Debt Collectors looking to use Facebook, MySpace LinkedIn and other social media sites will have try another tactic. Last week, a Florida judge ordered Mark One Financial LLC, a debt collection agency, to stop using Facebook and other social media websites to locate debtors.

Mark One Financial had been sued for, among other things, using Facebook to locate a Tampa woman over her $362 late payment on her car loan. The presiding judge, W. Douglas Baird, ordered the Jacksonville, Fla. company to refrain from contacting the woman’s family or friends on Facebook.

Melanie Beacham filed a lawsuit last August against the collection agency. According to her complaint, Mark One sent several messages to Ms. Beacham herself and her family members on the Facebook networking site. Messages asked her family to have her call the agency asap about the alleged debt.

Billy Howard of the Morgan and Morgan law firm in Tampa, said the debt collectors violated his client’s privacy and the agencies actions constituted harassment under Florida law. He said that in the past few months, over a dozen potential clients have reached out to him because debt collectors have used social media sites to track them down or harass their friends and relatives.

“It’s the beginning of an epidemic,” Howard said, calling it “another weapon” unethical debt collectors can use, if allowed.

Allegedly, Mark One contacted Ms. Beacham up to 10 times a day by phone, sent text messages to her cell phone, called her neighbors and dispatched a paid courier to deliver a letter to her place of work. Last November, Mark One said it would not discuss Beacham’s case and denied breaking any Federal or Florida laws. However, the company did acknowledged that instructs its collectors to use Facebook to find people when they don’t respond to efforts at contact, like sending letters and making phone calls.

This is not an isolated case, as many consumers are filing suits relative to being contacted via social media. In one Chicago case, a man accepted a new friend request from a young woman in a bikini. But, much to his surprise, the account was a debt collector’s. The man figured this out when the new Facebook “friend” posted a message on his wall for all his friends to see. The message read: “Pay your debts, you deadbeat.”

Most of the questions we get here relate to what collectors can and can’t do. Since all collection agencies in the United States are governed by the FDCPA or Fair Debt Collections Practices Act, I decided it would be good to post on the Top 5 things most consumers DON’T KNOW about the FDCPA.
 

Most consumers understand that collectors can and cannot do certain things, but sometimes they make assumptions based on logic or intuition. However, it is important to understand exactly what FDCPA covers and what it does not… in many cases it may surprise even the most educated consumers.

So, here is our list of the Top 5 Things You Did Not Know About FDCPA.

5. You can have a collector to stop calling you. Just as simple as that. All you have to do is send the collector a letter and let them know you have no intention of paying the debt or that you are requesting that they cease communications. Section 805.c is very clear on this matter:

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U.S. Sens. Al Franken (D-Minn.) and George LeMieux (R-Fl.) recently introduced legislation to end abusive debt collection practices. The End Debt Collector Abuse Act includes several provisions designed to eliminate predatory practices, including prohibiting debt collectors from seeking arrest warrants to collect on debts and ensuring consumers are better protected against abusive debt collectors.

“This bill will protect Minnesota consumers from abusive debt collectors who often exploit loopholes in the law to make an extra buck,” said Sen. Franken. “Debt collectors often use deceptive and aggressive tactics, sometimes going after debts that have already been paid or even targeting the wrong person. This bill will protect consumers, keep debt collectors honest, and stop the misuse of law enforcement resources for private profit.”

The End Debt Collector Abuse Act adopts recommendations by the FTC and consumer rights groups that will help to protect consumers, while keeping debt collectors honest. Obviously, stopping the abuse of law enforcement and judicial resources for private profit is one aspect of this act.

A few of highlights from the proposed End Debt Collector Abuse Act are:

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We have posted some new and updated Debt Collection Letters to help you with different collection agency situations that may arise.

Debt Validation Letter
This letter will help you validate a debt if you aren’t sure you owe the debt, aren’t sure the amount is correct or think the statute of limitations may have expired on your debt.

Cease and Desist Collections Letter
This letter will help when you want a 3rd party collection agency to stop calling you and/or your references and family members.

Wage Assignment
Payday Lenders use wage assignment often, and I am pretty sure they are the only ones still using it. The reason is that the FTC has declared this practice virtually illegal and only shady online payday loan companies are still using this tactic to collect on debt.

Wage Garnishment
A court ordered Wage Garnishment cannot be stopped. This letter will do nothing for that situation unfortunately and you should contact a lawyer.

Payday Lenders claim to garnish wages often, but they are most often just referring to a wage assignment (see above). So, we refer you again to the wage assignment letter.

I hope you enjoy and use these letters to stop harassing debt collectors and as always, if you have any questions please Ask Brent.

