San Jose Bankruptcy & Fair Debt Collection Practices Act Lawyer Blog

A Fair Debt Collection Practices Act (FDCPA) case against debt collector Bakalar & Associates will to go to a jury, despite the collection agencies attempts to have the federal case thrown out. Rios v. Bakalar, 795 F. Supp. 2d 1368; (S.D. FL 2011). Back in June, Plaintiff Maria Rios filed a lawsuit in Florida against debt collector Bakalar & Associates for alleged violations of the FDCPA after the firm attempted to collect a consumer debt which was discharged in her bankruptcy. Bakalar & Associates argued Rios' case should be thrown out because bankruptcy laws do not allow consumers to file a FDCPA lawsuit when a debt collector tries to collect a debt that was discharged in bankruptcy. The firm also claimed the Ninth Circuit Court of Appeals, which includes California, supported their position in the case of Walls v. Wells Fargo Bank, N.A., 276 F. 3d 502 (9th Cir. 2002).

Rios argued her case should not be dismissed, relying on a case from the Seventh Circuit Court of Appeals which allowed claims for violations of the FDCPA even though the consumer's debt had been discharged in bankruptcy Randolph v. IMBS, Inc., 368 F. 3d 726 (7th Cir. 2004).

In the Walls v. Wells Fargo case the Ninth Circuit Court of Appeals said if the consumer wanted to sue they had to do it in bankruptcy court, under bankruptcy law. However, the Seventh Circuit Court of Appeals, disagreed, reasoning that the consumer could bring the claim in either bankruptcy court or federal court.

The federal court in Florida disagreed, or distinguished the Rios v. Bakalar case from Walls v. Wells Fargo, and refused to throw out the case against Bakalar & Associates, reasoning:

[T]he FDCPA and the Bankruptcy Code do not exist in irreconcilable conflict; in fact, the FDCPA and the Bankruptcy Code have different elements, require different levels of scienter, offer different defenses, and allow different damages where someone attempts to collect on discharged debt....Nor can anyone seriously argue that the Bankruptcy Code covers the whole subject of the FDCPA or vice versa. Bakalar & Associates, moreover, do not argue that Congress clearly intended the Bankruptcy Code as a substitute for the FDCPA. Hence, to the extent that Walls suggests that a discharge injunction under the Bankruptcy Code prevents consumers from bringing any FDCPA claim, I disagree.

Simply put, the Florida court found no conflict existed between the bankruptcy code and the FDCPA, and refused Bakalar & Associates' request to throw out the consumer's lawsuit.

A jury will now have the opportunity to decide whether Bakalar & Associates violated the FDCPA when the firm attempted to collect on a consumer debt which was already discharged during bankruptcy.

Background

Bakalar & Associates is a Florida based collection law firm which attempt to collect consumer debts arising from homeowners association's and other entities. The firm's debt collection efforts are primarily focused on the collection of HOA fees and assessments.

Last month, the a federal court in the Eastern District of Pennsylvania refused to dismiss a Fair Debt Collection Practices Act (FDCPA) complaint against NCO Financial Systems, Inc. In the lawsuit, plaintiff Anne Carr claimed NCO Financial Systems placed repeated and continuous calls to her over a period of roughly 30 days in violation of the FDCPA. Carr specifically identified nine telephone calls by both time and date and alleged she believed other calls were also made to her home telephone. She claims NCO Financial Systems violated the FDCPA's prohibition against abusive and harassing behavior when it placed the automatic telephone calls.

NCO Financial Systems filed a motion to dismiss Carr's complaint and argued nine telephone calls do not, as a matter of law, constitute harassing conduct under the FDCPA. The company also stated the number and frequency of the calls were not sufficient for the court to infer intent to harass or annoy Carr. The Eastern District of Pennsylvania disagreed with NCO Financial Systems, however, and denied the company's motion to dismiss. The court stated Carr was only required to plead her case with enough specificity to demonstrate the volume and frequency of telephone calls made by NCO Financial Services may have resulted from intent to annoy or harass her.

The court also disagreed with NCO Financial Systems' argument that the number and frequency of telephone calls alleged in the complaint failed to meet the definitions of continuously and repeatedly described in the FTC Staff Commentary on the Fair Debt Collection Practices Act. According to the court:

The Commentary defines "continuously" as "making a series of telephone calls, one right after the other," and defines "repeatedly" as "calling with excessive frequency under the circumstances." Id. The Court fails to see how these general definitions would dictate that nine calls does not constitute repeated or continuous telephone calls. Indeed, nine calls in thirty days could possibly constitute excessive frequency under these circumstances.

The federal court also distinguished McVey v. Bay Area Credit Serv., (N.D. Tex. Jul. 26, 2010) from the case at hand by stating the plaintiffs in McVey failed to allege specific facts and instead "merely regurgitated the statute's language in its complaint." In contrast, Carr identified specific telephone call dates and times in her complaint.

Because no controlling case law states the precise number and frequency of telephone calls that would be a violation of the FDCPA, the court refused to dismiss Carr's lawsuit. Simply put, this means a jury gets to decide whether NCO Financial Services engaged in harassing or annoying behavior in violation of the Act when the company called Carr nine times in a 30 day period.

Background

NCO Financial Systems is a collection agency and debt buyer. Creditors use the services of NCO Financial System in order to collect on unpaid debts. The company also purchases unpaid debts from an original creditor and then makes repeated automated telephone calls in an attempt to collect the debt.

California consumers brought a class action lawsuit claims against CashCall, Inc., consumer finance company, alleging CashCall secretly monitored their telephone conversations with CashCall employees without the consumer's knowledge or consent. The consumers alleged violations of California Penal Codes 631 and 632 of the Invasion of Privacy Act. In essence, Cashcall was monitoring telephone calls during their attempts to collect debts.

The California Appellate Court said a lower court judge was wrong in denying two of consumer's claims against Cashcall. So, Cashcall will now be forced to litigate further and defend against those claims.

The Court's Holding

First, the California Appellate Court said that:

"In Flanagan v. Flanagan, (2002) 27 Cal.4th 766 [117 Cal. Rptr. 2d 574, 41 P.3d 575], our Supreme Court held [Penal Code] section 632 protects an individual's right to know who is listening to a telephone conversation. Consistent with this holding, we conclude the statute applies even if the unannounced listener is employed by the same corporate entity as the known participant in the conversation."

