Friday, April 23, 2010


A Supreme Court decision yesterday could make it easier for consumers to sue collectors for sending erroneous collection notices, Collections & Credit reported today.

The Court, in a 7-2 opinion, ruled that collectors can't protect themselves from such lawsuits simply by stating they made a legal error when sending a notice.

At issue were the actions of an Ohio law firm, Carlisle, McNellie, Rini, Kramer & Ulrich Co., that started foreclosure proceedings on behalf of Countrywide Home Loans Inc. The homeowner in the case, Karen Jerman, disputed that the debt existed. Countrywide later confirmed that Jerman had paid the debt, and the law firm withdrew the foreclosure lawsuit.

Jerman then sued the law firm, arguing that it violated the Fair Debt Collection Practices Act (FDCPA) by contending in the foreclosure suit that Jerman's alleged debt would be assumed to be valid unless she contested it in writing.

A lower court agreed with Jerman that the firm violated the FDCPA, but ruled that the law firm was shielded from liability because the violation wasn't intentional and was the result of a bona fide legal error. Justice Sonia Sotomayor and the court disagreed, ruling that Congress hadn't explicitly provided a mistake-of-law defense to collectors.

Consumer Fraud- see story below

Debt-settlement firms misled consumers, GAO report says
By Ylan Q. MuiWashington
Post Staff WriterFriday, April 23, 2010; A16

A government investigation into the burgeoning debt-settlement industry has found that many firms misled consumers by claiming to be affiliated with federal stimulus programs and exaggerating their ability to reduce consumers' loans.

The report by the Government Accountability Office, presented Thursday at a Senate commerce committee hearing, included audio recordings of salesmen describing their companies as "government approved" and linking settlements to the federal bailout of troubled banks. Another sales recording stated that all customers eliminated their debt in three years, while others encouraged customers to stop paying their creditors -- a practice that violates the industry's own standards.

"It is appalling beyond words," Sen. John D. Rockefeller IV (D-W.Va.), who heads the committee, said at the hearing. "These debt-settlement companies are kicking people when they are down."

The number of debt-settlement companies has ballooned to more than 1,000 during the past five years, after changes to the federal bankruptcy law made it more difficult for consumers to qualify and as the recession ravaged household budgets. The companies promise to negotiate with a customer's creditors to reduce the principal, rather than just interest and fees, as many credit-counseling firms do.

But consumer advocacy groups have attacked the industry for charging hefty upfront fees before calls to creditors are made. In addition, they have accused debt-settlement firms of misleading consumers in sales pitches and instructing them not to pay bills.
Industry groups have defended their business by pointing to roughly $2 billion in debts that they have settled. The U.S. Organizations for Bankruptcy Alternatives (USOBA) and the Association of Settlement Companies (TASC) said that their members are supposed to fully disclose the terms of their agreements with customers and are prohibited from encouraging them to stop paying bills.

But the GAO examination, which was conducted from November through this month, found that 17 of the 20 companies contacted told undercover investigators to do just that.
"Once you are in our program, you will no longer make any of your credit card payments," one debt-settlement salesman said, according to the GAO.

Companies also claimed to be affiliated with federal stimulus programs or government agencies. One Web site is titled the North Carolina Relief Act and displays the seals for the Social Security Administration and the Federal Trade Commission, though small print at the bottom of the home page states that the site is not connected to any government agency.
In addition, the companies claimed success rates from 85 to 100 percent. The FTC and state investigations have found the rate to be less than 10 percent, though the industry argues that it is closer to 34 percent.

USOBA legislative director John Ansbach acknowledged wrongdoing at the companies contacted by the GAO. He said that his organization, along with TASC, supports regulations proposed by the FTC that call for additional disclosures and bar certain advertising practices.
"This is not a rosy picture," Ansbach said at the hearing. "There are absolutely issues in this industry that must be addressed."

