NACBA and the NCLC have added their voices to an Eleventh Circuit student loan discharge case. Acosta Conniff v. ECMC, No. 16-12884 (11th Cir.). The amicus brief, filed August 22, begins with a direct attack on the Brunner, hardship test as straying too far from the plain language of Section 523(a)(8) and from congressional intent to permit discharge of student loans under certain circumstances. [Read more…] about NACBA and the NCLC Seek Rejection of Brunner Test
Federal Reserve of St. Louis Issues Debt Report
The Federal Reserve Bank of St. Louis issued its inaugural edition of Quarterly Debt Monitor, reporting on trends in consumer debt. The report, titled “Consumer Debt Rises for Tenth Quarter in a Row,” by Don E. Schlagenhauf and Lowell R. Ricketts, compared the four largest metropolitan statistical areas in the district of the Eighth Federal Reserve District with national averages. The focus was on mortgages, home equity lines of credit (HELOC), automobile and student loans, and credit card balances. The article concludes that after a period of deleveraging following the recession of 2007-2009, consumer debt is on the rise again, particularly in the areas of automobile and student loans. Home mortgage debt went up to a lesser degree for people in the 31- to 40-year and 66- to 75-year age ranges, but went down in the age range in between. [Read more…] about Federal Reserve of St. Louis Issues Debt Report
Tax Scammers Arrested in Miami
Five Cuban nationals were arrested in Miami in connection with an ongoing tax scam. See Washington Post. The sophisticated scam involves scammers calling victims on the telephone, often using Voice Over Internet Protocol that makes the caller ID appear to be the IRS, falsely identifying themselves as IRS agents, and demanding money for taxes owed. The callers insist that money be wired immediately, recently demanding that the victims pay using iTunes gift cards, or the victim will be subject to arrest. When they call, they claim to have the victim’s tax return and they seek further personal information.
The suspects are accused of tricking 1,500 victims into paying a total of $2 million. This is the “largest and most pervasive” scam the IRS has faced in 30 years and is thought to have taken in approximately 6,400 victims overall and netted criminals $36.5 million.
The scammers were tracked down following a tip that came into the Senate Aging Committee’s fraud hotline last year. The call led fraud investigators to uncover the identity of some of the suspects through Walmart surveillance tapes. Christian Science Monitor. The suspects have been charged with wire fraud and conspiracy to commit wire fraud.
The IRS advises victims receiving such calls to hang up immediately. For more information, call the IRS information line at 1.800.829.1040. To report scams contact TIGTA at 1.800.366.4484 or visit the “IRS Impersonation Scam Reporting” form on their website.
Chapter 7 Trustee Suspended
The Director of the Executive Office of the United States Trustee upheld the one-year suspension of a Chapter 7 bankruptcy trustee for conduct in three separate 341 meetings that was egregiously aggressive, discourteous, and unprofessional. The trustee was also ordered to undergo diversity and sensitivity training. Final Agency Action 2015-0001 (March 4, 2016). [All identifying information was redacted from the decision.] The case was before the Director on appeal of a decision by the Regional United States Trustee issued September 10, 2014. [Read more…] about Chapter 7 Trustee Suspended
Misconduct by HAMP Servicers Examined
A report to Congress by the Special Inspector General of the Troubled Asset Relief Program (SIGTARP) examined the reasons for the high percentage of redefaults by homeowners in HAMP. By December 31, 2015, over 500,000 homeowners who had HAMP modifications had missed three payments (“redefaulted”) on their loans. This number represents approximately one-third of homeowners in the program. Concern over the high redefault rate and potential misconduct on the part of the servicers caused the Treasury, at SIGTARP’s request, to conduct compliance testing at each of HAMP’s largest servicers: Bank of America, CitiMortgage, JP Morgan Chase, Nationstar, Ocwen, Select Portfolio Servicing, and Wells Fargo. The Treasury looked at samples of 100 homeowners who had redefaulted out of HAMP at each of the targeted servicers. The study found that 6 out of 7 servicers had wrongfully terminated homeowners who were in good standing. (The only large servicer that had not been found to have erred in this way was Select Portfolio Servicing, Inc.). These six mortgage servicers account for 673,039 of the 915,699 (74%) HAMP modifications funded solely by TARP since the start of the program.
