Tag Archive | debt settlement

Why we don’t often settle with Debt Buyers like Portfolio Recovery and LVNV.

This is the headline in the news today…”Consumer debt collectors Portfolio Recovery Associates LLC and Sherman Financial Group LLC (parent company of LVNV Funding) have agreed to vacate thousands of judgments totaling $16 million, and pay a total of $475,000 in penalties and costs, for making untimely claims against New Yorkers, the attorney general said Thursday.”

Read that again, please. They have agreed to vacate thousands of judgments in New York totaling $16,000,000.00.  Why would they do that?  Because they basically committed fraud in filing those lawsuits. No debt collector or debt buyer may file a lawsuit on a claim where the statute of limitations has expired. To do so would be a violation of the Fair Debt Collection Practices Act (FDCPA).

Portfolio Recovery Associates and Sherman Financial Group (again, LVNV) are both debt buyers that purchase unpaid consumer debts, mostly from credit cards, from the original creditors or other debt-holders at substantial discounts and then try to collect. In these instances, they filed lawsuits on debt that was expired or “beyond the statute of limitations”. This sort of thing happens on a daily basis. When a debt buyer purchases a group of accounts, they are buying the accounts AS IS.  This means that there are no warranties or assertions that the data or documentation contained therein is accurate.  Think about that… these companies have no idea if the amounts are correct, if the debt has already been paid, if the customer names are correct, if the interest and fees that were applied are correct… on and on.  This also means that they often have no idea if/when the statute of limitations has expired.  Do you see where I’m going with this?  How can we recommend to our clients to pay one of these claims?

Why would these debt buyers file these lawsuits if they might be time barred?  Because the problem often isn’t noticed.  We have seen different statistics showing that between 85% and 92% of people who are sued on a collection case do not contact an attorney.  They either get scared and pay the debt, or, put their head in the sand and do nothing, and the debt buyers know this.  Apparently, filing these out of statute claims is part of the business model and its apparently, its a risk worth taking.  If you knew that you were going to win the lottery 85% to 92% off the time that you played, would you play every day???  Of course you would.

The AS IS portion of this article is why we rarely recommend to our clients to settle these claims.  These debt buyers like Portfolio and LVNV and others buy these debts AS IS.  They have no idea if the information/data is accurate.  We, and most other knowledgeable consumer attorneys, win these cases with great frequency.

 

Posted in LVNV, Portfolio Recovery

Settle with Midland Funding?

You’ve just received a letter from Midland Funding (or its subsidiary Midland Credit Management) or worse yet, a deputy delivered a lawsuit to your door.  Your first question is, “Who is Midland Funding?”  Midland Funding is a debt buyer, a very large one.  They buy delinquent credit card accounts for a few pennies on the dollar and then they try to collect from consumers like you.  It often starts with a letter from Midland Credit Management.  The letter alleges that you owe a debt and then states that they would be happy to settle with you.  There is often a “discount” settlement offer included in this letter.  It may go something along the lines of “Pay us 50% right now, that is a tremendous savings for you” or “Pay us 60% in three easy installments”.  Typically, if you do not pay, you will receive a second and/or a third letter.

So the question is, should you settle?  Most times, the answer is NO NO NO.  I find that for the most part, the people who call my office are good people.  They had a credit card that they could not pay, usually due to a divorce, a job loss/income reduction, or a health issue for themselves or a family member.  They want to pay the debt, but they simply could not pay it at that time, or, they still cannot pay it now.  I understand that, and it makes sense.  Please keep reading though and you’ll see why we think that you should not pay them.

Let’s assume that you had a credit card account with JCPenney.  For whatever reason, you default (be it job loss, divorce, health, doesn’t matter).  When you default, JCPenney has a decision to make.  They can sue you, OR, they can sell the debt to a debt buyer like Midland.  In many cases, they sell the debt.  When they sell the debt, they SELL it.  What I mean is, they retain no ownership rights whatsoever in that account.  If you settle a claim with Midland, the original creditor is not going to see an additional dollar.  So, are you really paying your debt if the original creditor isn’t getting any money? We say no, you are not.

To compound the issue, let’s look a little further into what Midland is acquiring.  They are buying allegedly defaulted credit card accounts, in bulk.  These sales can range from 500 accounts up to 25,000 or more.  That’s alot of credit card accounts… and they make these purchases several times per year.  When they buy these accounts, they are bought on an AS IS basis.  Maybe you have heard that term before with a used vehicle… it means that the accounts (and the limited paperwork or information contained therein) are not authenticated to be accurate.  Think about that for a minute… they are buying accounts that may or may not contain  accurate information, amounts, documentation, contracts, or contact information.  Why would you pay on something that might not be accurate.

