Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
John Watts =============
Well, hello. My name is John Watts and I want to welcome you to our video.
This will be questions that have been submitted to us related to consumer issues. My name is John Watts, I am a Consumer Protection attorney located in Alabama. We try to do these every Friday. Today is Aug. The 14th, so if you would like to have your questions answered next week on the 21st, you can either put it as a comment below this video or you can go to out main consumer website, alabamaconsumer.com and leave us a question there. Or, you can even call us 205-879-2447. Ask to speak to Caroline and let her know you have a question that you would like to be answered.
So, we’ve got about five questions and the first one is: What do I do if Nationstar is showing up on my credit report but I don’t have a mortgage in my name. It’s in my spouse’s name only.
So, this is something that we see quite often and it’s when a mortgage company, specifically this is Nationstar, this happens with other companies as well, where they will get a loan and they will start collecting against you.
But the problem is the loan is not in your name. So, I’ll use myself as an example. So, if my wife is the only one on the note and to make sure we’re clear on the terms, the note is the debt and then that is tied to the dirt, or the property, by the mortgage. Now, we say, “I need to make my mortgage payment.” If we were being technically correct, we would say, “I need to make my note payment.”
But let’s assume that only my wife is on the note. I’m not on the note at all. But suddenly on my credit report, Nationstar is reporting. It may be their collection letters from Nationstar saying, “Hey, John. You owe this debt.” But you see, I don’t owe the debt.
So what do I do?
Well, normally when a company like Nationstar gets the debt, let’s represent it with this piece of paper, the question is: was that loan in default when Nationstar first touched it. The answer is almost always yes. Well, that’s true that Nation Star is a debt collector and they’re subject to the FDCPA, Fair Debt Collection Practices Act. So, what does that law provide? What does it give to you? Well, it tells debt collectors like Nationstar, “You better not lie. You better not do anything unfair or harassing.”
Well, let’s think about that. If I’m not even on the note and I don’t owe any money, then if Nationstar is saying I owe them money, that’s a lie. That’s unfair.
Certainly, the note, the contract does not say, “Oh by the way, you can report this or collect against people who don’t owe the debt.” Of course it doesn’t say that. Is that harassing? Well, sure it is. To say to somebody who owes nothing to say to them, you owe this money, I’m going to destroy your credit report, I’m going to send you harassing letters, I’m going to make harassing phone calls. Well, I don’t know how else you would describe it.
So, what’s the solution?
There’s a couple of ways that you could do it. One, you can dispute through the credit bureaus. Because a lot of times, a company like Nation Star won’t remove this from your credit report, but if you go directly to the credit bureaus – Equifax, Experian, TransUnion – sometimes they will, even if Nationstar doesn’t want them to. Although, usually they’ll do whatever Nationstar will tell them to.
The other approach is to say, “You know, we’re just going to sue Nationstar under the FDCPA,” because the prohibits false credit reporting, prohibits false debt collection and harassing unfair – all those things that when you’re collecting against somebody that doesn’t owe anything. I don’t know how else you would describe it other than to say it’s harassing, it’s unfair, it’s deceptive.
So, that is usually the best approach because when you sue these companies like a Nationstar, there’s plenty of others that do this as well but our question is on Nationstar, they tend to suddenly go, “Wait, wait, wait, wait. We’ll fix this problem. We’ll leave you alone. We’ll take care of your credit reporting and now how much do we need to pay you?” But if you just call them, if you just write them letters, a lot of times they’re just like, “No. That’s not gonna do it. We’re not gonna make a change.”
But when you sue them, and they get that lawsuit in their hands, suddenly now they’re very interested to at least try to make things right and the question is: will they pay the right amount of money?
Because this is illegal what they’re doing and there’s a price that has to be paid for that illegal conduct. So, if you’re dealing with Nationstar, Ocwen, Selene, SLS, Bank of America, whoever the company is and they are reporting on your credit report and they’re coming after you for a loan that you’re not even on, then you need to take some very serious and usually immediate action to make sure that that gets fixed now, but also in the future that company will remember, “Oh yeah, don’t do false credit reporting on the spouse that doesn’t owe anything!” So that’s usually the right solution.
Okay, our next question is: is it illegal to garnish a person’s paycheck without first notifying that person that they owe that money?
So, a couple of things about that question. I’m not 100% clear on but I think what the person is asking is should I be notified or should I be served with a lawsuit before there can be a garnishment and the answer to that is yes. You have to be served before a judgement is valid.
Now, if you were served and let’s say there’s a judgement in 2010 and now all this time goes by and it’s 2015 and now suddenly you get garnished. You have to be told here in 2015 that, “Hey. We’re about to garnish you.” Well, it’s a little unclear. I think technically you should be. A lot of times though you may have moved and they definitely notify your employer before they garnish you and that’s usually how you find out. You get a memo or a phone call from HR saying, “Hey, look. We’ve got this garnishment notice in.”
