Effective January 1, the Maryland Court of Appeals has instituted new rules that will require debt buyers to have more proof before they can obtain affidavit judgments in debt collection cases.  This is good news for debtors.

Debt buying companies focus on buying debts from credit card companies and other creditors that are past due.  They buy the past due debt for a fraction of the amount owed.  Frequently, the only proof the debt buyer has regarding the debt is the debtor’s name, address and social security number.

Since debtors often don’t appear in court on debt buyer/debt collection cases, debt buyers bank on obtaining monetary judgments by default.  However, the debt buyer frequently does not have sufficient reliable documentation showing ownership and the details of the debt (principal, interest, etc.). 

Now, debt buying companies will have to have additional information when filing these types of cases.  Better proof of the debt and interest is now required in addition to proof of ownership by the debt buyer.

A win for Maryland consumers!

The District Court of Maryland ordered a stay on over 3,800 debt collection cases filed by LVNV and Resurgent Capital Services.  The order is in response to the suspension of the collection agency licenses for the 2 companies by the Maryland Office of Financial Regulation.  The stay stops the cases from proceeding and prevents the companies from collecting any money owed.

The District Court of Maryland dismissed 314 Sunshine Financial Group debt collection cases against Maryland residents. The mass dismissals are part of the terms of a settlement between the Sunshine Financial Group and the Maryland State Collection Agency Licensing Board. The pre-judgment dismissals are “without prejudice,” so the cases might be re-filed in the future.

The dismissals include cases against Maryland residents who have been sued by Sunshine Financial Group to collect debts. In addition to the dismissals, the court ordered that for 323 other Sunshine Financial Group cases that have already gone to judgment, the attorney fees will be indicated as satisfied. Additionally, for 18 other cases that have already gone to judgment, the attorney fees and pre- and post-judgment interest will be indicated as satisfied.

Defendants whose cases are affected by these orders will receive written notification from the District Court of Maryland. To get more information, Maryland residents should contact the local District Court location where the debt collection case was filed. In addition to sending written notices to the people affected by this settlement, the District Court is directing that court records and the Judiciary Case Search public records website be updated to show the dismissals.

“Wouldn’t you like to get something for nothing? That sounds too good to be true, but it’s the business model the debt settlement industry has regularly used as it has taken money from tens of thousands of vulnerable consumers around the country and often done little or nothing to help them settle their debts. To stop such predatory practices, the Maryland legislature needs to strengthen the debt settlement bills now before the House and Senate and establish firm and reasonable caps on the fees the industry can charge consumers.”

That’s the beginning of a great Baltimore Sun article by Marceline White (executive director of the Maryland Consumer Rights Coalition) on the debt settlement bills currently pending in the Maryland legislature.  Read her full article on the debt settlement bills.

The Chief Judge of the District Court of Maryland dismissed over 10,000 debt collection cases against Maryland residents. The mass dismissals are required by the terms of a settlement of a class action lawsuit against Midland Funding in federal court.

The dismissals include cases against Maryland residents who have been sued in District Court between Jan. 15, 2007 and Jan. 15, 2010 by Midland Funding to collect debts. The cases are being dismissed because Midland Funding was not licensed as a debt collection agency in Maryland at the time.

Debtors whose cases have been dismissed will receive written notification from the District Court of Maryland.

A federal court in Maryland has approved a class action settlement in the case against Midland Funding. Midland will drop more than 10,000 debt-collection cases against Maryland consumers under the settlement. The dismissed claims, mostly for unpaid credit card debt that Midland bought from creditors, total at least $10.2 million.

Consumers brought suit against Midland alleging that Midland was operating as a debt collector without a state license, in violation of state and federal law.  You can read more about the case in the Baltimore Sun.

Gerri Detweiler wrote a great article on Credit.com answering this question.  And the answer might surprise you.   What can and can’t be said by debt collectors is not as straightforward as you would think.  You can read Ms. Detweiler’s article on Credit.com.  (By the way, I’m one of the experts quoted in the article.)

Great article on CreditCards.com regarding the tax implications of settling your past due debts.  Here’s a snippet of the article:

If you thought your money woes ended last year when you settled that credit card debt, think again.