To make matters worse, often times these accounts are sold several times.  We have seen many scenarios where a person settles a debt, or rather, believes that they did, and then they are sued by another company alleging to own that same debt.  This is a nightmare scenario for the consumer and its one of the main reasons that we generally advise against settling with debt buyers.

If you have been sued by Midland Funding or if you have received a letter from Midland Credit Management, please contact my office for a free consult.

Posted in Midland Funding

Debt Settlement Companies and Lawsuits

In previous posts, I have advised all of you to avoid Debt Settlement Companies like the plague.  In my experience, I have found that they either are outright scams, or, they simply charge way to much for the service that they provide.  Lately, we have found a new issue with a few of these companies and it has really been making me angry.  We are only 11 days in to this month, and I have already received 3 calls from potential clients who allowed a debt settlement companies to prepare or assist in preparing a response to a lawsuit.  In each case, I had to explain to the potential client that the responses that they allowed the debt settlement company to prepare were hurtful to their lawsuit.  All three of these clients likely would have won their lawsuits had they hired us from the start.  Unfortunately, they allowed these companies to prepare the responses, which were improper and/or inadequate, and which put the client in a disadvantaged position.  The sad part is that the responses were prepared by attorneys for the debt settlement company.  (Note: not any old attorney can prepare a response to a credit card lawsuit, and this is especially so when the attorney is not licensed in Pennsylvania). 

In each case, I had to advise the client that their case had been undermined by the inappropriate response of the out of state attorney that was retained by the debt settlement company.  It would now cost more in legal fees to try to correct or minimize the damage that had been done versus if they had hired us from the beginning.  The message here:  DO NOT LET A DEBT SETTLEMENT COMPANY ASSIST YOU IN PREPARING A RESPONSE TO A LAWSUIT.

Posted in Lawsuits, Other

Reduce debt by 70% and other false claims

The advertisements for debt settlement companies are all over the radio and television.   “Information the Credit Card companies don’t want you to know” and  “You are entitled to lower your credit card debt by 70%”.  “We can lower your payments substantially and cut your debt in half”.  “Be debt free in less than a year”. The words fraud and scam come to mind when I hear these phrases.

If you have ever heard the saying that its too good to be true, then it likely is. These ads fit that description exactly. You are not “entitled “ to lower your credit card debt under any law  that I am aware of.  “We can cut your debt in half”, well, only in very extreme and lucky circumstances.  Cutting the debt to 70% is a more reasonable goal (unless you are dealing with a debt buyer and not the original creditor. You can get a better reduction, but you should not pay anything to them) and this sort of reduction only applies where you can pay a lump sum or make substantial monthly payments.  “Be debt free in less than a year”? Only if you file bankruptcy or hit the lottery.

The truth of the matter is that these claims are false, misleading, and in my opinion, fraudulent. These claims are merely a sales pitch to get you to hire a debt settlement company. They know that you are having financial difficulties and will do anything to get out of it. The worst part about these false claims isn’t that they can’t back them up and make them come true. No, the worst part is that they charge you an outrageous fee when you sign on with the company, usually a large percentage of the debt (I have seen upwards of 20%) and an additional monthly fee.  The fee is typically paid up front, before any creditors are paid.

Here’s how the debt settlement companies work. They promise to reduce your debt. You hire them. They arrange for you to make payments to their account. When the account builds up enough money, they contact creditors one by one and try to settle cases. To be blunt, this is a horrible idea.  What do you think is happening while you are paying into the account? The creditors are getting upset and are filing lawsuits against you, all the while, the interest continues to accrue at a rate approaching 30%.

Let’s look at a hypothetical situation. Mike owes $25000 in debt to credit card companies. He hires XYZ debt settlement company to work on his debt problems. They establish an account, he pays $500 per month to the account. Since their fee is 20% (that would be $5000 here), and they get paid first, the first 10 payments are solely to pay the debt settlement company. I have to shoot out a common sense question here, is that money well spent? How much interest accrued during that 10 months? How many lawsuits were filed during that 10 months?  Even though they may tell you otherwise, signing on with a debt settlement company does not stop a creditor from filing a lawsuit. To the contrary, it may expedite the filing of the lawsuit because many creditors do not work with debt settlement companies.

The moral of the story here is to contact a consumer attorney in your area if you are faced with credit card debt. There are a number of issues that need to be reviewed, including who the creditor is, how old the debt is, who is representing the creditor, whether the debt has been sold, on and on. Perhaps negotiation is the way to go. On the other hand, perhaps defending a lawsuit is the way to go. Bankruptcy is always an option to consider. Spend the time to consult with a consumer attorney if you are struggling with credit card debt.  Hire the debt settlement company, and you are simply burning money.