So, the thing we look at, and we get a lot of calls about this, were you served? If you were served and you just didn’t show up or you lost a trail, then, you know, there’s consequences to that and they can garnish your wages as long as they follow the laws on garnishment. But if you were never served, now that’s a completely different matter.
There doesn’t need to be a garnishment if you were never served and we have other videos about what’s being served. So, sometimes people get upset because again, they have the judgment way back here, five, six, seven years goes by and that may double that judgment just with interest and now suddenly, this collector or collection law firm shows up and they’re want to garnish your wages.
That’s a problem.
It’s a real challenge for folks and so, you start looking at:
Can I settle this?
What about bankruptcy?
Very extreme option, usually not appropriate, but occasionally it is appropriate. You know, what can I do? A lot of times with settlements, the way to try to go may be you can do a monthly payment to them, maybe you can get your hands on a lump sum and you can settle it that way. But you definitely need to figure out what are your options if you are in that situation.
Okay. Next question is: what if I pay a medical bill but then a debt collector like Tri-State Adjustments – that’s a debt collector out of Wisconsin, I believe – trashed my credit report. What do I do then?
Well, so let’s set the stage. You have medical treatment and then you pay that bill and after you pay the bill, this debt collector appears and there’s all these different kinds of types of medical debt collection companies. Tri-State’s just one that – they happen to deal with St. Vincent’s in Birmingham and surrounding areas and they have other accounts as well.
What do you do?
Well, let’s kind of walk through that. So, I incurred the bill, so I owed the debt. But then I pay the debt and after I pay the debt, this debt collector, Tri-State in this situation, pops up. Well, when they pop up, do I owe the debt? Well, no remember, I incurred the debt, I paid it.
So, what are they collecting?
Well, they’re collecting nothing and what happens is sometimes they don’t communicate very well with the hospital or the medical provider and so Tri-State says, “Wait a minute, we didn’t know that you had paid it!” Okay, I paid it. Now you know. But what we see is: have the bill, pay it, Tri-State appears, all right I already paid it, and then they put it on your credit report as a collection account.
I mean, isn’t that amazing that you’ve already paid the bill before Tri-State gets the bill, it’s already been paid, and they go, “Ah, you know what? We’re gonna stick it on your credit report.” Now, maybe they’ll show it as being a 0 balance that has been paid, but it’s false! That’s just wrong to put a paid bill on somebody’s credit report as a collection account when it was paid before the collector even touched it.
So, we go through the FDCPA, Fair Debt Collection Practices Act, is it false? Absolutely. It’s a complete lie. Is it unfair? Yeah. I mean, can a collector just go along and go, “Oh, well you know 5 years ago you paid this bill, so we’re going to stick it on your credit report.” But what’s the difference between that and five months ago or five weeks ago?
If it’s paid before it gets to the collector, the collector has no business putting that on your credit report. It’s an absolute lie. So, is it a lie? Yes. Is it unfair? Yeah.
Take our mortgage example.
Every month you make your mortgage or note payment on your house and then a collector comes along and says, “We’re going to report you every single month. Now, we’ll show it as being paid, but we’re going to show it as a collection account.” And you’re like, “I’ve never been late! That is so unfair.” That’s what these medical collection agencies do.
So, is it a lie? Is it unfair? Is it harassing? Yeah! I mean, here’s the purpose of this. We all know you have medical procedure. It’s a nightmare getting the billing straight. Do you get double billed? Do they forget to bill your insurance? Do they forget X, X, X, etc… Sometimes medical providers wait two years before they send a bill. Well, that’s not my fault they waited two years to send me a bill and so it’s very confusing and all of the sudden you get this letter or they show up on your credit report from Tri-State and you’re like, “What is this?”
But you know what? If you realize that Tri-State always credit reports. If they have created this impression in the marketplace that, “you know what, you get a letter from us at Tri-State, we’re going to be on your credit report.” Then you might go, “You know, I think I’ve paid this but I am not taking a chance. I’ll go ahead and pay Tri-State because it’s only 50 bucks.” Right? It’s a 100 bucks.
Well, that’s what they’re trying to do in my opinon is create this impression in the marketplace that, you know what? We will credit report. We will come after you. So, that explains why they got the bill, they paid it, and then it goes to Tri-State. They’ll still be on your credit report because they want to create that impression in the market place. This is what these medical debt collectors do .That, you know what? Don’t mess with us because we will come after you on your credit report.
