Floreclosure Mills Covered by Debt Collection Act

JERMAN v. CARLISLE, MCNELLIE, RINI, KRAMER & ULRICH LPA ET AL.


CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

No. 08–1200. Argued January 13, 2010—Decided April 21, 2010

The Fair Debt Collection Practices Act (FDCPA), 15 U. S. C. §1692 et seq., imposes civil liability on “debt collector[s]” for certain prohibited debt collection practices. A debt collector who “fails to comply with any [FDCPA] provision . . . with respect to any person is liable to such person” for “actual damage[s],” costs, “a reasonable attorney’s fee as determined by the court,” and statutory “additional damages.” §1692k(a). In addition, violations of the FDCPA are deemed unfair or deceptive acts or practices under the Federal Trade Commission Act (FTC Act), §41 et seq., which is enforced by the Federal Trade Commission (FTC). See §1692l. A debt collector who acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances that such act is [prohibited under the FDCPA]” is subject to civil penalties enforced by the FTC. §§45(m)(1)(A), (C). A debt collector is not liable in any action brought under the FDCPA, however, if it “shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.” §1692k(c).

Held: The bona fide error defense in §1692k(c) does not apply to a violation resulting from a debt collector’s mistaken interpretation of the legal requirements of the FDCPA. Pp. 6–30. a) A violation resulting from a debt collector’s misinterpretation of the legal requirements of the FDCPA cannot be “not intentional” under §1692k(c). It is a common maxim that “ignorance of the law will not excuse any person, either civilly or criminally.” Barlow v. United States, 7 Pet. 404, 411. When Congress has intended to provide a mistake-of-law defense to civil liability, it has often done so more explicitly than here. In particular, the administrative-penalty provisions of the FTC Act, which are expressly incorporated into the FDCPA, apply only when a debt collector acts with “actual knowledge or knowledge fairly implied on the basis of objective circumstances” that the FDCPA prohibited its action. §§45(m)(1)(A), (C). Given the absence of similar language in §1692k(c), it is fair to infer that Con gress permitted injured consumers to recover damages for “intentional” conduct, including violations resulting from a mistaken interpretation of the FDCPA, while reserving the more onerous administrative penalties for debt collectors whose intentional actions.

Florida Default Law Group Subject of Attorney General Investigation

 Forward to them assignments, affidavits of fees, especially affidavits of attorneys fees. MAKE SURE YOU SEND ANY INFORMATION CERTIFIED MAIL AND MAKE SURE YOU FOLLOW UP TO CONFIRM RECEIPT.

From the Attorney General's Website:

The case file cited below relates to a civil -- not a criminal -- investigation. The existence of an investigation does not constitute proof of any violation of law.

Case Number: L10-3-1095
Subject of investigation:
Florida Default Law Group, PL
Subject's address:
9119 Corporate Lake Drive, Suite 300, Tampa, Florida 33634
Subject's business:
Law Firm, Foreclosures
Allegation or issue being investigated:
Appears to be fabricating and/or presenting false and misleading documents in foreclosure cases. These documents have been presented in court before judges as actual assignments of mortgages and have later been shown to be legally inadequate and/or insufficient. Presenting faulty bank paperwork due to the mortgage crisis and thousands of foreclosures per month. This firm is one of the largest foreclosure firms in the State. This firm appears to be one of Docx, LLC a/k/a Lender Processing Services' clients, who this office is also investigating.
AG unit handling case:     Economic Crimes Division in Ft. Lauderdale, Florida

http://myfloridalegal.com/__85256309005085AB.nsf/0/A4F1B85DCC5D5ACD852577130045B63F?Open&Highlight=0,florida,default,law

House Panel Approves FHA Reform Measure

A bill to crack down on fraudulent brokers and lenders moved out of the House Financial Services Committee yesterday after majority Democrats warded off GOP amendments to require higher down payments and tougher lending standards for Federal Housing Administration mortgages, CongressDaily reported today. Rep. Ron Klein (D-Fla.) along with co-sponsor Rep. Maxine Waters (D-Calif.) said the bill also creates a cash incentive for mortgage servicers to reach out to financially troubled homeowners and advise them on options to avoid foreclosure. The bill could be on the floor as early as next week.