Simply, put, the Appellate Court held that for purposes of determining who must give consent, the corporation is not a single unit and all participants to the telephone conversation must give consent before the conversation may be monitored.

Second, the California Appellate Court said:

"triable factual issues exist on whether the alleged telephone conversations were "confidential communication[s]" within the meaning of [Penal Code] section 632 and whether plaintiffs had objectively reasonable expectations that their conversations would not be secretly monitored."

Simply put, that means a jury will get to decide if Cashcall violated California law by secretly monitoring "confidential communications."

Third, the California Appellate Court said:

"we cannot accept CashCall's argument that it provided adequate notice as a matter of law. First, even assuming CashCall's argument is correct that each plaintiff heard [*39] the warning message "at the outset" of his or her "borrower/lender relationship" with CashCall, this fact does not establish as a matter of law plaintiffs were adequately warned that subsequent calls would be monitored...The evidence further raises factual issues as to whether all inbound callers received the message."

Simply put, that means a jury will get to decide if Cashcall provided adequate notice that the telephone calls may be monitored.

The California Appellate Court rejected Cashcall's arguments based on an unpublished Ninth Circuit decision in another Fair Debt Collection Practices Act case. Thomasson v. G.C. Services, 321 Fed. Appx. 557 (9th Cir. 2008).

Background

CashCall is a finance company that provides unsecured loans to consumers. Plaintiffs' complaint alleged that each of the plaintiffs borrowed money from CashCall, and, in making the loans and collecting delinquent payments on those loans, CashCall "secretly" monitored and eavesdropped on telephone conversations between CashCall employees and plaintiffs, including conversations pertaining to "sensitive financial information." Plaintiffs alleged CashCall conducted the "illegal monitoring ... for the purpose of assisting [CashCall] in its collection efforts" without the "knowledge or consent" of plaintiffs or the class members. Plaintiffs further alleged CashCall's "corporate representative has admitted under oath that as a regular part of its ongoing daily business practices, [CashCall] monitors, eavesdrops on, or otherwise makes unauthorized connections to a number of collection calls with alleged debtors."

During the relevant times, consumers applied for loans from CashCall by applying online or by calling one of CashCall's advertised toll-free numbers and speaking to a CashCall representative. All borrowers, including online applicants, must call CashCall and speak to a CashCall representative to complete their loan application. All members of the class are or were CashCall borrowers.

In essence, the consumers allege Cashcall supervisors monitored these telephone calls without informing consumers the calls may be monitored. If Cashcall is found to have violated the law, the lawsuit seeks to have the company pay California consumers $5,000 for each violation. See California Penal Code § 637.2.

An appellate court upheld a judge's ruling, throwing out a lawsuit brought by Arrow Financial Services, LLC against a consumer, since the debt collector could not prove its right and ownership to collect the debt. Arrow Financial Services, LLC v. Wright, 715 S.E.2d 715 (2011).

Arrow Financial Services, LLC is a debt buyer and collection agency that sues to collect debts nationwide, including in California. Arrow Financial is owned by Sallie Mae, a company whose stock is traded on the New York Stock Exchange (ticker symbol SLM). For a link to its website click here.

According to San Jose (Santa Clara County) Court records, Arrow Financial has filed hundreds, or even thousands of lawsuits against San Jose consumers. Arrow Financial has brought these lawsuits in Santa Clara County Superior Court, alleging they were assigned debts by creditors such as:

Bank One
Bank First
Chase
Walmart
Neiman Marcus
First Premiere Bank
GE Money Bank
Washington Mutual

* For a more complete list of creditors who allegedly assigned debts to Arrow click here. (Santa Clara List of Arrow suits):

Arrow Financial Could Not Prove Ownership of or Right to Collect the Debt

In Arrow Financial Services, LLC v. Wright, 715 S.E.2d 715 (2011), the three judge appellate court in Georgia ruled that Arrow Financial Service's business records were insufficient to prove the consumer owed the debt collector a debt.

Arrow Financial Services claimed that it had been assigned the debt by a previous entity. Arrow Financial presented an employee as a witness. She provided a series of statements sent by GE Money Bank and its predecessors as evidence of the debt's origins. The consumer objected and the court then allowed the consumer to examine the witness about her knowledge of the documents before rendering a decision on their admissibility. The witness then testified that she had no personal knowledge of the means by which the documents were created. She also testified that Arrow Financial had not obtained the documents at the time it began its efforts to collect the debt.

Based on this testimony, the trial court sustained the consumer's objection to the documents' admission on the ground that Arrow Financial did not have the personal knowledge necessary to authorize admission of the documents under the business records exception to the hearsay rule. Simply put, the court found that the records were not Arrow's and any Arrow testimony about them were hearsay.

Court Directs a Verdict in Favor of the Consumer

At the close of this testimony, the consumer asked the court for a "directed verdict" (meaning the court can issue a verdict since the matter need not even go to a jury). The court granted the directed verdict in favor of the consumer on the grounds that Arrow Financial had failed to prove either the original contract or a valid chain of assignments from the original creditor to Arrow.

The court went on to order Arrow Financial to pay the consumer for her emotional distress as a result of Arrow Financial's actions that were in violation of the Fair Debt Collection Practices Act.

Arrow Lost Previous Verdicts for Violations of the Fair Debt Collection Practices Act

Arrow Financial is no stranger to Fair Debt Collection Practices Act (FDCPA) violations. Back in 2007 a federal jury in Los Angeles, California, returned a $100,000 verdict against Arrow Financial for its violations of the FDCPA. Laura Nelson v. Arrow Financial Services, LLC, Case# CV06-1568 RGK (PLAx), U.S. District Court, Central District of California, May 9, 2007. For the court's decision denying a motion for a new trial click here. For a link to the press release click here.

Debt collectors LVNV Funding, LLC and Resurgent Capital Services, L.P. have been ordered to cease collecting debts in Maryland. The cease & desist order issued by Maryland's Commissioner of Financial Regulation, Mark Kaufman, also applies to the debt collectors' related entities, including Sherman Financial Group, LLC. The order was signed on October 25, 2011, and was effective immediately. Click here for a link to the press release.