Both groups, however, said that preserving advance fees is crucial to the survival of their industry, though they would support capping the amount. The FTC has proposed banning advance fees altogether, as it has for other credit services companies. Julie Brill, an FTC commissioner, said that it is still unclear when a final ruling will be adopted.

At the end of the hearing, Rockefeller said that he was open to drafting legislation imposing new limits on debt-settlement companies. Sen. Charles E. Schumer (D-N.Y.) is planning to introduce a bill next week that would prohibit the industry's advance fees and cap the total amount charged. It would also allow consumers to cancel the program and receive a refund.

Thursday, April 22, 2010

Non-Judicial Foreclosure In Florida

HB 1523 &
SB 2270

Recent Cases

Supreme Court Grants Cert in Ransom
Title: Ransom v. MBNA, America BankDocket: 09-907
Issue: Whether, in calculating the debtor’s “projected disposable income” during the plan period, the bankruptcy court may allow an ownership cost deduction for vehicles only if the debtor is actually making payments on the vehicles

2nd Circuit Court of Appeals
In re Kalikow, --- F.3d --- (2nd Cir. 2010)(Motion to reopen chapter 11 affirmed where: 1) service on creditors' law firm constituted proper service on them; and 2) creditors violated sections 1141 and 524 and the express terms of the Plan and Confirmation Order. However, the order is reversed where creditors were not holders of pre-confirmation claims discharged in bankruptcy who would normally be bound by the provisions of the Plan, and thus the sanctions awarded against them were improper)

Monday, April 19, 2010

FHA at work

I read this post on BK Prof blog- you got to love it!

April 18, 2010
Original Owner of Land
This email is floating around. Thx to Brett Curlee for sending it to me.
Subject: FHA LOAN - You got to love this lawyer.....
Part of rebuilding New Orleans caused residents often to be challenged with the task of tracing home titles back potentially hundreds of years. With a community rich with history stretching back over two centuries, houses have been passed along through generations of family, sometimes making it quite difficult to establish ownership. Here's a great letter an attorney wrote to the FHA on behalf of a client: You have to love this lawyer... A New Orleans lawyer sought an FHA loan for a client. He was told the loan would be granted if he could prove satisfactory title to a parcel of property being offered as collateral. The title to the property dated back to 1803, which took the lawyer three months to track down. After sending the information to the FHA, he received the following reply.(Actual reply from FHA): "Upon review of your letter adjoining your client's loan application, we note that the request is supported by an Abstract of Title. While we compliment the able manner in which you have prepared and presented the application, we must point out that you have only cleared title to the proposed collateral property back to 1803. Before final approval can be accorded, it will be necessary to clear the title back to its origin." Annoyed, the lawyer responded as follows: (Actual response):"Your letter regarding title in Case No.189156 has been received. I note that you wish to have title extended further than the 206 years covered by the present application. I was unaware that any educated person in this country, particularly those working in the property area, would not know that Louisiana was purchased by the United States from France, in 1803 the year of origin identified in our application. For the edification of uninformed FHA bureaucrats, the title to the land prior to U.S. ownership was obtained from France, which had acquired it by Right of Conquest from Spain. The land came into the possession of Spain by Right of Discovery made in the year 1492 by a sea captain named Christopher Columbus, who had been granted the privilege of seeking a new route to India by the Spanish monarch, Queen Isabella. The good Queen Isabella, being a pious woman and almost as careful about titles as the FHA, took the precaution of securing the blessing of the Pope before she sold her jewels to finance Columbus' expedition... Now the Pope, as I'm sure you may know, is the emissary of Jesus Christ, the Son of God, and God, it is commonly accepted, created this world. Therefore, I believe it is safe to presume that God also made that part of the world called Louisiana. God, therefore, would be the owner of origin and His origins date back to before the beginning of time, the world as we know it, and the FHA. I hope you find God's original claim to be satisfactory. Now, may we have our damn loan?"
The loan was immediately approved.