The improper servicing was so entrenched that 4 out of the 6 servicers continued to commit the termination errors even after the Treasury had repeatedly identified problems in their systems. Errors included miscounting the number of missed payments by a homeowner, misapplication of payments, and mishandling of rolling delinquencies. The report noted that servicers regularly failed to make timely and accurate reports to the Treasury, thereby making monitoring difficult.
The Treasury also found that 5 out of 7 servicers failed to offer redefaulting homeowners alternative assistance available through the Making Home Affordable Program. The report concludes with the warning that the number of erroneous terminations from HAMP in the small sample tested is an indication of extensive misconduct on the part of the servicers, which must be addressed by further oversight by the Treasury.
Who’s Watching You?
The CFPB has published its 2016 list of consumer reporting companies. These companies collect financial information and provide consumer reports to other companies. The CFPB list includes the name and contact information from the three largest nationwide consumer reporting companies—Equifax, Experian, and TransUnion—as well as dozens of specialty reporting companies that collect information for specific purposes such as employment screening, tenant screening, bank account screening, utilities, medical, etc. The report gives guidance and contact information for obtaining your free, yearly credit report from any of the three largest companies. It also explains what information the specialty companies collect and to whom the information is disseminated. It is important to note that with respect to the specialty companies, it is possible not to discover a negative credit report until after adverse action has been taken by a potential employer, landlord, etc. The report provides tips on which specialty reports might be important for you to fact-check depending on your specific situation. Contact information for each of the reporting companies is provided in the report, and, like the largest consumer reporting companies, most provide free yearly reports. As a consumer, you have the right to see what is in your reports and to dispute any inaccuracies.
CFPB Sues over Deceptive Pension Advances
The Consumer Federal Protection Bureau and the New York Department of Financial Services are seeking to enjoin deceptive lending practices by two pension advance companies. CFPB v. Pension Funding LLC, No. 8:15-cv-01329 (C.D. Cal.). On August 20, 2015, the agencies filed suit against Pension Funding LLC and Pension Income LLC and managing members, Steven Covey, Edwin Lichtig, and Rex Hofelter, alleging that the individuals and companies were in “violation of federal and New York law through the offering of pension advance products that came with hidden fees and interest charges that were not properly disclosed to consumers.” Specifically, the complaint alleges that the companies engaged in a scheme under which elderly consumers would send them eight years’ worth of pension payments in exchange for a lump sum. Though the consumers would be promised little to no fees or interest, in fact, the transactions included a hidden effective interest rate of more than 28 percent and were in violation of the Dodd-Frank Wall Street Reform and Consumer Protection Act and New York usury laws.
The agencies moved for preliminary injunction and the companies responded that the transactions at issue were sales rather than loans and, therefore, the companies and individuals were not “lenders” over which the CFPB and DFS could exercise jurisdiction.
The agencies responded that “the facts establish that Defendants’ pension-advance transactions constituted loans under the CFPA, as consumers incurred debt and were granted the right to defer its payment, in this case typically over a period of eight years. That pension payments the consumers were entitled to receive were expected to be used to repay the debt does not change the fundamental character of the transaction, and Defendants’ arguments to the contrary are unavailing.”
A hearing on the motion for preliminary injunction is scheduled for December 18, 2015.
NCBRC Gains Support of the American College of Bankruptcy Foundation
The National Consumer Bankruptcy Rights Center (NCBRC) is honored to have received a 2015 Pro Bono Grant for $10,000.00 from the American College of Bankruptcy Foundation. NCBRC is a 501(c)(3) organization dedicated to protecting the integrity of the bankruptcy system and preserving the rights of consumer bankruptcy debtors. NCBRC advances these goals by assisting either through working directly with debtors’ attorneys or by filing amicus briefs in courts throughout the country.
Formed in 1989, the ACB is an honorary public service association of bankruptcy and insolvency professionals invited to join based on their established record of the highest standards of professionalism and public service to the profession. It is the largest financial supporter of bankruptcy and insolvency-related pro bono legal service programs in the United States. The ACB’s stated missions of: “sponsorship and encouragement of legal research, publications, and forums; establishment of scholarships; providing for the collection and maintenance of data and documents for scholarly research; and fostering the institution and maintenance of legal aid facilities for the indigent,” harmonize with those of NCBRC to support the bankruptcy bar and assist the most financially vulnerable members of society.