The Maryland State Collection Agency Licensing Board began an investigation in July 2011. The investigation revealed that all of the companies above (and some others) are ultimately owned, controlled and operated by Sherman Financial Group. A number of individuals (Benjamin W. Navarro, Leslie G. Gutierrez, Scott E. Silver, Kevin P. Branigan, and Robert A. Roderick) serve as the directors, managers and officers of subsidiary business entities in varying capacities.

According to the documents that were filed, Resurgent Capital Services, L.P. acts as the master servicer for charged off consumer debt owned by LVNV Funding. Which means that Resurgent attempts to collect debts owned by LVNV.

LVNV and Resurgent Cannot Prove Ownership of the Debts
One of the problems is the Agency found that LVNV cannot prove ownership of the debts it claims to have bought for pennies on the dollar. Yet, the company filed thousands of lawsuits in Maryland and obtained judgment, by filing false affidavits with the Courts.

LVNV and Resurgent Were Collecting Without a License
The filings say that LVNV filed approximately 25,811 lawsuits in Maryland district courts seeking judgments against consumers. Of those LVNV filed 17,160 lawsuits before it was ever licensed to collect debts in Maryland!

LVNV and Resurgent Did Not Have Valid Title to the Debts
Another problem is that in most cases LVNV is that the company did not have valid title to the debts it says it purchased. LVNV only purchased a computer database from a previous creditor or other debt buyer, and the only document it filed with its lawsuit complaints was a one-page printout from a database that had been allegedly created y the original creditor. LVNV did not acquire the original contracts applicable to each consumer, and they did not acquire credit card statements or any other documents about the actual use of the credit cards by the consumers. Simply put, the documents were insufficient to obtain a judgment against the consumers. The filing goes even further to say that the documents allegedly transferring the debts (the Bill of Sale and Assignment) were faulty.

LVNV and Resurgent Deceived the Court
The cease and desist order continued its harsh criticism saying LVNV and Resurgent knowing violated state law by, "knowingly submitting false or misleading affidavits that were intended to deceive the courts and consumer defendants. In another section the Agency wrote, "the various form affidavits submitted by [LVNV and Resurgent] contained artfully crafted language intended to deceive the courts and consumer defendants."

Creditors hiring LVNV Funding and Resurgent should be careful collecting debts in states such as California, where the California Fair Debt Collection Practices Act incorporates much of the federal Fair Debt Collection Practices Act. These laws protect consumers from unlawful collection practices like those above. In California LVNV Funding and Resurgent sometimes hire the Brachfeld Law Group, P.C. to try to collect their debts.

The issue of whether someone who files bankruptcy in San Jose has to go to court keeps coming up, so I thought I would write about it here.

Do I have to go to court?

The Quick Answer
You will need to attend a short hearing about 4-6 weeks after you file.

For directions to the U.S. Bankruptcy Court in San Jose, CA click here.

The Long Answer
About two weeks after you file your bankruptcy petition you should receive a notice in the mail from the court. The notice will tell you that a bankruptcy has been filed, and will also tell you the date it was filed, your case number, and the date, time and location of your hearing.

What will happen at my hearing?

The Quick Answer
At your hearing the bankruptcy trustee, and any creditors who show up, get the chance to ask you questions regarding your petition.

The Long Answer
What will the trustee do?
At your hearing the bankruptcy trustee will ask you, "do you promise to state the whole truth and nothing but the truth." You should respond "I do" (assuming that you will state the truth).
The trustee's job is to review your bankruptcy papers to make sure that you have listed all of your property, and that you have honestly and accurately valued your property. The trustee may even want to ask you while you're under oath whether or not you honestly and accurately valued your property. Sometimes, the trustee will spend more time on a case that involves a lot of property, than a case with little or no property.

Common questions from trustees
Common questions trustees have regarding property are: "How did you decide the value of your house?" "Whether you plan on keeping your cars?" Whether or not anyone owes you any money?" "Whether you expect to get a tax refund?" "Whether you expect to get any inheritance in the next 6 months?" "Whether you are still at the same job?"

Additionally, the trustee will want to make sure that the laws you used to protect your property (known as exemption laws) are being used properly. If you do not use the right exemption laws to protect your property the trustee may have a problem with your bankruptcy. If so, some changes may be necessary. Just because the trustee is asking you questions regarding your property doesn't mean that there is a problem.

For those filing bankruptcy in San Jose, CA the laws are favorable enough that typically you can protect most or all of your property. But you should check with a qualified bankruptcy attorney if you have any questions about any property you are concerned about protecting. Also, the trustee may want to find out if you have given away any property before you filed your bankruptcy, or paid off any creditors while ignoring others. The trustee can review your papers to find that out, or may just simply ask you a few questions about your financial dealings the past year or so.

In San Jose the bankruptcy trustee will also want to make sure you read the Bankruptcy Information Sheet. Don't panic about what's mentioned on the sheet, a qualified bankruptcy attorney can help you better understand it.

Will any creditors be at my hearing?
After the trustee is done asking questions, creditors are given an opportunity to ask you questions. However, most creditors, including major credit cards do not bother showing up at the hearing.

Questions which you won't be asked
Don't be confused by myths you may have heard, or by movies you may have seen. Because the answers are self evident, you are usually not asked why you are filing for bankruptcy or why you can't pay your bills.

I remember seeing in a movie where someone who filed bankruptcy went to their hearing and the court stamped "BANKRUPT" on the person's paperwork. In all of the hearings I have gone to I have never seen that happen. Nor do I believe that it is even legally possible since your bankruptcy case cannot be concluded until 60 days after your hearing. Also, since there is no judge at the hearing, I don't think there is anyone there to declare you bankrupt!
I think it's safe to say that the exciting image of a courtroom that everyone has, based on Hollywood's theatrics, is far more entertaining and intimidating than anything you'll see if you choose to file bankruptcy.

If you have been confused by all the rumors, then I strongly suggest you speak to a qualified bankruptcy attorney who knows first hand what happens at a hearing. DON'T rely on someone who doesn't know. Many professionals will be willing to meet with you at no charge to help you learn more about the process.