Yesterday, in U.S. District Court in San Jose, a jury awarded a California couple $500,000 in a fair debt collection case.  Credigy Services Corp. was found to be in violation of the Fair Debt Collection Practices Act and were trying to collect on money that was not owed.

The jurors in the cases cited Credigy Services Corp. used intentional and systematic efforts to cause emotional distress for the consumers, Manuel G. Fausto and his wife Luz.

Credigy Service Corp’s lawyers said it’s too early for them to comment on the jury’s decision. U.S. District Court Judge James Ware has yet to enter judgment on the case. If he does not approve the verdict, that could give Credigy’s attorneys an opportunity to get it overturned.

This is certainly a huge win for consumers, not to mention the Fausto’s. Let’s just hope the judge upholds the jury’s decision and sends a message to debt collectors who violate state and federal laws.

UPDATE: The Faust’s lawyers have sent me a link with more details on this debt collection lawsuit.

In an effort to increase debt collector regulation in the state, Oregon Governor Ted Kulongoski has signed a new law that allows the the Oregon Attorney General to sue debt collectors in the Beaver State. The Attorney General’s ability to regulate debt collectors will grow significantly under this bill and offer Oregon debtors a degree of protection from harassing collectors that many states do not.

The legislation will allow Attorney General John Kroger to sue debt collectors who harass Oregon customers by violating their legal rights under Oregon collection law. “This important legislation will help us crack down on debt collectors who routinely violate state and federal law,” AG John Kroger said in a Thursday.

Oregon Senate Bill 328 will allow the state’s attorney general to go to court to enforce a 1977 law against illegal collection practices, the so-called Unlawful Debt Collection Practices Act. Currently, the Oregon attorney general can sue collection agencies under Oregon’s Unlawful Trade Protection Act, but not under this consumer protection law.

Last year, the Oregon Justice Department received 834 written consumer complaints about debt collection agencies and 254 about first-party debt collectors, the attorney general’s office said.

This is a great step that Oregon is taking to make sure that enforcement of collection law is available to their AG in his efforts to protect Oregon consumers.

Debt Collectors will get the Dateline NBC treatment on Friday night, March 27th at 10pm Eastern and Pacific. Reporter Chris Hanson, most famous for his work exposing child predators on “To Catch a Predator,” will “expose dirty tactics used by some collection agencies.” According to NBC, hidden cameras will be involved, so this should be a really interesting show to watch on Friday night.

The episode of Dateline is titled “Debt in America and Its Collectors” and is part of a series called “Inside the Financial Fiasco.” Collection agencies abusing consumers is a serious issue in our country and it is great to see Dateline NBC and Chris Hanson tackling this issue with their trademark style.

However, everyone is not so excited. Without even having seen anything but the preview (below), Patrick Lunsford of InsideARM is lamenting the fact that it will be unfair and biased, with this from his article on the show:

To pre-suppose that the show will be an unfair view of the ARM industry is a bit beyond us at this point. I seriously can’t imagine what manner of awfulness will be foisted upon the public in this segment. I guess that we should withhold judgment until the piece airs, but I can’t see a piece that touts itself as a hidden camera expose of the ARM industry being even-sided.

While it’s always great to see “foisted” used in an article, I’m not sure how Patrick already knows the show will be so unfair? Maybe, it’s because Patrick, as an InsideARM expert, is well aware that there are a lot of debt collectors out there breaking the law every day, and if Chris Hanson is on the case, he’s bound to expose a number of them on national TV Friday night. Even better than Patrick’s “warning” to fellow debt collectors are the comments below the post. Apparently it’s not required to take an economics class to be a debt collector.

Tune in on Friday night or check back here on Saturday for an update on the episode.

Alabama collection lawsuits are up almost 4 times according to court documents for the U.S. District Court for North Alabama. Many of these cases are related to collection agencies collecting from the wrong person, and certain companies seem to have a very high rate of suits.

Unifund tops the list with 26 suits filed in the last 12 months in North Alabama alone. Behind them is California’s Midland Credit Management with 22 suits in the last year. Here is an excerpt from the article in the Birmingham News:

California-based collection agent Midland Credit Management was sued by a woman living in Limestone County.

The problem? The woman was getting regular phone calls from Midland Credit’s bill collectors. Among the messages left by the collectors, according to the suit: “Trash like you need to pay your bills and stop ignoring them.”

The real problem was that the woman didn’t owe $1,492 to a furniture dealer for a debt allegedly incurred in 2003. Midland Credit Management was never able to substantiate the debt with receipts or signed credit agreements or other documentation, despite repeated requests, the suit said.

