Debt-Buyer Business Model

Buying delinquent consumer accounts has bloomed into an industry unto itself with its own business model, which thrives on certain practices, such as the following: * Purchase thousands of delinquent accounts for pennies on the dollar.  This gives debt-buyers a spreadsheet of data, which they do not verify; they purchase without representations or warranties as to the accuracy of the information.  They do not know if the balance stated is correct, or if anything is owed at all. * Contact the consumer.  Contact the consumer a lot!  While there are regulations on fair debt collection practices, not all debt collectors are interested in fair debt collection.  The debt-buyer calls and writes to settle the account…and if that does not work: * File a Small Claims lawsuit.  A Small Claims Court notice can get lost in the paperwork shuffle, and the consumer does not show up for court (or does not defend) and the debt-buyer wins by default. * If the consumer does take time off work to launch a defense, ask for a continuance.  Repeat delay tactics until the consumer stops coming to court. * Have a judgment entered against the consumer.  That judgment is good for 20 years, so […] Read More

What’s In Your Wallet?

Whether it is your paycheck or bank account, debt-buyers are standing by.  While garnishment used to be the purview of child support, it has begun to share the spotlight with debt-buyers, and in Florida, they can take up to 25% of your net income, or sweep your bank account for everything in it. Debt-buyers purchase delinquent accounts in bulk for pennies on the dollar.  Their business model is a numbers game:  they know they will not collect on every account, but they have so many of these accounts that they will make a profit, despite their losses.  Furthermore, if they can get a money judgment against you, they can wait up to twenty years to collect. Often these are delinquent accounts that wind up in Small Claims court for amounts less than $5,000—old credit card debts and medical bills.  The claim may not start as a large amount, but the interest piles up. Just because you owe money does not mean you lack rights. Consumer debt comes with a lot of paperwork.  A Small Claims Court notice can get lost in the shuffle, the consumer does not show up in court (or does not defend) and the debt-buyer wins by […] Read More

Role of Legal Aid

Legal Aid often deals in poverty law with very complicated cases, high stakes, lots of pressure, and very little money in it.  With law school student loan debt ranging from $75,000 to $125,000, it can be hard to get an attorney to take on Legal Aid cases.  However, while Legal Aid plays a critical role in poverty law (a role most people are unaware of) it also plays a critical role in providing experience to lawyers (another role most people are unaware of). I have been an attorney since 2008, and through my involvement with Saint Johns County Legal Aid, I had a lot of time in front of judges early on, which was beneficial to me in my new career, and beneficial to my clients, both pro bono and otherwise.  That benefit continues with my continued work with Legal Aid.  I enjoy helping people and am glad to have the knowledge and experience to help even those who cannot afford legal representation. Whether you are looking to fulfill your pro bono hours for the Florida Bar, or if you are seeking an attorney but unable to afford one, contact your local legal aid office.  Even if you do not […] Read More

Wage Garnishment Trend

Wage garnishment used to be all the rage for child support; lately it has been trending for consumer debt collection, especially within the 35 to 44-aged set. A new study by National Public Radio and ProPublica shows that one in ten American employees between the ages of 35 and 44 have a lighter paycheck due to wage garnishment, and for those earning $25,000 to $40,000 a year, more than half that population are being garnished for consumer debt (not child support). In Florida, debt collectors can take up to 25% of your net pay for things like old credit card debt, medical bills, and/or student loans.  Debt collection is big business.  Debt-buyers purchase delinquent accounts for pennies on the dollar.  For the debt-buyer it is a numbers game—often a BIG numbers game because many consumers are not aware of their rights or how to assert them and do not defend their case at the hearing (if they attend at all). Furthermore, the debt-buyers purchase a spreadsheet of data without verification that the information is correct.  The debt-buyer does not know if the consumer owes anything or not, or how much.  They will not collect on every account, but they collect […] Read More

Time Machines in Credit Card Contracts?

