San Jose Bankruptcy & Fair Debt Collection Practices Act Lawyer Blog

Twenty Percent Of Consumers Have Errors On At Least One Of Their Three Credit Reports

We all know that our credit score affects our ability to obtain credit as well as influence how much interest we will pay for the credit we receive. But, did you know that your credit score also affects your ability to obtain insurance, the amount you will pay for insurance and whether or not you can get a cell phone? Unfortunately, the heavily relied upon information on credit reports is frequently wrong. A recent congressionally mandated study conducted by the Federal Trade Commission (hereinafter FTC) found that twenty percent of consumers had errors on at least one of their three credit reports. Obviously, those of us in California (especially in San Jose or the San Francisco Bay Area) should be worried about paying higher interest rates on mortgage loans for real estate that commands higher prices than just about anywhere else in the U.S.

The Fair Credit Reporting Act Helped Some Consumers Correct The Mistakes

The FTC is responsible for assisting consumers prevent fraudulent, deceptive and unfair business practices. Additionally, they provide information to consumers about how to recognize errors on their credit report and how to have the errors corrected. The FTC provided the study participants with an associate to help them spot the problems on their credit reports. Then the FTC encouraged consumers to use the Fair Credit Reporting Act ("FCRA") to resolve any potential credit report errors. Four out of five study participants who filed disputes saw some type of modification to their credit report and approximately ten percent of the study participants saw a change in their credit score after the credit reporting agencies ("CRA") corrected the errors on their credit report.

What To Do If Contacting The Credit Reporting Agencies Yourself Does Not Work

While some of the study participants' credit report errors were fixed, what happened to the other participants who did not see any resolution? Once a dispute is raised with the CRA, they are required to contact the creditor to confirm the accuracy of the reported debt. If the creditor informs the CRA that the debt is being reported accurately, the CRA may not change the credit report. If this happens to you, contact an attorney to discuss your rights and your legal options. One of your options may be to file a lawsuit against the creditor or collector who is reporting the debt incorrectly under the FCRA or Fair Debt Collection Practices Act ("FDCPA"). The FDCPA was enacted by congress to protect consumers against both abusive and mistaken collection activity. Furthermore, California's Rosenthal Fair Debt Collection Practices Act, and the California Consumer Credit Reporting Act, may assist consumers in California against illegal and deceptive collection activity, and incorrect credit reporting.

You Have Rights, Use Them

The FTC study clearly shows that we all must assume a bigger role in monitoring our credit report. The FTC suggests you obtain a copy of your credit report regularly. Once a year, you can obtain a free copy of your credit report from www.annualcreditreport.com. If you find errors on your credit report be proactive and ask that the errors be corrected. If the CRA does not fix the errors, seek the advice of a consumer right's attorney.

Hundreds of Thousands of Americans Are Receiving Harassing Phone Calls To Pay Debts They Don't Owe

Debt collectors from overseas call centers have been placing millions of abusive calls to people. The astonishing fact about these collection calls is that the loans had already been paid in full or were never owed in the first place.

Debt Collectors Targeting People Who Have Applied For Online Payday Loans

Online payday loans have become popular with people needing quick cash. It's bad enough that these loans carry an exorbitant interest rate; now overseas call centers are trying to collect money that was already repaid. The collectors call your home, cell and work number, sometimes dozens of times a day. They threaten to send someone to your home or work to personally collect the money. Collectors will even threaten legal action, including arrest. Unfortunately, their illegal tactics work. An ABC News investigation in 2012 found that call centers in India were successful in scaring people into paying more than $5,000,000.00 to them for debts they did not owe.

A Frightening Story of Abusive Collection Activity Shared by New Orleans Woman

Cindy Gervais obtained an online loan when her husband's car was damaged in an automobile accident. Ms. Gervais subsequently paid off the loan. Even though the loan was paid, she began receiving threatening collection calls. She was told that if she didn't pay, she would be arrested. They called her home, cell and place of business. They threatened to come to her job and take her to jail. She was so afraid that she paid them.

California Debt Collector Charged for Fraudulent Debt Collection

In August of 2012, United States Attorney Benjamin B. Wagner stated that Kirit Patel, a resident of Tracy, California, set up an American shell company called "Broadway Global Master". A call center in India would pressure people into paying nonexistent debts and then Mr. Patel's company would process their credit card payments. Mr. Patel's Sacramento based attorney, Mark Ellis, claims that Mr. Patel had no idea what the call centers in India were doing.