For many consumers with debt problems, after the debt collector leaves their lives, the taxman arrives.

Months after successfully resolving credit card debts, consumers have received 1099-C  “cancellation of debt” tax notices in the mail. Why? The U.S. Internal Revenue Service considers forgiven or canceled debt as income. Creditors and debt collectors who agree to accept at least $600 less than the original balance are required by law to file 1099-C forms with the IRS and to send debtors notices as well. Taxpayers must report that “income” on their federal income tax returns.

The problem: Many consumers have no clue what the 1099-C forms are, and some may be trashing the cancellation of debt notices because the forms are sent by creditors or debt collectors with whom they thought they no longer had business. Still others are not filing the 1099-Cs with their federal income tax returns — putting taxpayers at risk for IRS audits, penalties and fines. Consumer credit counselors and tax attorneys say few consumers are aware of the tax implications of settling to pay a lesser amount than they owe in credit card debt.

Consumers who receive the 1099-C cancellation of debt forms should immediately take them to a tax preparer or tax adviser, experts say.

Read more of the article on CreditCards.com.

Allied Interstate Inc., a large collection agency based in Minnesota, will pay $1.75 million to settle federal allegations that employees repeatedly tried to collect debts from the wrong person.

The penalty is the second largest civil fine obtained by the FTC against a collection agency. The largest settlement involved Academy Collection Service Inc.

According to the FTC’s complaint, between 2006 and 2008 Allied continued collection efforts even after consumers told the company they did not owe the debt. Allied repeatedly did not verify the accuracy of the disputed information.

Allied Interstate also allegedly made improper harassing phone calls to consumers, using abusive language or calling many times a day for weeks or months, sometimes hanging up when the calls were answered. The complaint also charges that Allied made repeated calls to third parties seeking to locate a consumer, revealing alleged debts to those parties without the consumers’ consent or court permission – then threatened legal action against consumers it did not intend to take. The complaint alleges that these practices violated the Fair Debt Collection Practices Act (FDCPA) and the Federal Trade Commission Act.

“Debt collectors had better make sure their information is accurate, or they could end up paying a big penalty,” said David Vladeck, director of the FTC’s Bureau of Consumer Protection, in a statement. “There is no excuse for trying to collect debt from someone if you can’t confirm that they actually owe it.”

Along with the monetary penalty, Allied agreed to other measures, mostly already required by law.

When a consumer disputes a debt or the amount of a debt, Allied must either close the account and end collection efforts or suspend collection until it has investigated the dispute and verified that its information about the debt is accurate. If Allied cannot substantiate that the consumer owes the debt, the company cannot sell the debt or provide it to any business other than the client from which it obtained the debt.

The consent decree also officially bars Allied from:

* Making false statements to collect a debt or obtain information about a consumer;

* Making claims that a debt is owed or about the amount without a reasonable basis;

* Asking a third party for a consumer’s location information more than once without that third party’s consent or a reasonable belief that the person’s earlier response was wrong or incomplete and that the person now has correct location information;

* Communicating with third parties about a consumer’s debt without the consumer’s consent or court permission;

* Using obscene or profane language or harassing consumers with repeated phone calls;

* Making any other false or misleading statement in collecting a debt, including threatening action it does not intend to take; and

* Violating the FDCPA.

Maryland’s financial regulators have ordered a Kansas firm to stop collecting debts from Maryland residents, alleging that the company repeatedly tried to collect on illegal payday loans despite being warned not to do so.

Smith Haynes & Watson’s debt-collection license was suspended by Maryland’s Department of Labor, Licensing and Regulation after receiving complaints from state residents. The company pursued residents for payment on payday loans that can’t legally be collected. The loans were issued by unlicensed companies and had interest rates far higher than allowed by the state.

In one case, a consumer was given a $300 loan to be repaid in less than two weeks along with a $90 finance charge, which is the equivalent of a 995% annual interest rate. Maryland’s payday-loan law caps interest rates at 33% on loans of $1,000 or less.

Maryland’s acting deputy commissioner of financial regulation said the state notified Smith Haynes & Watson more than a year ago that it could not collect on such debts, but the company continued doing so. The firm also misled consumers as it tried to collect on the debts, telling one resident that it had “placed a grievance” against her Social Security number.