There was a young lady who bought shoes in bulk, that way she got a discount and always had something to wear on her feet.  The purchase landed on her credit card statement as a big debt.  The young lady wondered how she would ever foot the bill. She took steps to pay off the debt—she got a job and put herself on a budget.  Little by little she began to reduce her debt balance, but her account went delinquent because she had other bills to pay as well, like rent and food and gas.  Then the young lady got sued in Small Claims Court on the credit card contract. The problem was that the credit card company had charged off the debt in 2004, but the credit card agreement was copyrighted in 2006.  “How are you suing on Contract?” the young lady’s attorney asked, at which point the debt collector got back in his time machine and disappeared from the lawsuit. Just because you owe money does not mean you lack rights.  Seek competent legal counsel to properly assert your consumer rights. Read More

Dr. Wolf’s Phantom Bill

Once upon a time a debt collector telephoned Little Red Riding Hood’s grandmother about a medical bill.  “But I paid that bill two years ago,” Grandma Riding Hood told the caller.  Still, the caller insisted there was an outstanding balance and started asking for personal information, saying, “I have to be sure I am talking to the right person, so could you give me your date of birth, address, Social Security number, and account number you used to pay the bill?” Little Red Riding Hood happened to be visiting her grandmother that day and overhearing the conversation.  “Grandma, ask for something in writing,” she told her. “But I do not want to be rude,” said the Grandmother.  “After all, this was for Dr. Wolf who made that house call when I was sick.” “He locked you in the closet!” Little Red exclaimed. “He said it was good for my rheumatism,” Grandma Riding Hood replied. “He was going to eat me!” Little Red protested further. “Well, he was on a special diet, dear.” “Grandma, these debt collectors are required to send you something within 5 days in writing, and then you have 30 days to dispute the debt.  That will give […] Read More

Not Going Anywhere for 20 Years?

The standard operating procedure in credit card debt is not to be sued by your credit card company, but instead by a third-party debt-buyer.  Most consumers arrive at Small Claims Court and the Judge says:  “Do you admit or deny the claim?”  They admit it, saying they need time to pay; then they make a repayment plan with the debt-buyer.  Instead of asking for verification, most consumers rely on third-party debt-buyers to have their facts straight.  That can be a costly silence. When you get a credit card, you sign a credit card agreement that says you agree to the terms of that contract.  That is not what the debt-buyer sues you on.  Instead of suing you on the credit card debt or contract debt, the debt-buyer sues on Account Stated. For debt-buyers it is a numbers game.  They buy millions in debt for pennies on the dollar.  They purchase a spreadsheet of data without representations or warranties, and they do not necessarily know that the information is correct.  The debt-buyer does not know if you owe anything or not. When pushed to a trial with live testimony, the debt-buyers lose.  In Small Claims Court we like to agree to […] Read More

Garnishment is Better Than Debtors’ Prison

Garnishment is better than debtors’ prison because it gives the debtor a chance to repay their bills instead of relying on their family to buy them out of hock…but it is still not great.  With garnishment, money just disappears from your paycheck or bank account, then you receive Notice of Garnishment (as if you had not noticed). Everyone should pay their bills, but you have to be able to stay in your home, feed yourself, and put gas in your car.  That is why certain incomes are eligible for exemption. If you are head of household supplying more than one-half the income to support a minor child, that income is eligible for exemption. If your income comes entirely from Social Security or a pension fund, that income is eligible for exemption.   So, money disappears out of your account and then you get a Notice of Garnishment, what can you do then?  Then you can fill out the form (that comes with the Notice) to file for an exemption. The key to that exemption is that you have to claim it.  Just because you are eligible does not mean you automatically get it. Whether or not you are eligible for an […] Read More

Social Security & Small Claims Court

August 15, 1953 President Franklin D. Roosevelt signed the Social Security Act into law, providing financial assistance for the elderly, the blind, the disabled, and the unemployed.  This year the Social Security Administration projects that over 59 million Americans will receive almost $863 billion in Social Security benefits…none of that is meant to be used to pay off a credit card debt in Small Claims Court. Everyone should pay their bills, but you have to be able to stay in your home, feed yourself, and put gas in your car.  Therefore do not promise your Social Security income to cover a collection judgment; claim an exemption instead. If you are living off Social Security, you may be able to claim those benefits as exempt from a debt collection judgment.  The key to that exemption is that you have to claim it.  Just because you are eligible does not mean you automatically get it. Seek competent legal advice to learn more about exemptions from judgment.  (You do not need an appointment to pick up a pamphlet at Legal Aid about collection exemptions and how to claim them.)  Small Claims Court is not necessarily easy, but good legal advice may give you […] Read More