Posted in Other

Another Debt Settlement Scam

Potential Client X sent an email to me today advising that she was in trouble.  She has several credit cards in default, so she hired a debt settlement company to assist her. (This is always a HUGE mistake as all debt settlement companies are either scams or not worth the exhorbitant fees that you pay them). The company is charging her 20% of her outstanding debt and have asked her to make monthly payments of $500 into their account. Because her total debt is about $40000, their fee is going to be $8000!  (I wish that I could charge that much, but my conscience doesn’t allow me to do that).  The best part (maybe the worst part) is that the company gets its money first.  The first 16 monthly payments go to the settlement company before they do any work.  Isn’t that just great!  Of course, all of the credit card companies are going to wait this out until the company gets its fee, right? 

The sad part, if it could get any sadder, is that the company told potential Client X that the credit card companies would not sue her because they were involved now. They mentioned that if a lawsuit did come, that they would take care of it.

Well, the lawsuit from Citibank did arrive. Potential Client X notified the company and they advised her that they would handle it.  They advised her to send an extra $125 per month to make payments to Citibank.  Potential Client X complied, only to find that while the funds did go to Citibank, the debt settlement company did not respond to the lawsuit and a judgment was entered against her for the full amount plus attorney fees. They told her that they thought Citibank would like to have 6 months of payments and then they would review her case, because ” that’s how they have handled things in the past”.

This entire fiasco could have been averted if Potential Client X had contact my office, or the office of another consumer attorney, rather than the debt settlement company.  Moral of the story, all debt settlement companies are a waste of your time and money.

 

Even if they get a reduction of 40%

Posted in Other

Should I use a Debt Settlement Company?

I am amazed at the number of people who choose to hire a debt settlement company.  I realize that you are being bombarded with advertisements that claim that they can help, but the truth is that most of these agencies are scams, or, in a better light, simply not worth the money.

The scams are quite frequent.  I have had a number of clients contact me with the same claim, that they have paid several monthly payments, sometimes up to 18 months worth,  only to find that the settlement company has done nothing or worse, gone out of business. 

Other clients contact me and say that the settlement company did help them.  When I hear that, I always dig further.  Client X called me a few months ago and told me that a debt settlement company got a $20,000 credit card debt reduced to $12,000, which he thought was a great deal.  Then I asked him about payments and he told me that he had made 19 $1000 payments to the company.  I asked him to do the math and I could see his jaw drop through the phone.  He was charged $7000 to obtain a net  $1000 reduction on his claim.  To make matters worse, we found out that they have given him bad advice on a claim that they could not settle.  (That is why he contacted me). 

He received a lawsuit from a collection agency that the debt settlement company could not settle.  The debt settlement company advised him to send a letter to the court explained his financial difficulties.  Fortunately, he contacted me before sending the letter.  Had he sent that letter, he would have lost the  case for sure.  Instead, we filed objections to the lawsuit (for a very, very small fraction of the $7000 that he was charged on the other claim) and had the claim dismissed.

If you are facing a collection agency claim, generally the last place that you want to go is to a debt settlement company.  Call my office at 412-823-8003 or 1-888-536-6644 for a free, no obligation review of your claim.

Posted in Other

Should I Pay a Collection Agency?

The phone rings and its a debt collection agency on the phone.  They are demanding that you pay off your Chase credit account from 4 years ago.  What to do?  Honestly, the answer is often that you should do nothing other than encourage them to sue you. 

In this day and age, there are 2 types of collection agencies.  The first is the agency that is working directly for the original creditor.  This type of agency is, in my opinion, a little more credible than the other type of collection agency.  The other type of collection agency what is called a “junk debt buyer”.  (LVNV, Atlantic Credit, Midland Funding, Asset Acceptance and the like are junk debt buyers).  You should almost never pay this type of agency.  The reason is that they are very easily beaten in court, at least with our office representing you. 

The only time that I consider recommending that a client pay one of these agencies is where the claim amount doesnt warrant the hiring of an attorney.  For instance, if you are being pursued for $700, it may be more cost effective to negotiate with the Collection Agency at that point than to hire an attorney for several hundred dollars on a defense.

Posted in Collection Agencies


Credit Card Lawsuits

If you are faced with a credit card lawsuit, whether its an original creditor or a junk debt buyer, contact my office at 412-823-8003 right away. We offer a free, no obligation review of any credit card based lawsuit that is filed in PA.

FDCPA Attorneys

Many Debt Collectors threaten people, that's a fact. Threats of wage garnishment, jail, fraud charges and contacting employers, friends and relatives happens every day to people just like you. The truth is that most of these threats are illegal. If a debt collector is threatening you, contact our office at 412-823-8003 for a free initial consultation.
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