Thanks to ABA Headline News

Case Law Update

7th Circuit Court of Appeals, April 15, 2010

In the Matter of Altheimer & Gray, --- F.3d ---, 2010 WL ----------------- (7th Cir 2010)(In a law firm chapter 11, partner's claim not paid as the reorganization plan subordinated partners' claim to those of other creditors, and here, petitioner is a non-unit partner under the plan)


8th Circuit Court of Appeals, April 13, 2010
Bremer Bank, N.A. v. John Hancock Life Ins. Co., --- F.3d ---, 2010 WL ----------------- (8th Cir 2010)(plaintiff's equity in an aircraft and lease was not improperly extinguished by a bank, acting on defendant's instructions, where: 1) the bank properly informed plaintiff that the lease of the aircraft was in default, as required by the lease agreement; 2) given the lease's expansive language, it was reasonable to consider as a remedy the 11 U.S.C. section 1110(b) stipulations requiring the airline to maintain the aircraft and to make monthly payments despite the bankruptcy stay)

9th Circuit Court of Appeals, April 13, 2010
In re Sabban, --- F.3d ---, 2010 WL ----------------- (9th Cir 2010)(monetary award under California's unlicensed contractor statute, Cal. Bus. & Prof. Code section 7031(b), was dischargeable, since under section 523(a)(2)(A) it was not premised on either fraud or actual harm)



Thanks to Findlaw.com and BankruptcyProf

FTC Shuts Down Credit Repair and Loan Scammers

The Federal Trade Commission obtained a court order banning eight companies and their principals from selling credit repair and mortgage relief services, and requiring them to pay more than $7.5 million for deceiving consumers throughout the United States.

The FTC charged seven of the companies and three officers with making false promises that they would improve consumers’ credit scores by removing negative information such as late payments, charge-offs, collections, inquiries, delinquencies, judgments, and accounts discharged in bankruptcy. According to the FTC, the defendants charged consumers up to $2,000, including illegally charging an advance payment of $300, and failed to provide written contracts and other materials required by law.

The FTC also asserted that various of the defendants falsely claimed they would help consumers get mortgage loan modifications or stop foreclosure in all or virtually all instances. The court entered default judgments against all of the defendants except Gerald Serino, also known as Jerry Serino, after they failed to respond to the lawsuit.

The credit repair defendants are United Credit Adjusters, Inc., doing business as United Credit Adjustors and UCA; United Credit Adjustors, Inc., d/b/a United Credit Adjusters and UCA; United Counseling Association, Inc., d/b/a UCA; Bankruptcy Masters Corp., National Bankruptcy Services Corp., Federal Debt Solutions, Ltd., United Money Tree, Inc., Ahron E. Henoch, Ezra Rishty, and Gerald Serino. The loan modification defendants are The Loan Modification Shop, Ltd., Casey Lynn Cohen, a/k/a Casey Lynn Collins, and Rishty.



The court order prohibits the credit repair companies and their owners from selling credit repair services, and it bans the loan modification companies and their individual owners from selling mortgage loan modification and foreclosure relief services. The order also prohibits the defendants from misleading consumers about financial goods and services, such as loan terms or rates, how much a consumer will save by enrolling in a debt relief service, and credit terms other than those a lender actually offers. The order also bars the defendants from misleading consumers about any good or service, such as refund terms, government affiliation, and total cost.



In addition, the order bars the defendants from trying to collect payment from their customers, and from selling or otherwise disclosing their customers’ personal or financial information. The order imposes a $7,500,334 judgment against the credit repair defendants, and a $32,710 judgment against the loan modification defendants. Litigation will continue against Serino.

GSE/ Regulators Announce Anti Mod Scam Campaign

Fannie Mae, Freddie Mac and various federal agencies recently announced a national campaign to prevent loan modification scams through the formation of a Loan Modification Scam Prevention Network, as well as a consolidation website.