A spokesman for Midland Credit’s parent company, San Diego-based Encore Capital Group, said the corporation doesn’t comment on collections lawsuits. The case, like many, was settled under confidential terms.

Of course it was settled under “confidential terms.” That’s the standard method of operation for many of these collection agencies. Consistently and systematically break the collection laws that are there to protect consumers and settle any lawsuits that come up as fast and quietly as possible. Then, the lawyers representing consumers get 75% of the settlement money. Unethical collection agencies just view these lawsuits as a cost of doing business. Until there is greater enforcement from state agencies or the FTC, consumers will continue to suffer from collection harassment, while lawyers and collection agencies reap the profits.

**Read the full Birmingham News Story**

Press Release
March 13, 2009

West Virginia Attorney General Darrell McGraw today announced that his office has entered into a settlement agreement with Brady and Caruso which will provide $9287.87 in refunds and $282,953.84 in debt cancellation for approximately 174 West Virginia consumers. Brady and Caruso, LLC, doing business as Brady, Caruso, and Associates, LLC, is a Nevada limited liability corporation that collects debts from its headquarters in Amherst, New York.

The Attorney General’s investigation was prompted by a complaint that a consumer received a collection call from Brady and Caruso but was not able to dispute the debt or determine whether she owed it because the collector could not verify the debt that she allegedly owed. Under federal law, debt collectors are required to send consumers a written notice within five days of their initial contact. The notice is required to provide the amount of the debt and the name of the creditor to whom the debt is owed. The consumer has 30 days from the date of this notice to dispute the debt in writing. If the consumer disputes the debt, the debt collector is required to provide verification of the debt, including the name of the original creditor, or a copy of the judgment. If the collector cannot provide such verification, it must stop all collection efforts. The Attorney General’s investigation of Brady and Caruso also revealed that it was not registered or bonded to collect debts in West Virginia.

The consumer also complained that the debt collector threatened to place a lien against her property if she did not pay the debt. Under West Virginia law, liens may not be placed against property unless the creditor first sues the debtor and obtains a judgment in court. West Virginia law prohibits the use of threats and coercion in debt collection and explicitly prohibits threatening that nonpayment will result in the taking of any action that requires a court order if the collector does not tell the consumer that it must obtain a court order before such action can be taken.

Under the terms of the settlement, Brady and Caruso will close all the West Virginia accounts, write those accounts down to a zero balance, take the necessary steps to delete any negative credit reporting in connection with those accounts, and refund any amounts paid on the accounts. The settlement also requires the collector not to resell the accounts. Consumers who are covered by this settlement will receive letters confirming the amount of debt cancellation and refunding any payments they made.

In a very disturbing case, the 7th Circuit has ruled in favor of debt buyers by upholding a lower court decision that MCM Capital Group did not violate the Fair Debt Collections Practices Act (FDCPA).   In Wahl vs. Midland Credit Management, the court decided that by referencing the total amount of debt purchased as the “principle” amount the debt buyer did not violate FDCPA’s requirement that interest and principle be itemized.

The basic story is that Ms. Wahl charged less than $70 to a BP credit card in the 80′s.  Due to a stroke, she was unable to pay the balance, so interest and fees started accruing at about $40 per month.  After Ms. Wahl’s $70 in gas debt had grown to $1,149 in debt, BP decided to sell the debt to a debt buyer.  The debt buyer then began adding it’s own interest, but reported the $1,149 as the “principle” balance and it’s own interest as the interest.

So, what the court affirmed is that if a debt buyer purchases the debt, they are under no obligation to provide the consumer with any information on how a $70 debt turned into $1,149 and can in fact report that debt as the principle balance.

From the 7th Circuit Court’s Decision:

The starting or original amount owed, she would say, was what she actually charged on the BP card. It follows that none of the interest, whether tacked on by BP or Midland, is part of the “principal balance.” And since Midland included the BP interest within the “principal balance” figure, it uttered a falsehood. But this logic ignores Midland’s role in the process entirely. The interest charged by BP was very much part of the principal balance in Midland’s eyes.
Midland obtained the entire BP debt,3 including interest, so the starting or original amount owed, as far as it was concerned, was indeed $1,149.09.

Regardless of the legal merits, this is certainly a very bad decision for the consumer or debtor.  Basically, a creditor can rack up all kinds of usurious fees and interest, in this case over $1000 for $70 borrowed, and then sell the balance to a debt buyer.  At that point, the debt buyer has no obligation to demonstrate how $70 turned into $1,149 and can refer to $1,149 as “principle.”

This sounds like a great decision for payday lenders operating illegally out of Costa Rica or Grenada, banks hiding behind “fees” to charge usurious rates and collection agencies that want to pursue old inflated debts.