Despite the fact that more than 1 million people file bankruptcy in the U.S. each year, there still seems to be a lot of confusion about bankruptcy. So, I took a moment to answer some common bankruptcy questions.

Of course, the information below is not intended to be specific legal advice. when considering bankruptcy you should meet with a qualified bankruptcy attorney. For more information look at www.e-bankruptcy.com, or call San Jose bankruptcy attorney Ronald Wilcox, at 408-296-0400.

What kind of bills can I wipe out in bankruptcy?
Generally, if you go through bankruptcy, your goal is to wipe out your unsecured debts. Your unsecured debts are typically major credit cards, medical bills, or any other money you may owe someone that is not secured.

Can I keep my house and my car?
Many people filing bankruptcy can keep their homes, their cars, and all of their property (we have helped many people in San Jose protect their property).

Can I get rid of taxes in bankruptcy?
You may have heard that you cannot wipe out taxes in bankruptcy. THAT IS NOT ALWAYS TRUE! Under certain conditions you may be able to wipe out taxes in bankruptcy.

How long does it take and who will be told?
Typically, you can expect your case to take three to four months from the day you file your papers (known as the bankruptcy petition) 'till the day your debt is discharged. For the most part, notices will only be sent to those you owe money.

When will those ruthless bill collectors stop calling?
In most cases, the day you file your bankruptcy, a restraining order goes into effect against your creditors. This restraining order is called the automatic stay. Generally, the automatic stay prohibits any attempt by a creditor to try to collect a debt which you had before you filed your bankruptcy.

Do I have to go to court?
You will need to attend a short hearing which, in San Jose, is about 4-6 weeks after you file.

Do I have to talk to a judge?
Your bankruptcy hearing is typically run by a trustee, not a judge. That means you can be more relaxed since things are less formal. In fact most trustees sit at a table with you,
rather than those intimidating court rooms you have seen on T.V.

What will happen at my hearing?
At your hearing the trustee, and any creditors who show up, get the chance to ask you questions regarding your petition. However, these days creditors rarely show up.

When will I know when my debts are discharged
Approximately 60 days after your hearing, the court will mail discharge notices to you, your attorney, and all of your creditors. The discharge notice will say that your dischargeable debts have been discharged.

What if I have used my credit cards just before bankruptcy?
If you intentionally run up your credit cards in the hopes of wiping them out in bankruptcy, you have committed fraud. However, if you made purchases for reasonable living expenses it may not be fraud.

Can I go to jail if I can't pay my bills?
Typically, you won't go to jail because you are unable to pay your bills (although you should talk with an attorney if you owe child support debts).

What affect will bankruptcy have on my credit?
Bankruptcy may appear on a credit report for up to 10 years. But, that doesn't mean you can't obtain new credit during that time.

Can I rebuild my credit after bankruptcy?
Yes. You may have heard about people who have filed bankruptcy two or three times. Maybe they are the best proof that people can actually get credit after bankruptcy. If they weren't able to get credit after their first bankruptcy, they would not have had to file bankruptcy again!

What is a Chapter 13 reorganization?
A chapter 13 is a type of bankruptcy where you reorganize your finances and repay some, or all, of your debts over time.

What Court Will My Case Be Filed In?
For the U.S. Bankruptcy Court near you in California, see the links below:
U.S. Bankruptcy Court Northern District of California
U.S. Bankruptcy Court Eastern District of California
U.S. Bankruptcy Court Central District of California
U.S. Bankruptcy Court Southern District of California

Bankruptcy Fees Increase

The Northern District of California, U.S. Bankruptcy Court (which has courthouses in San Jose, San Francisco and Oakland), has announced that bankruptcy filing fees will increase on November 1, 2011.

• Chapter 7 bankruptcy filing fees will increase from $299 to $306.
• Chapter 13 bankruptcy filing fees will increase from $274 to $281.
• Chapter 11 filing fees will increase from $1,039 to $1,046.

The bankruptcy filing fees are only increasing by $7, but it's an increase nonetheless.

Other fees, such as filing an Adversary Complaint, Motions regarding the Automatic Stay, and others, will also be increasing by differing amounts.

Bankruptcy Filing Fees are Separate From Attorney's Fees

The above fees are paid to the court clerk. They are always in addition to any attorney's fees for representation in a case. Most attorneys will give you a FREE consultation to first see if bankruptcy can help you.

Adjustments for costs of living, etc., are not unusual in the bankruptcy world. On January 1, 2010 the homestead exemptions rose to $75,000 for those who are single, and $100,000 for those who are married (that's the law that lets you protect equity in your home, i.e., if the equity in your home is $100,000 or less, you can protect it and creditors cannot take it away).

Most people filing bankruptcy in San Jose can typically protect all of their property, including their house, since California's exemptions laws are favorable to consumers. There are many different exemptions that help people protect their property when filing bankruptcy. While the federal bankruptcy code provides a list of exemptions, these exemptions are not available in California. California law requires you to use the exemptions found in California state law -- not the U.S. bankruptcy code.

One exemption scheme in California allows a "wild card" exemption. That lets you protect anything you own up to a certain amount (currently more than $23,000). However, whether or not you are trying to protect equity in a house affects your wild card exemption. To put it simply, most people filing bankruptcy in San Jose can protect their house, car, personal property, paycheck and retirement accounts. A qualified bankruptcy attorney can help you figure out what bankruptcy exemptions apply to your particular circumstances.

Note: California's exemption amounts are no longer updated in the statutes themselves. California Code of Civil Procedure section 740.150 deputized the California judicial council to update the exemption amounts every three years. (The last revision was in 2010; the next will be 2013.) The current exemption amounts for personal property can be found on the California Judicial Council Website. http://www.courtinfo.ca.gov/forms/documents/exemptions.pdf

How to Get the Value of Your Home
Zillow.com is a helpful tool that shows home values in your neighborhood. Just click on the link to Zillow.com and enter your street address to get an estimate of the value of your house, and all others in your neighborhood. Zillow.com also shows a listing of the average home value in your zip code. (Note: Does not serve all areas, and valuations are imperfect estimates only.). However, Zillow.com does provide estimates of home values in San Jose, California.

Michael Lewis, author of "Moneyball" and "Liar's Poker," has a lengthy article in the November issue of Vanity Fair magazine about how dire California's public finances are.

