors or this report, please feel free to contact us.

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Denise Richardson has reported on the data breach at the University of Alabama:

University of Alabama campus officials sent letters out to 37,000 people whose personal information may have been stolen by computer hackers.

The school revealed Friday that in November, seventeen of their four-hundred databases were tapped by hackers. One of those computers contained lab results for people tested at the campus Medical Center. However, school officials say campus computer technicians quickly caught the hackers before they likely retrieved any confidential information.

Still, the school is suggesting people whose information was compromised check their credit records for any potential identity theft. A letter addressed to all of those with information on the servers were advised to place a fraud alert on their credit files and check bank accounts for unusual activity.

For more information on how to protect yourself if your data has been stolen read Denise's informative website here.

If you are a victim of Identity Theft, here are some additional steps you can take as well as contacting us for a free consultation on your rights.

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You go to the hospital for an approved procedure and expect for your insurance company to pay the bills and you pay the co-pay or deductible. But what about the doctor in the operating room that is "out of plan" or not a part of the Blue Cross Blue Shield plan? She may only be paid 50 cents on the dollar and guess who the doctor tries to stick the other 50% to? Yep. You. Welcome to the wild world of "balance billing".

Maria Perotin recently wrote an informative article about this practice which we recommend you read. Detailing one man's experience, Maria writes:

As Heidelberger remembers it, no one discussed his insurer’s network in 2007, when he underwent his medical procedure.

An anesthesiologist at the hospital spent a few minutes giving him a local anesthetic, he said.

Then, his physician tinkered successfully with a device that previously had been implanted in his heart.

Months later, the anesthesiologist’s bill arrived for $1,005.

That’s when Heidelberger discovered that the doctor didn’t have a contract with his PPO.

The anesthesiologist had set a fee of $2,020 for his services, and the insurer had paid only the amount it deemed fair for an out-of-network doctor — $1,015. So, the doctor turned to Heidelberger in October for the remainder of the bill.

Heidelberger has refused to pay.

He said he believes that the bill is too high and took too long to arrive.

And he contends that he should have been warned that the anesthesiologist was a costly out-of-network provider.

"My strong belief is this: If I take my car to a garage or you take your car to a garage, because the engine is acting peculiarly, the garage calls you and says: 'The engine's wrong. This is wrong. It'll cost you thus-and-such to repair it,' " Heidelberger said. "I think I should've been made aware of that and had the option to choose another anesthesiologist."

Be aware of this practice as these bills can quickly be turned over to collection agencies. It has been our position for years that contract law applies to medical bills. If the term of "price" is not agreed to ahead of time, then the law will supply a reasonable price term. If we want to know what is reasonable, we look to the "usual, customary, and reasonable" (UCR) that insurers such as BCBS set forth. We have always had hospitals and doctors back down when challenged as they may try and collect in balance billing or from an uninsured person two to three times what the UCR is which is not reasonable.

We'll keep an eye on developments in this area and keep you posted.

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Americans For Fairness In Lending has a nice list of ten items that the government needs to consider and act upon to help restore some order to the markets and to be fair to consumers.

We won't repeat them here except to say we are particularly concerned about the horrendous practice of mandatory binding arbitration - particularly when it occurs through an amendment contained in a "bill stuffer". Its funny how companies don't want to be bound by mandatory arbitration (for example car dealers say its unfair for manufacturers to require binding arbitration) but these same dealers say it is absolutely fair to have mandatory binding arbitration on consumers. I know its hard to be always be consistent but come on....

Check out the article and if you agree let your elected officials know what you think and what you expect.

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This video describes (with an admitted slant) the compelling story of Lilly Ledbetter who was defeated at the U.S. Supreme Court in her attempt to gain justice for Goodyear breaking the law by paying her less than comparable male employees. This led to Congress passing a law prohibiting courts from throwing out similar cases based on when the discrimination was discovered.

Here is where the president signed the Lilly Ledbetter Fair Pay Act:

We congratulate Lilly Ledbetter for her wonderful fight and her determination to turn a negative court ruling into a positive law for everyone. Well done.

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The Wall Street Journal reported late last month about the explosion in US legal jobs being sent overseas to India. It seems the economic troubles are causing some big companies to reduce legal expenses by hiring cheaper Indian lawyers.

While this is not directly related to consumers facing debt collection (although many collectors are now from India) or errors on credit reports (although the investigations occur off shore) it does show how the pressures on companies to reduce expenses (or raise revenues) reaches even into the most prestigious law firms. Therefore it should not be a surprise that companies will cut corners and even violate the law in collecting debts or keeping false items on your credit reports.

Unless I get a memo from Stan Herring outsourcing me, we still plan on being here representing Alabama consumers who are facing harassment by collectors and who are dealing with credit reporting errors.... Contact us if we can help you.

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Jonathan Stein is a lawyer in California with a couple of really nice blogs and he recently had an article entitled "Debt Settlement Tips" published by Avvo which has information about lawyers in various states (not in Alabama yet). If you are dealing with debt and need some suggestions, take a look at his article.

If collectors have started calling you and harassing you, it may be better to consult with a consumer attorney about your options. If you are in Alabama, please call us for a free consultation on all of your options and the good and bad of each option.

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One of our favorite blogs (and bloggers) is Denise Richardson who has a wealth of helpful information about identity theft and other consumer issues. Her personal story is impressive and the content of her site reveals her dedication to consumers. She has recently redesigned her website and blog - check them out and if you don't subsribe by RSS to her blog we recommend you do so in order to make sure you get to read all of her posts.

Keep up the great work Denise!

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Denise Richardson has a good post up about some recent scams that are affecting people, particularly older Americans. Check out her post and remember if something "smells wrong" trust your instincts - it probably is and you should proceed with caution.

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Credit reports are so important that there is the temptation to want to remove all negative information. We help consumers dispute false negative information but not correct negative information. Unfortunately, there are many credit repair firms that charge money to remove correct negative accounts.

According to this FTC release last month, many of these firms have been targeted by the FTC for breaking the law. Read the entire release but here is the first part:

The Federal Trade Commission and 24 state agencies today announced a crackdown on 33 operations that deceptively claim they can remove negative information from consumers' credit reports, even if that information is accurate and timely. In the seven FTC actions announced today the Commission seeks to halt the defendants' allegedly unlawful business practices, prohibit further violations, and make them pay consumer redress and give up their ill-gotten gains. In addition, the FTC announced three related credit repair cases earlier this year.

'Companies that promise they are able to scrub your credit reports of accurate, negative information for a fee are lying - plain and simple,' said Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. 'Under federal law, accurate, negative information can be reported for up to seven years, and some bankruptcies can be reported for up to 10 years.'

In response to thousands of complaints from consumers throughout the nation, the FTC launched 'Operation Clean Sweep' with 24 state agencies in 22 states. In the cases announced today, the Commission charged seven operations with violating the FTC Act and the Credit Repair Organizations Act (CROA) by making false and misleading statements, such as claiming they can substantially improve consumers' credit reports by removing accurate, negative information from their credit reports. The agency also alleged that the defendants violated the CROA by charging an advance fee for credit repair services. The 26 state actions include alleged violations of state laws and the CROA.

Remember, pull your credit reports, review them, then dispute any false information, and finally sue if the false information is not corrected. Please feel free to contact us if you live in Alabama and have questions about your credit reports.

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