A recent article in the American Banker highlights some of the problems with practice of selling old debts to debt buying companies.  It appears Bank of America (just like many other banks) sold portfolios of credit card debt to CACH LLC.  A portion of the debt sold was either discharged in bankruptcy or already repaid.  The face value of the portfolio was $65 million but CACH bought the portfolio for 1.8 cents on the dollar.

The problem that these sales causes is the consumer is stuck in the middle.  If the consumer repaid the debt already or it was discharged, the consumer rightfully believes the debt is done.  But the company that bought the “debt” now decides to harass the consumer for payment or, even worse, sue on the debt.  In most small claim courts, even though its suppose to be up to the company to prove the consumer owes the debt, in reality most judges are looking for the consumer to prove they don’t owe it.  Talk about a nightmare for the consumer.  The lesson here is we now need to keep all of our records forever because you never know when a debt is going to come back to life.

If you want to read the American Banker story, you can read it here:  Bank of American Sold Card Debts to Collectors Despite Faulty Records.

Asset Acceptance, one of the largest consumer debt buyers, has agreed to pay $2.5 million to settle the FTC’s charges against it.  The FTC alleged that Asset Acceptance (1) failed to disclose that debts are too old to be legally enforceable, (2) failed to disclose that a partial payment could extend the time a debt could be sued upon, (3) failed to notify consumers that it provided negative information to the credit bureaus, and (4) repeatedly called third parties who do not owe the debt, among other violations.

The settlement requires Asset Acceptance to inform consumers when their debt is too old to be sued upon in court and that Asset Acceptance will not sue on that debt.  Asset Acceptance is also prohibited from placing negative information on a consumer’s credit report without notifying the consumer. 

The FTC recently issued a new publication to help consumers understand their rights with regards to old debts. The publication, entitled “Time-Barred Debts: Understanding Your Rights When It Comes to Old Debts“, provides information on when a debt is too old to be enforced in court and whether a consumer should pay a debt that’s time-barred.

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.

A federal judge has ordered Real Wealth Inc. to pay $10.4 million for the harm caused to thousands of consumers nationwide who bought in to the company’s work-at-home and grant scams.

The company was charged with duping thousands of consumers nationwide with a direct-mail campaign that targeted the elderly and disabled. They marketed and sold booklets that supposedly explained how to earn money by working from home or applying for government grants.

The court banned Real Wealth from marketing or selling work-at-home or grant-related products, and from assisting others in doing so.

Real Wealth lured consumers with deceptive sales pitches that the court said were false or unsubstantiated, in violation of the FTC Act. Few, if any, consumers made substantial income with the company’s products.

A federal court banned First Universal Lending, LLC from the mortgage modification business and ordered them to pay nearly $19 million for consumer refunds, according to terms of a settlement with the Federal Trade Commission.

The company allegedly deceived homeowners with false claims that they would help to modify their mortgages. First Universal encouraged homeowners to stop making mortgage payments, saying lenders would not modify their mortgages unless they were at least a few months behind in their payments.

After charging consumers up to $7,000 in upfront fees, the company often did little or nothing to help them. The court subsequently halted the company’s operation, froze their assets and ordered them to disable their Web sites and computers.

Along with imposing a judgment of more than $18.8 million, the settlement order bans First Universal from the mortgage relief services business.

The Federal Trade Commission is sending $3 million in refunds to more than 172,000 consumers who were falsely promised free gifts and wrongfully paid monthly fees for “program memberships” in discount buying and travel clubs. The free gifts promised to consumers included shopping sprees, movie passes and gas vouchers.

The court banned Brian K. McGregor, the architect of the scheme, from telemarketing and selling program memberships. McGregor and Membership Services Direct Inc., also known as Continuity Partners Inc., were ordered to pay $28.2 million.

The amount of money consumers receive will vary, depending on how much they lost in the scam. The average check will be for about $18 per consumer.

“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 Maryland Family Magazine had a good article on child identity theft.  Identity theft is not just a problem for adults, it’s a problem for kids as well.  Child identity theft is an easy crime because the child is an unsuspecting victim and the most common perpetrator (a family member) has ready access to the child’s personal information.  Read more about this problematic crime (for both the adult and the child) in the Maryland Family Magazine’s story on child identity theft.