Lewis also talks about how the City of San Jose is on the verge of bankruptcy. He goes into detail about how San Jose mayor Chuck Reed and Vallejo Fire Chief, Paige Meyer, are trying to avert catastrophes in their respective cities.

One of the experts interviewed for the article says that people want more services, they just don't want to pay for them. Another perspective is that those providing such services (those working in the prison systems, police officers, fire fighter's, etc.) have been unrealistic in their demands for salary and benefits.

The article goes into great depth about what happened in California, but if you want just a summary, here it is:

• In 2011, California will spend $32 billion on employee pay and benefits. In 2010 California spent $6 billion on prisons and another $4.7 billion on higher education. Over the past 30 years the state's share of the budget for the University of California has fallen from 30% to 11%. In 1976 a Cal student paid $776 a year in tuition, and in 2011 now pays $13,218.

• The head parole psychiatrist for the California prison system was the state's highest paid public employee; being paid $838,706 in 2010.

• Lewis claims San Jose is nearly bankrupt, despite its AAA bond rating from Moody's. He fears the $245 million San Jose has to pay out in pensions and health-care for retired city workers "are more than half" the yearly budget and eventually, they consume the entire budget.

• San Jose's budget turns on the pay of its public-safety workers: the police and fire fighters now make up 75% of discretionary spending. Lewis writes that over the past decade the City of San Jose repeatedly caved to the demands of its public-safety unions. As result of higher pay and benefits, San Jose has now been forced to lay off thousands of city workers, closed libraries three days a week, and cancel plans to open a new community center.

• In Vallejo 80% of the city's budget was wrapped up in the pay and benefits of public-safety workers. Since Vallejo's bankruptcy the police and fire departments have been cut in half.

• From 2006-2010 Vallejo saw its real-estate values fall 66 percent. Vallejo then declared bankruptcy in 2008.

• Vallejo has a population of 112,000, and the Fire Department receive13,000 fire calls per year. That's 8.7 fire calls per person. Or 37 fire calls each day. There are 67 firefighters in Vallejo's fire department. So thats 194 calls per firefighter. Fortunately, they aren't all fires.

• In Vallejo all the traffic lights are set to blink; there are no more cops to police the streets.

The bottom line was a housing-price collapse in California lead to a decline in property tax revenues. Lewis offers an explanation of how this all snowballed:

"From 2002 to 2008, the states had piled up debts right alongside their citizens': their level of indebtedness, as a group, had almost doubled, and state spending had grown by two- thirds. In that time they had also systematically underfunded their pension plans and other future liabilities by a total of nearly $1.5 trillion. In response, perhaps, the pension money that they had set aside was invested in ever riskier assets. In 1980 only 23 percent of state pension money had been invested in the stock market; by 2008 the number had risen to 60 percent. To top it off, these pension funds were pretty much all assuming they could earn 8 percent on the money they had to invest, at a time when the Federal Reserve was promising to keep interest rates at zero. Toss in underfunded health-care plans, a reduction in federal dollars available to the states, and the depression in tax revenues caused by a soft economy, and you were looking at multi-trillion-dollar holes that could be dealt with in only one of two ways: massive cutbacks in public services or a default--or both."

The observations are interesting, but there are some oversights. In 2011, the "average Californian" made $48,000 a year, but is carrying $78,000 in debt; that's a negative of a whopping $30,000! Lewis attributes this to people living beyond their means. Lewis relied on data from the Federal Reserve, but he failed to mention that much of that debt is mortgage debt, which until the recent financial crisis was considered "good debt", since homes are considered an appreciating asset. Also, owning a home in California is a lot more expensive than in the rest of the U.S. Whether or not San Jose if forced to follow Vallejo into bankruptcy, there are a lot of lessons to be learned from the last boom and bust!

Opal V. Bate filed a debt collection harassment lawsuit against Wells Fargo. His lawsuit alleged that Wells Fargo violated debt collection laws by:

• continuing to communicate with him despite that fact the bank knew he was being represented by legal counsel,
• making collection phone calls to him before 8.a.m. and after 9 p.m., and
• by repeatedly contacting him in a harassing manner

A federal judge refused to dismiss the lawsuit against Wells Fargo. Bate v. Wells Fargo, 2011 Bankr. LEXIS 2293 (M.D. FL 2011).

Wells Fargo argued that Florida collection laws were trumped by federal law; the National Banking Act, to be more specific. The judge ruled that the National Banking Act did not trump, or pre-empt, the State of Florida's collection laws.

The Federal Court Judge explained the history of debt collection laws in the United States, stating:

"Following World War II there was an explosion of consumer credit in the United States. With an increase in debts, consumers were faced with the problem of how to pay their debts, and creditors were faced with the problem of how to collect their money. This led to a corresponding problem of an increase in third-party debt collectors representing numerous types of creditors: "hospitals, general retailers, credit unions, colleges, department stores, utilities, banks, commercial or wholesale accounts, medical
clinics, and newspapers." The techniques used by creditors and third-party debt collectors
ranged from friendly coercion to blatant harassment"...Debtors who were abused by outrageous debt collection practices were left to common-law tort remedies."

However, the common law tort remedies most states had were often not adequate to address such a unique problem. Thus, the federal court said, "Due to the increase in debt collection abuses and the inadequacy of the common-law tort remedies, in the late 60's and early 70's, the states recognized the need for consumer protection legislation in the area of debt collection. Most states enacted consumer protection laws aimed at debt collection practices. In Florida the FCCPA was enacted in 1972 to address these very concerns."

But, even the collections laws enacted by the states were not always effective, especially when collectors made contact with consumers over state lines. So, the U.S. Congress also saw the need to pass a federal law that regulated debt collectors. In 1978 Congress passed the Fair Debt Collection Practices Act ("FDCPA") in 1978."

While the federal Fair Debt Collection Practices Act regulated collection agencies, and not original creditors like Wells Fargo, several states, like Florida, California, Texas, Illiniois, Massachusetts and West Virginia, have state laws very similar to the federal FDCPA. Thus, creditors collecting in those states must abide by collection laws or risk being sued if they abuse, harass or deceive a consumer.