Now, they would just absolutely disagree with this and say, “We absolutely don’t do that. If we know a debt’s been paid before we get it, we would never put it on a credit report.” Well, then, I would ask them this simple question because we have a case just like this where we told them we’d paid and they go, “Oh, okay, okay. We won’t bother you” and then they put it on our credit report after that.
They don’t put that it’s disputed. Obviously, we dispute it being with a debt collector and it shouldn’t be on there in the first place. So what’s the explanation? Well, the typical industry explanation is it’s all just an accident. It’s a simple mistake.
We weren’t really trying to collect anything.
Well, that’s something they can prove in front of a jury and so if you deal with medical collection, you’ve got to check that stuff very quickly because so many times, either you never got the bill in the first place, it just goes straight to a collector. Well, how is it late if you never had a bill? Or, you got the pill, you paid it and then it goes to a collector or then 6 months later a collector pops up on your credit report.
You’ve got to monitor this very carefully with medical bills and if you’ve got a medical debt collector out there that’s violating the law, then look at your options for suing them under the Fair Debt Collection Practices Act, under Alabama state law. Because once they realize that… And this is what we said in a closing argument a few years ago in federal court.
When these debt collectors realize that there will be full and fair compensation for Alabama consumers. So, you break the law, the FDCPA, and jury awards a full and fair amount of compensation. That sends a message to these debt collectors and says, “Woah! You know what? We need to be very careful in Alabama because if we break the law, people will be compensated.”
Now, they don’t like that. They want to be able to break the law for 100 people and 1 person will sue and they will say, “Well, you should barely get any money.” Well, why? We want full, fair compensation for somebody and when debt collectors, whether it’s medical collectors, credit card collectors, it doesn’t matter what kind of collector, when they know there will be full and fair compensation in Alabama courts, they go, “Woah, let’s be careful in Alabama.” Now, we may be reckless in Georgia or Mississippi or somewhere else, but let’s not do this in Alabama because there will be a heavy price to be paid.
Okay. So our next question is: If Portfolio Recovery is collecting a debt that I don’t owe, how do I stop them collecting when I’ve been dealing with collector after collector on the same bogus debt?
Now, you can substitute any debt collector and Portfolio Recovery is just a big one. We’ve sued them dozens and dozens of times in Alabama Federal Court. So, what do you do? You get this letter and it says, “You owe 1,000 dollars on some debt.” You go, “I never owed that debt and I told this collector and that collector and this other collector and this other collector that I don’t owe this debt and I even told the original creditor” or these collectors told the original creditor you don’t owe the debt. Maybe it’s identity theft, maybe you paid it off, whatever it is, but it just keeps coming over and over and over.
If you have kids, you’ve probably been to Chuck E. Cheese and there’s that game, I think it’s called Whack-A-Mole. You get that little stick and there are all these little holes there and this mole comes out and you whack it. You’re like, “Ahh! I won!” Oh wait, it pops over here so you whack that one. Oh, it pops up over here.
That’s what these debt collectors are like.
They’ll come after you for bogus debt and you go, “Hey! Leave me alone! Stop.” They go, “Well, send me this, send me that.” You send them all this stuff and they go, “Okay” and they just send it to the next one or they send it back to the original creditor and say, “Hey consumer says it’s bogus.” Then they send it out to another debt collector.
Now, you’d think a debt collector gets an account, they’d say to the original creditor, “Hey, has anybody said this is not a valid account?”
They don’t do that.
It’s kind of like see no evil, hear no evil. I don’t want to know. That’s how the debt collectors are. So, when they get it they want to be able to say, “Well, I thought it was a legitimate debt.” Well, did you ask?
Did you go back to the original creditor and say, “You know, it’s sort of funny this has been through 13 debt collectors. Is there a problem with the account?” Particularly when you’re collecting against someone who has perfect credit and they know. They pull credit reports. They go, “Huh, that’s strange. This account has been to all these different debt collectors. The guy we’re collecting has never been late in his life. Oh, you know what? I think it’s a valid debt!” That’s their mentality.
So what do you do about that? You can write them a letter. Maybe it will stop. Of course, it may be more of that Whack-A-Mole where it pops up somewhere else. They’ll just sell it or transfer it to somebody else. So, you can write them, call them.
You know, sometimes the best solution is you sue a company like Portfolio. You say, “Hey guys. I don’t owe this debt. You know I don’t owe this debt and leave me alone.” Because when you sue them, that tends to get their attention. They go, “Oh, okay. Let’s see. We don’t want to collect this debt anymore. We want to get this off your credit report and we want to just bury this in the basement of our building and it will never come back to life.”