As part of the campaign, the network has launched a website, www.PreventLoanScams.org, which is designed to support national, state and local law enforcement efforts. The website serves as a nationwide clearinghouse and destination for loan modification scam information on complaints filed, laws and regulations, and enforcement actions. The website includes: (1) an electronic complaint form for scam victims; (2) names of individuals and organizations identified by enforcement agencies to have allegedly committed a loan modification scam; (3) information on how to avoid a loan modification scam; (4) state-by-state information about rules, regulations and resources available to homeowners; and (5) news and information on enforcement efforts.

Prominent contributors to the campaign include: the Treasury Department, FDIC, the Department of Housing and Urban Development, the Federal Trade Commission, the Conference of State Bank Supervisors, the National Association of Attorneys General, the Justice Department and FBI.

Consumer bankruprtcy Filings Continue to Rise

The 149268 consumer filings in March were up 23 percent over the March 2009 total, according to the American Bankruptcy Institute.

Case Law Update

2nd Circuit Court of Appeals, April 08, 2010

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)

Thanks to Findlaw.com

Pending Student Loan Legislation

Thanks to David Goch who posted this on the Bankruptcy Roundtable Listserve:

Yesterday, the House Judiciary Committee's Subcommittee on Commercial and Administrative Law held a hearing on H.R. 5043, "The Private Student Loan Bankruptcy Fairness Act of 2010".
H.R. 5043, according to Rep. Cohen (D-TN), the bills sponsor along with Rep. Davis (D-Ill.), "is very narrowly tailored to make debt resulting from student loans issued by private, for-profit institutions dischargeable in bankruptcy."

H.R. 5043 amends Bankruptcy Code Section 523(a)(8), eliminating Section 523(a)(8)(B), which currently makes debt from private loans issued by for-profit lenders nondischargeable in bankruptcy absent undue debtor or debtor's dependents hardship. The bill also amends Section 523(a)(8)(A)(i) to clarify that only loans for which substantially all of the funds were provided by a nonprofit institution remain nondischargeble in bankruptcy.

Deanne Loonin, a staff attorney for the National Consumer Law Center, pointed out that student loan borrowers are a very diverse group of people but they chare one common trait: "they're all trying to better themselves through education" and are all struggling with student loan debt. However, Loonin stated "[B]ankruptcy is not and should not be the entire safety net" for borrowers who cannot repay their student loans."

Loonin said she supports H.R. 5043, not because bankruptcy is the best option, but because it is the only option some have to be able to move on with their lives.

According to John Hupalo, managing director at Ramirez Capital Advisors, a group specializing in student loan finance, whether or not to permit bankruptcy discharge of private student loan debt is a complex issue. Huppalo indicated he understood the intended benefit of repealing non-dischargeability of private student loans, but went on to state he is concerned the bill would be "counter-productive to the country's shared goal of making a college education more accessible to the greatest number of students possible."

Adrian Lapas, a solo practitioner testifying on behalf of the National Association of Consumer Bankruptcy Attorneys, voiced support of H.R. 5403, noting that the legislation will "restore fairness in student lending by treating privately issued student loans in bankruptcy the same as other types of private debt."

Meanwhile, in an April 21 letter to Cohen, more than two dozen organizations representing students, consumers, institutions of higher education and civil rights and public policy organizations expressed their support for the bill. Among the groups signing the letter: The American Council on Education, Consumer Action, Consumer Federation of America, Consumers Union, Demos: A Network for Ideas & Action, Rock the Vote, U.S. Public Information Research Group, UNCF, and the National Association for Equal Opportunity in Higher Education.

CA Bankruptcy Blog I read today

http://letbksaveyou.blogspot.com/

SUPREME COURT RULING GOES AGAINST COLLECTION INDUSTRY

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

Non-Judicial Foreclosure In Florida

HB 1523 http://www.myfloridahouse.gov/Sections/Bills/billsdetail.aspx?BillId=... &
SB 2270 http://www.flsenate.gov/data/session/2010/Senate/bills/billtext/pdf/s...

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)

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.