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The law firm of Pressler & Pressler of Parisppany, New Jersey has been fined $1 million for filing debt collection lawsuits without thoroughly investigating the evidence. Many of the cases were based on flimsy or non-existent evidence. Read more…
People are losing their jobs as a result of debt collectors. Debt collectors are calling consumers at their place of work and harassing them. Read more...
Debt collector to pay $10 million for abusive debt collection practices. Read more...
Credit scores and debt. Read more....
Debt Collector sends elderly woman to the hospital. Read more...
Consumer Financial Protection Bureau Provides Clarification for New Mortgage Servicing Rules
By: Tracy M. Evans, Esq., Associate, Saxon, Gilmore, Carraway & Gibbons, P.A.
We previously reported on the recent activity of the Consumer Financial Protection Bureau (“CFPB”) regarding changes to Regulation Z, which implements the Truth in Lending Act. The previous article can be viewed here.
Earlier this year, the CFPB also released new mortgage servicing rules under the Real Estate Settlement Procedures Act and the Truth in Lending Act, scheduled to take effect in January 2014. A recent bulletin issued by the CFPB (the “Bulletin”) provides guidance and clarification on some of the new servicing rules.
Policies and Procedures upon the Death of a Borrower
A mortgage servicer will be required to adopt and maintain policies and procedures in instances where a borrower has passed away. The purpose of this new rule is to eliminate the difficulties often experienced by successors in interest when attempting to pursue assumption of the mortgage loan or loss mitigation options. The CFPB anticipates that the new rule will reduce the number of defaults and foreclosures following the death of a borrower. The Bulletin outlines acceptable practices that should be included in the policies and procedures implemented by a servicer upon notification that a borrower has passed away. These practices include: providing any claimed successor in interest with a complete list of all documents required to establish the death of the borrower and the identity and interest of the successor; providing successors in interest information and documentation regarding continuing payment on the loan, assumption of the loan, and loss mitigation options; prompt review of any documents and forms submitted by the successor in interest; and providing training and information to the servicer’s employees regarding compliance with procedures, laws, and investor requirements following the death of a borrower. The CFPB also suggests that servicers consider the possibility of implementing policies and procedures that would postpone or withdraw pending foreclosures where a borrower becomes deceased, in order to allow a successor in interest adequate time to pursue assumption of the loan or loss mitigation.
Live Communication Efforts under the Early Intervention Rule
The new Early Intervention Rule requires a servicer to make good faith efforts to establish live communication with a borrower by the 36th day of a loan’s delinquency. The Bulletin outlines precisely what types of communications constitute good faith efforts to establish live contact. In particular, ongoing contact with the borrower regarding the completion of loss mitigation applications and the servicer’s evaluation of the same satisfies the live communication requirement. In addition, live contact initiated by the borrower also satisfies the requirement. The CFPB suggests that good faith efforts should be evaluated in the context of the individual borrower and loan account. For instance, where a borrower has proven unresponsive or the subject of six or more consecutive delinquencies, a single telephone call or a request for the borrower to contact the servicer regarding the delinquencies in a periodic statement or e-mail may be sufficient to satisfy the good faith effort requirement.
Interaction between the New Servicing Rules and the Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act (“FDCPA”) establishes a set of ethical guidelines and prohibited practices aimed at preventing abusive, deceptive, and unfair debt collection practices. One particular area of the FDCPA that seems to conflict with certain communication and disclosure requirements of the new servicing rules is the FDCPA’s “cease communication” provision. Pursuant to this provision, a debt collector is prohibited from communicating with a borrower once the borrower sends a request in writing that the debt collector cease all communications with the borrower. According to the Bulletin, when a borrower sends a request to the lender to cease communications with the borrower, the lender will not be found in violation of the FDCPA where the servicer is in the process of providing information or completing an action previously requested by the borrower. In addition, communications regarding the investigation and resolution of errors reported by the borrower are permitted. Also, communications regarding a borrower’s loss mitigation application will not be considered in violation of the FDCPA. Further, disclosures regarding the placement of force-placed hazard insurance, interest rate adjustments, and periodic loan statements are also allowed. As the effective date of the CFPB’s new mortgage servicing rules approaches, our firm will continue to monitor any new developments with respect to the new rules to ensure our clients stay informed.
The full text of the CFBP’s recent bulletin is available at http://files.consumerfinance.gov/f/201310_cfpb_mortgage-servicing_bulletin.pdf/
To see all the new rules issued by the CFPB, please visit http://www.consumerfinance.gov/regulations/
© 2013 Saxon Gilmore. Saxon Gilmore publications should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information and educational purposes only, and should not be relied on as if it were advice about a particular fact situation. The distribution of this publication is not intended to create, and receipt of it does not constitute, an attorney-client relationship with Saxon Gilmore. This publication may not be quoted or referred to in any other publication or proceeding without the prior written consent of the firm, to be given or withheld at our discretion. To request reprint permission for any of our publications, please use our Contact form via the link below. This site may contain hypertext links to information created and maintained by other entities. Saxon Gilmore does not control or guarantee the accuracy or completeness of this outside information, nor is the inclusion of a link to be intended as an endorsement of those outside sites.