You see, if you sue them they know now, particularly since you sued them – but really they knew before – but they know now you don’t owe this debt and then they transfer is to someone else. Well, we sue Portfolio again and sue the new debt collector again. Because it’s illegal to collect a debt you do not owe. You know, this is what in law we call strict liability. It’s just, “are you collecting a debt I do not owe?” If the answer is yes, then you are strictly liable for that.
Now, the debt collectors have some legal arguments, some defenses they try to prove. “Oh, it was a complete accident. We have all these elaborate procedures in place to make sure this never happens.” Okay, well if they can properly prove that, they might not owe any money. Very difficult for them to prove it because they intentionally do not have good procedures in place so that they have this sort of alibi, if you will. So, again it’s like see no evil, hear no evil so we can collect against anybody and when they complain about it, we go, “Oh, wait, wait, wait. I’m totally innocent.”
I’ve been doing this a long time and I’ve never seen a situation where they truly can prove that. So, again, every situation is different, check with a lawyer, but it may be your best interest is to go ahead and sue Portfolio just to finally bring this thing to a halt.
All right, I think we’ve got one more. I filed bankruptcy and either could not or did not reaffirm my mortgage. Will I get kicked out? Do I still owe the debt?
Alright, so here’s the deal.
You have a mortgage, you file bankruptcy and I assume they mean chapter 7 bankruptcy, and once you get to the end of that bankruptcy, it wipes out all your debt. There’s a few exceptions but mortgages, notes, loans, and debts would be wiped out.
So, there’s something called reaffirmation. It means to affirm or to agree and the ” re” means to do it again. So, it’s an agreement again that you are responsible for this debt. So even that you’ve got this debt, could be credit card, car loan, mortgage loan, even thought it would just be torn up, if you reaffirm it, then after you bankruptcy you’re still on the hook for that loan. Now, we’re not getting into why you should or shouldn’t do that, but sometimes the consumer doesn’t do it. Sometimes the mortgage company says, “Oh no. We won’t reaffirm it.”
So where does that leave you?
Well, to some extend it leaves you in this kind of no man’s land because once you’ve got that debt, you file bankruptcy, you get to the discharge, here’s what happens to that debt. It just gets torn up. It doesn’t exist anymore. They can never come after you for that debt and if they do they violate the law and you sue them.
So what happens to the house because you don’t owe anymore money on your house? Does that mean you get your house for free? No and we get these calls. Somebody will get these calls and go, “Hey! I didn’t reaffirm on a half million dollar house so I want my house for free.” No. You don’t get it for free.
That mortgage company, even though the debt has been torn up, so… We’ve got the debt, we’ve got the land, okay? The mortgage ties the debt to the dirt.
So, the debt goes away but that mortgage, that security interest in the property is still there. So they can come and get the property. How do they do that? They foreclose. So, what happens as a practical matter?
Normally, if you make your payments – this can make your head hurt – if you make your payments on a debt you do not owe, think about that for second because remember, it’s just been shredded. You don’t owe it anymore. But if you make payments on that, they won’t foreclose.
Normally, they won’t foreclose.
So, what happens a year goes by, two years go by, what’s it being reported on your credit report? Well, it won’t be reported other than the debt has been discharged because you don’t owe a debt. So, they won’t report every month that you’re making payments on this debt that has been shredded. It’s been discharged.
So, can they foreclose? Well again, normally, if you make your payments they’re not going to foreclose. Well, can you get loss mitigation? Yeah, you can. Maybe into a loan…
We’re getting into all of the exceptions to the exceptions. Definitely get with your bankruptcy lawyer about this and a lot of times bankruptcy lawyers will say, “Hey, John. Will you talk with this client because we need somebody to explain to them what situation they’re in?”
Because maybe it’s years have gone by, you’ve been making all your payments, now you want to sell your house and buy a new one. Well, how do you do that? How do you get a payout on the loan. It gets very complicated.
So, again. I’m not saying whether you should reaffirm, should not reaffirm. There’s advantages and disadvantages but hopefully that answers the question about will I get kicked out of my house. Well, only if the foreclose and they normally will not foreclose if you’re making your payments.
So, hope that these answers to the questions have been helpful. Certainly would be glad to put your question on our next show. You can just put a comment below this video or go to Alabama Consumer. Or, you can click here to Contact Us. You can ask us a question and just let us know. Generally people contacting us through there want us to call them and they’re asking a question. They’re saying, “I live in Alabama and I need some help here!” But if all you want is it answered on the webinar, you can certainly tell us that and even call us: 205-879-2447, ask for Carolyn.
And if you do live in Alabama and you want to speak with us directly, not just have a question answered online, want to speak with us directly and set up a consultation, you can do that as well through Alabama Consumer or calling 205-879-2447. So, we appreciate your questions, I’ll look forward to chatting again with you next week. Okay. Bye-bye.