Certain states, like California have state laws that regulate creditors and debt collectors, and incorporate the federal law above. See California Civil Code 1788 et seq., California Civil Code 1788.17, Alkan v. Citimortgage, 336 F. Supp. 2d 1061 (N.D. Cal. 2004), and Gonzales v. Arrow, (9th Cir., September 23, 2011).

Thus, creditors, like Wells Fargo, attempting to collect debts here in California must abide by these laws (the California Fair Debt Collection Practices Act) and cease communicating with consumers once they know the consumers are represented by a lawyer. These laws also say a creditor cannot make repeated and continuous calls in an attempt to collect a debt, or call a consumer at a time known to be inconvenient.

Numerous Consumers Have Alleged They Were Abused or Mislead by Wells Fargo

This is not the first time Wells Fargo has been sued for unlawful collection practices. Wells Fargo has been sued multiple times for unlawful collection practices: For a list of some of the California cases see below:

• Marseglia v. Wells Fargo, Case #7-2010-00051655-CU-PO-NC, April 12, 2010 (San Diego Superior Court, California),
• Vanags v. Wells Fargo, May 7, 2009 (San Diego Superior Court, California),
• Ibarra v. Wells Fargo, Case #08-cv-01966-WQH-RBB, October 24, 2008 (S.D. Cal), Serrano v. v. Wells Fargo Auto Finance, Case # 09-00118008, January 12, 2009 (Orange County Superior Court, California),
• Sokolik v. Wells Fargo, Case #63710, June 11, 2010 (Tehama Superior Court, California),
• Rathbun v. Wells Fargo, Case #CLJ 494554, April 29, 2010, (San Mateo Superior Court, California),
• Adams v. Wells Fargo, 08-CECL-08302, August 4, 2008 (Fresno Superior Court, California),
• Baker v. Wells Fargo, Case# 37-2010- 00066030, February 10, 2011 (San Diego Superior Court, California),
• Ballard v. Wells Fargo, Case #149451, February 8, 2010 (Butte County Superior Court, California),
• Barnett v. Wells Fargo, Case# 166285, May 28, 2009 (Shasta County Superior Court, California),
• Cole v. Wells Fargo, August 5, 2010 (San Francisco Superior Court, California),
• Devlin v. Wells Fargo Bank, (Contra Costa County Superior Court, California),
• Gil v. Wells Fargo, Case# L10-01074, February 2, 2010 (Los Angeles Superior Court, Califonria),
• Gwaltney v. Wells Fargo, 09-cv-6272, September 14, 2009 (Amador Superior Court, California),
• Mage v. Wells Fargo, Case# 09-00860, February 26, 2009 (Los Angeles County Superior Court, California),
• Masterton v. Wells Fargo Auto, Case# BC 422200, September 29, 2009 (Los Angeles Superior Court, California),
• Meeks v. Wells Fargo, 09K-11048, June 3, 2009 (Los Angeles Superior Court, California),
• Rathbun v. Wells Fargo, CLJ 494554, April 29, 2010 (San Mateo Superior Court, California),
• Babida v. Wells Fargo, 110-cv-184728 (Santa Clara Superior Court, California).

A recent study found that bankruptcy filings are up among college graduates and those earning $60,000 a year or more. Also, it seems bankruptcy filings are also up for married people.

The study shows that the economic recession has caused financial stress which is spreading to those who may have more of an education, who earn more money, and even dual income families. The study, done by the Institute for Financial Literacy (a nonprofit organization that promotes effective financial education and counseling), collected responses from 50,000 individuals that filed bankruptcy in the past five years. Each of these people sought credit counseling (which is now required under the new bankruptcy law- typically bankruptcy attorneys help their clients obtain this).

The study found that those holding a bachelor's degree accounted for 13.58% of filings last year. That number is up from 11.2% in 2006- a significant 21% increase. Those holding high school degrees still accounted for the largest percentage of filers, being 36.27%, but their proportion as to all people filing bankruptcy fell by 8.6%. Those most at risk for a bankruptcy filing were individuals who attended college but did not complete a degree, the study said. They accounted for 28.7% of filings last year. This may be because these individuals are saddled with student loans, but don't have the rewards of an actual college degree.

Those earning $60,000 or more accounted for 9.2% of all filings last years, that is up from 5.5% in 2006, which is a 67% increase! Those earning less than $20,000 per year accounted for nearly 40% of all bankruptcy filings.

The study found that the number of bankruptcy filers who were married jumped above 60% in the past five years, from 57.2% in 2006. That out paces the 50.3% of U.S. adults that are married, according to the U.S. Census Bureau.

In California bankruptcy filings increased by 25% from 2009 to 2010. In San Jose bankruptcy filings increased 16%, with more than 13,000 people and businesses seeking bankruptcy protection.

Specifically there were 13,366 new cases filed in San Jose, 7,844 of which were Chapter 7 filings, and 5,376 people filing chapter 13 bankruptcy (a reorganization plan that allows people to repay part of their debt over time). The rest of the cases were Chapter 11 bankruptcies (usually for companies) and Chapter 12 bankruptcies (for family famers).

Ironically it looks like the passage of the new bankruptcy law (the 2005 Bankruptcy Abuse Prevention and Consumer Protection Act) did not stop the increase in people needing to file bankruptcy.

Looking back at statistics and a comparison of bankruptcy filings under Chapter 7, Chapter 13 and Chapter 11 for the United States Bankruptcy Court Northern District of California (which includes San Jose, San Francisco and Oakland), shows bankruptcies rose sharply from 2007-2008.

In 2007 there were a total of 127,359 bankruptcy cases filed in the Northern District of California. The number of bankruptcies then rose each month and each quarter. In the 2nd quarter of 2007 there was a 16% increase in bankruptcy filings, the 3rd quarter of 2007 increased 7% more and then the 4th quarter of 2007 increased another 14%, for a total of 21,758 filings for the last three months of 2007. Then in 2008 there was an even larger increase in bankruptcy cases filed. The 1st Quarter increased 18% from the last quarter of 2007, the 2nd quarter of 2008 increased 26%, the 3rd quarter of 2008 increased 14% and the 4th quarter increased by 3% for a total of 38,011 filings for the last three months of 2008.