Second Circuit Breathes Life into Lawsuit against Debt Collector.
By Dan Strumpf
A Massachusetts debt-collection agency got a slap on the wrist from a federal court in Manhattan today — and a woman who was once its target is getting another chance to fight back.
The U.S. Court of Appeals for the Second Circuit said on Thursday that debt-collector Collecto Inc. was being “false, deceptive or misleading” when it sent Berlincia Easterling a letter seeking collection of an unpaid student loan debt in 2008.
This letter, according to the decision, read: “Your account is NOT eligible for bankruptcy discharge and must be resolved.”
Not quite true, the appeals court said. Like most debts, student loan debt can be wiped clean during bankruptcy. The bar is higher though — the debtor has to take additional legal steps, including showing that he or she can’t maintain a “minimal” standard of living if forced to repay the loan.
Ms. Easterling, who is from the Buffalo, N.Y. area, filed for bankruptcy protection in August 2001. At the time, she did not seek to have her student loan debt of $2,469 wiped out, according to Brian Bromberg, Ms. Easterling’s attorney. Mr. Bromberg acknowledges that this decision had nothing to do with the letter, which came seven years later anyway. But that’s not the point, he said.
“You can’t mislead people as to their legal rights,” Mr. Bromberg said. “Debt collectors have been going around telling people, ‘You can’t get a discharge, this is a student loan’ … It’s difficult but it’s not impossible.”
Bradley Levien, an attorney for Norwell, Mass.-based Collecto, declined to comment on the decision.
The appeals court’s decision reverses the decision of a lower court, which threw out Ms. Easterling’s lawsuit against Collecto over the letter. Mr. Bromberg said 181 people in New York State received such a letter around the same time as Ms. Bromberg, and the lawsuit will seek class-action status on behalf of those individuals.
This debt collector has a heart
By Sarasota Herald-Tribune
Four years ago, Nathan lost his job as a home-improvement consultant for Sears and ended up moving into the Salvation Army's Sarasota homeless shelter with his father, who had a similar run of bad luck.
With a broken laptop that would only recharge if held a certain way and a cellphone that would shut down on the 17th of every month until he paid $40 to turn it back on, Nathan battled to get his head above water financially.
He got a temporary job as a debt mediator, in which he attempted to help people consolidate and reduce their debts. A short time later, he saw an article in the Herald-Tribune about how collections multimillionaire and angel investor Harvey Vengroff was offering free office space to entrepreneurs in return for a stake in their businesses.
A week after their first meeting, Vengroff called Nathan and told him he saw some synergies with what the young man was doing.
"I got dressed at the homeless shelter and went to his office, where I met with his entire board," Nathan said. "I said a little prayer and the next thing I know, they have me going over the details of my business plan on a whiteboard."
Since then, Nathan's debt-mediation business, Legal Debt Solutions, has taken off. The company helps people who have unmanageable credit card bills reduce their payments and, with Vengroff's backing, offers options for people underwater on their mortgages.
Jennifer Currier, 31, a nurse and a single mother of three, is one of the people who Nathan and Vengroff have helped.
An admitted shopaholic, Currier said she had run up high credit card bills during the economic boom of the mid-2000s. At the same time, she was trying to help a sister with financial problems. She struggled to pay her $1,250-per-month rent, and hospital, automobile, insurance, telephone, utility and babysitting bills.
Nathan and Vengroff found her a refurbished house off Bee Ridge Road that she could rent for $900 a month with an option to buy. They also worked to reduce her debts and to improve her credit.
"I'm a shopaholic and telling myself 'no' is extremely hard," Currier said. "But I realized that at some point I had to grow up and get on the ball and have something to show for it."
For Nathan, Currier typifies the people who got into trouble during the housing bubble. She is also emblematic of their desire to make things right, he said.
Both Nathan and Vengroff freely acknowledge they make a lot of money by helping people cut their debts.
If someone owes $100,000 in credit card bills, Nathan and Vengroff can earn as much as $10,000 over a two-year period by reducing that person's total debt.
"We get 5 (percent) to 10 percent of their total debt paid over 24 to 48 months," Nathan said.
Like other debt consolidators, Nathan and Vengroff take one person's debts and pool them with hundreds of others in the same situation. They then negotiate with creditors such as Visa or Bank of America to cut the debt of all the people in the pool.
The creditors benefit because the debtors do not seek bankruptcy, in which the court can wipe out the debts, Nathan said. The debtors benefit because they discharge some debts and can begin to repair their credit.
Rather than being ashamed of the financial problems he went through, Nathan wears them as a badge of honor.
Nathan was laid off at Sears in 2008. He lost his house shortly after, and he lived out of his car and on friends' couches before moving into the Salvation Army's homeless shelter.
Even after landing his first debt-mediation job, his troubles were not over. His employer stiffed him out of a commission that he had earned, Nathan said.
That was when he decided to provide the same services on his own.
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