NCBRC’s Board of Directors is grateful to the American College of Bankruptcy Foundation for its confidence in our mission and support in our mutual goals of providing the best and broadest assistance to consumer debtors in their quest for a fresh start. Without the support of donors like the ACB Foundation, the assistance provided by NCBRC would not be possible.
CFPB Penalizes Two Largest Debt Buyers
In a September 9, 2015, press release, the CFPB announced that it took action against the nation’s two largest debt buyers and collectors: Encore Capital Group and Portfolio Recovery Associates. Encore’s subsidiaries, also named in the action, are Midland Funding LLC, Midland Credit Management, and Asset Acceptance Capital Corp. Together, the two companies have bought over $200 billion in defaulted loans.
The Bureau found that both companies bought debts that “were potentially inaccurate, lacking documentation, or unenforceable. Without verifying the debt, the companies collected payments by pressuring consumers with false statements and churning out lawsuits using robo-signed court documents.” The all-too-familiar list of wrongdoing includes attempts to collect on debts that they knew were inaccurate or unenforceable using meritless lawsuits that they expected to, and often did, win by default, in violation of the FDCPA and the Dodd-Frank Wall Street Reform and Consumer Protection Act. They lied to consumers about their legal burdens and threatened litigation that was, in fact, not being considered. They harassed consumers with phone calls before 8:00 a.m. and after 9:00 p.m. and, in some instances, made collection calls to the consumer over 20 times in two days.
The enforcement action consists of requiring both entities to stop reselling debts, stop collection efforts concerning unverified debts, ensure accuracy when filing lawsuits, provide information to consumers such as the name of the creditor and charge-off balance, provide original documentation of the debt, use accurate affidavits, and cease collections efforts on time-barred debts.
Encore was ordered to pay up to $42 million in refunds and to dismiss all pending lawsuits or cease collection efforts on judgments involving misrepresentation.
Portfolio was ordered to pay $19 million in refunds where it made similar legal claims and where it collected payments on default judgments for debts that were barred by the statute of limitations.
Finally, Encore was ordered to pay $10 million and Portfolio $8 million to the CFPB; ‘s Civil Penalty Fund.
The Encore consent order can be found at: http://files.consumerfinance.gov/f/201509_cfpb_consent-order-encore-capital-group.pdf
The Portfolio Recovery Associates consent order can be found at: http://files.consumerfinance.gov/f/201509_cfpb_consent-order-portfolio-recovery-associates-llc.pdf
NCBRC Grateful for the Support of the O. Max Gardner Foundation
The National Consumer Bankruptcy Rights Center (NCBRC) has been honored with a $12,500.00 first-time donation from the O. Max Gardner Foundation. NCBRC is a 501(c)(3) organization dedicated to protecting the integrity of the bankruptcy system and preserving the rights of consumer bankruptcy debtors. NCBRC advances these goals by assisting either through working directly with debtors’ attorneys or by filing amicus briefs in courts throughout the country. Without the support of donors like the O. Max Gardner Foundation, the assistance provided by NCBRC would not be possible.
The O. Max Gardner Foundation was established in 1943 by Oliver Max Gardner (1882 – 1947). Mr. Gardner had a varied career beginning with teaching organic chemistry and, after attending law school, ultimately entering politics. He served as the 57th Governor of North Carolina from 1929 to 1933. After his term ended, Mr. Gardner worked in the administrations of Franklin D. Roosevelt, as an informal advisor and speechwriter, and Harry S. Truman, as Under Secretary of the Treasury. Mr. Gardner founded the O. Max Gardner Foundation to promote all forms of educational and community service organizations for the citizens of North Carolina.
His grandson, O. Max Gardner III, is a familiar name in the field of bankruptcy law having devoted his professional life to the service of consumer debtors and the education of the bankruptcy bar in the intricacies of this challenging area of regulation. His efforts have gone a long way toward leveling the playing field between consumer debtors and the often predatory lenders, and unethical servicers and collectors, they face.
NCBRC’s Board of Directors is grateful to the O. Max Gardner Foundation for its confidence in our mission and support in our mutual goals of providing the best and broadest assistance to consumer debtors in their quest for a fresh start.