As the statistics show, bankruptcy filings increased by approximately 70% from 2007 to 2008. The number of home foreclosures and adjusting mortgages contributed significantly to the increase in bankruptcy cases, as did layoffs and the "Great Recession."

It has been widely publicized that Citibank debt collectors caused the death of a man in Indonesia. The man killed, Irzen Octa, who had racked up a $5,700 debt on his platinum credit card to Citibank, was found dead on the bank's premises after being interrogated by third party debt collectors hired by Citibank to deal with long overdue debts.

Octa's widow said she first discovered that her husband had money problems when five men showed up uninvited at their Tangerang home one night in October and said they had come to get money. Unable to collect, they slept on a terrace outside the front door.

In the following months, debt collectors kept calling him. At the same time his debts kept rising because of hefty interest. In the end, his debt to Citibank was more than $11,000, including finance charges, but the bank said it was willing to settle for much less. He owed others money, too, and told his family members that they might have to sell their house.

Apparently, Octa left home at 6 a.m. to drop his daughter off at school and then headed over to Citibank to settle the debt. He told his wife, "Wish me luck." In the afternoon, a friend of Octa's went looking for him at Citibank and found him sprawled out on the floor with his nose bleeding and bruises on his head and abdomen.

There are conflicting reports on the circumstances of his death, as multiple autopsy reports have shown different results. The Washington Post has reported Citibank claims its "conducted its own private investigation and found no signs of physical violence."

Despite this uncertainty, the nation's government banned Citibank from adding any new credit card clients for two years, and banning Citibank from adding any new customers to its premium wealth service for one year. Due to the torture, false imprisonment and abusive collection tactics in relation to Mr. Irzen's death, 5 people, including 2 Citigroup employees have been charged. Apparently, someone posted a Youtube video showing the debt collectors being arrested!

Additionally, Citibank will not be allowed to use external debt collectors for three years in Indonesia. Apparently, the problem stems from collection agents that were outsourced as opposed to in-house. This is a huge setback for Citibank in what is Southeast Asia's biggest economy. Thus, Citi said last week it is hiring 1,400 debt collection staff in Indonesia, who were previously outsourced.

The nation's central bank is taking these measures as an effort to protect customers and the credibility of the banking industry, and went as far as telling Citibank to suspend executives involved. It has also said that if any crimes are found it will revoke Citibank's operating license.

Citi has said it is cooperating fully with police to determine if the collection agency staff had followed its code of conduct on debt collection and that it did not believe physical harm was done to the client.

Citibank, having been a big loser in the collapse of the U.S. housing market, has pushed hard since the 2008 financial meltdown to boost profits overseas, particularly in booming Asia.

California Law Prohibits Debt Collectors From Harassing Consumers

Certain states, like California have state laws that regulate creditors and debt collectors, and incorporate the federal law above. See California Civil Code 1788 et seq., California Civil Code 1788.17, Alkan v. Citimortgage, 336 F. Supp. 2d 1061 (N.D. Cal. 2004), and Gonzales v. Arrow (9th Cir., September, 2011).

Thus, creditors, like Citibank, attempting to collect debts here in California must abide by these laws (the California Fair Debt Collection Practices Act) and cease communicating with consumers once they know the consumers are represented by a lawyer.

Capital One is being sued again for failing to cease and desist making telephone calls. Yet another consumer claims that Capital One continued to place telephone calls to the consumer even after the bank was informed the consumer was being represented by legal counsel.

In Hamilton v. Capital One Auto Finance, Inc., 11-cv-00584 (W.D. WV 2011), a consumer alleged Capital One has continued to place telephone calls despite knowing she was represented by a lawyer.

This is just yet another lawsuit against Capital One for what appears to be a business plan and practice of unlawfully attempting to collect debts by calling consumers directly, despite the fact the bank knew the consumer as represented by an attorney.

Under certain state's laws a creditor or debt collector cannot communicate with a consumer when it knows the consumer is being represented by a lawyer. Capital One has been sued for this very same thing several times in the last two years:

• McNamara v. Capital One Bank (USA), N.A., Case# 10-cv-00353-H (S.D. Cal. 2010)(unlawfully contacting someone represented a lawyer, engaging in conduct the natural consequence is to harass and abuse, making more than 150 calls, and multiple calls per day)


• Bowling v. Capital One Bank (USA), N.A., Case # 10-cv-01294 (W.D. WV 2010)(unlawfully contacting someone represented a lawyer, engaging in conduct the natural consequence is to harass and abuse, making repeated and continuous calls in an attempt to collect a debt- 106 calls in less than 1 month)


• Blankenship v. Capital One Bank (U.S.A.), N.A., Case # 10-cv-01153 (D. WY 2010)(unlawfully contacting someone represented by a lawyer)


• Hamilton v. Capital One Auto Finance, Inc., Case # 11-cv-00584 (W.D. WV 2011)(unlawfully contacting someone represented by a lawyer)


• Rakes v. Capital One Bank (U.S.A.), N.A., Case# 10-cv-01367 (W.D. WV 2010)(unlawfully contacting someone represented by a lawyer)


• Vest v. Capital One Bank (U.S.A.), N.A., Case # 10-cv-01095 (W.D. WV 2010)(unlawfully contacting someone represented by a lawyer)


• Wiseman v. Capital One Bank (U.S.A.) N.A., Case # 10-cv-01131 (W.D. WV 2010)(unlawfully contacting someone represented by a lawyer)

The federal Fair Debt Collection Practice act strictly regulates how debt collectors can collect debts. In part the FDCPA says:

Communication in connection with debt collection [15 U.S.C. 1692c]

(a) COMMUNICATION WITH THE CONSUMER GENERALLY. Without the prior consent of the consumer given directly to the debt collector or the express permission of a court of competent jurisdiction, a debt collector may not communicate with a consumer in connection with the collection of any debt -

(1) at any unusual time or place or a time or place known or which should be known to be inconvenient to the consumer. In the absence of knowledge of circumstances to the contrary, a debt collector shall assume that the convenient time for communicating with a consumer is after 8 o'clock antimeridian and before 9 o'clock postmeridian, local time at the consumer's location;

(2) if the debt collector knows the consumer is represented by an attorney with respect to such debt and has knowledge of, or can readily ascertain, such attorney's name and address, unless the attorney fails to respond
within a reasonable period of time to a communication from the debt collector or unless the attorney consents to direct communication with the consumer; or

(3) at the consumer's place of employment if the debt collector knows or has reason to know that the consumer's employer prohibits the consumer from receiving such communication.

Certain states, like California have state laws that regulate creditors and debt collectors, and incorporate the federal law above. See California Civil Code 1788 et seq., California Civil Code 1788.17, Alkan v. Citimortgage, 336 F. Supp. 2d 1061 (N.D. Cal. 2004), and Gonzales v. Arrow (9th Cir., September 23, 2011).

Thus, creditors, like Capital One, attempting to collect debts here in California must abide by these laws (the California Fair Debt Collection Practices Act) and cease communicating with consumers once they know the consumers are represented by a lawyer.

A San Jose, CA federal judge will allow a California identity theft victim to proceed with his lawsuit against the Bank of America. Guillen v. Bank of America, et al., (N.D. Cal. August 31, 2011). The Bank of America asked the federal court to throw out several claims of a Santa Cruz man who was the victim of identity theft.

Narcizo Zavala Guillen alleged that someone stole his identity and used his personal information to obtain two mortgage loans from Bank of America. Mr. Guillen was surprised when he received a letter from Bank of America stating the available credit limit on his credit card had been reduced to $1,000.00. In response to the letter, Mr. Guillen went to a Bank of America branch on or about January 21, 2009. There he learned that two mortgage loans had been taken out in his name. Mr. Guillen also filed an identity theft report with the Watsonville Police Department identifying the loans as fraudulent. Mr. Guillen also disputed the debt with all four major credit bureaus (Experian, Equifax, Transunion, and CREDCO).

In response, Bank of America sent Mr. Guillen a letter on June 29, 2009, wherein it acknowledged that he was indeed a victim of identity theft as to delinquent mortgages and indicated it had requested removal of the loans from Plaintiff's credit report.

Despite this acknowledgment, however, Bank of America continued to report the inaccurate information, and ultimately referred one of the delinquent mortgages to debt collector SRA to attempt to collect $145,816.20. Bank of America eventually commenced a foreclosure proceeding against the home securing the mortgages, and thereby caused the Santa Cruz County Recorder's Office to publish defamatory statements concerning Plaintiff in the foreclosure documents.

The federal court rejected the Bank of America's argument that Mr. Guillen could not bring a suit under the California identity theft statute because the bank earlier admitted he did not owe the debt. The judge noted that the Bank of America continued to try to collect from Mr. Guillen, and foreclosed on the home, even after they admitted he was a victim of identity theft. Relying on another Northern District of California decision, the court also held that federal law did not block the California Identity theft claims. California Civil Code §1798.92 et seq. Pasternak v. Transunion, 2008 U.S. Dist. LEXIS 115442, at *10-11 (N.D. Cal. 2008).

Similarly the federal court also held that federal law did not block Mr. Guillen's claims under the California Fair Debt Collection Practices Act (California Civil Code §1788 et seq.)

The federal judge also allowed Mr. Guillen to proceed with his claims under California's Credit Reporting Agency Act (California Civil Code §1785.25), alleging Bank of America reported false information to the credit bureaus.

The decision was also significant in that Mr. Guillen was able to avoid filing bankruptcy to try to stop the Bank of America from attempting to collect the alleged $145,816.20 due. So, those in California can use California's identity theft law, and related laws, to protect them when creditors and debt collectors are trying to collect money that is not actually owed.

On July 29, 2011, a federal jury in Santa Fe, New Mexico, reached a verdict of $1.26 million against a debt collection law firm for pursuing a woman for a debt she did not owe.

The debt collection law firm of Farrell & Seldin spent three years chasing Lucinda Yazzie. Ms. Yazzie had the identical name of another Navajo woman. Despite protests that they had the wrong person, the collection law firm persisted and ignored numerous opportunities to correct the situation and pursued the wrong Ms. Yazie mercilessly. The debt collection law firm made two attempted wage garnishments, and placed a lien on the wrong Ms. Yazzie's her property (which wasn't released even after the jury returned its verdict!)

The verdict was $161,000 in actuals damages (or emotional distress) under the Fair Debt Collection Practices Act (FDCPA), New Mexicos' Unfair Deceptive Acts and Practices statute, and common law. The jury found that it was appropriate to levy punitive damages against the collection law firm in the amount of $1.1 million for its unlawful debt collection.

The consumer, and her employer, made repeated attempts to tell the debt collection law firm it was attempting to collect the debt from the wrong person. The debt collection law firm withdrew its first attempt to garnish Ms. Yazzie's wages, but then inexplicably made a later attempt to garnish her wages. It seems the debt collection law firm did not stop its wrongful pursuit of Ms. Yazzie until she hired an attorney to sue the debt collection law firm.

Ms. Yazzie's attorneys argued that the debt collection law firm took a factory approach to litigation, employing abbreviated procedures for filing lawsuits, citing other court cases condemning the practice of suing on scant, often unverified information. McCollough v. Johnson, Rodenberg & Lauinger, 645 F.Supp.2d 917 (D. Mont. 2009).

Ms. Yazzie also pointed the Court to two other recent jury verdicts against debt collectors for pursuing someone for a debt they did not owe. Fausto v. Credigy, where a San Jose, California jury reached a verdict of $500,000 against the debt collector, and McCollogh v. Johnson Rodenberg & Lauinger, where the jury reached a $311,000 verdict.

Ms. Yazzie's attorneys also argued that the Court should reject the debt collection law firm's position- that the FDCPA should not protect people who do not owe the debt- citing to other courts that have found the FDCPA also protects consumer that are being harassed for debts they do not owe; indeed one federal judge held:

Indeed, to read the FDCPA in this manner would allow unscrupulous debt collectors, and particularly buyers of junk debt who cannot verify the accuracy of the debts or the identities of the debtors, to simply file debt collection actions with impunity against all persons having a similar name as the debtor, on the chance that one of the named defendants is the true debtor, or that one of the named defendants will simply pay the debt allegedly owed under the threat of having a judgment obtained against them, with a resulting levy against their property.

In reaching the $1.2 million verdict it is obvious the jury disagreed with the debt collection law firm's tactics.