There Are More Abusive Debt Collectors That Have Yet To Be Caught

In the past few months, California consumers have been reporting collection calls eerily similar to Cindy Cervais' story. In mid January 2013, one woman said a collection company was trying to collect for a payday loan she had in 2008. She did not believe she ever had such a loan. Another, in January 2013, claimed a collection company called him over 100 times in the past year trying to collect for a supposed bad check he wrote in 2007 to a company called Allied Cash Advance. This man denied ever writing a check to this company. He called his bank and his bank confirmed that there was never a returned check from Allied Cash Advance. In late January a woman reported that a collection agency based in California who claimed they were collecting for HSBC. This woman claimed she has never owned HSBC and asked the collection company for proof of the debt. They responded to her request by hanging up on her. When she tried to call them back, at the same number they used to call her, the telephone just rang and rang and no voice mail would pick up.

Pursuant to the FDCPA Debt Collectors Have Very Specific Rules They Must Follow

The Fair Debt Collection Practices Act (FDCPA) and the Rosenthal Fair Debt Collection Practices Act have established rules that debt collectors and creditors must follow then attempting to collect a debt. If those rules have not been followed, your rights may have been violated. If you are receiving collection calls on debts that you believe have been paid, or for debts you do not owe, you have rights. Our San Jose, California law office can help. Call us at 408-296-0400.

Older Americans Are Incurring More Debt Than Ever Before

According to the Federal Reserve, Americans between the ages of 65 and 74 are saving less and borrowing more. The debt owed by these borrowers includes mortgages. Unfortunately, one of the by-products of mortgages owed by older borrowers is Widows losing their homes.

The Time in Life When A Family Home Is Paid In Full Is Changing

Remember watching old television programs when mom and dad threw a party to burn their deed when the mortgage was paid? The programs usually showed married couples where dad was still working and mom stayed home to take care of the kids. Times have changed; more and more retired individuals still make monthly mortgage payments.

In California, The Average Home Price More Than Doubled From 2000 To 2006

In California, the jump in property value coupled with the ease of refinancing with sub-prime lenders led numerous people to borrow on the equity they built in their home. For older borrowers, this money was often used to pay medical bills and to supplement their retirement income. The housing crash hit the Bay Area hard and the inflated home values quickly disappeared.

In 2011 6 Percent Of Loans Held By People Over 50 Were Delinquent

A study by AARP in July 2012 showed that loan payment delinquencies for people over the age of 50 were up from 1 percent in 2007 to 6 percent in 2011. Housing lawyers have confirmed that this accurately reflects the rising foreclosures on seniors' homes.

A Poor Housing Market Combined With Higher Mortgage Debt Is Causing More Widows To Enter Foreclosure

A growing sub-group of mortgage debtors are widows, some who are facing the complex arena of mortgage loans for the first time. If a widow falls behind on payments, one of the options available to a number of borrowers may not be available to them; loan modification. A loan modification allows borrowers to lower their monthly mortgage payments, bring their account current and sometimes lower the debt amount. However, many widow's names are not on the mortgage note. If their name is not on the mortgage, lenders will not work with them to modify the loan and in order to add their name to the mortgage note, they must be current on the loan payments. Put another way, by the time they need a loan modification, it is not available to them.

Bankruptcy Will Not Protect Your Home If Your Name Is Not On The Mortgage

A number of people who are unsuccessful modifying their mortgage file a Chapter 13 Bankruptcy. A Chapter 13 Bankruptcy will allow a borrower to keep their home and repay their mortgage delinquency over a 3 to 5 year period. Unfortunately, if a widow's name is not on the mortgage, they can't protect the home in bankruptcy as only debts owed by the individual filing bankruptcy can be restructured in bankruptcy. Therefore, the widow's options are limited to foreclosure or sale. However, if their property value dropped or they previously borrowed against the equity, they may owe more on their home than it's worth. Thus, their ability to sell their residence and pay off the mortgage is gone.

Loan Modification Can Be A Frustrating Process

At best, a successful loan modification takes time and patience. The added stress of a lost loved one as well as the additional procedures placed on a widow trying to modify their loan can make the process overwhelming. Consumer advocates are working with mortgage servicing companies in an attempt to make the process easier. Additionally, a $26 billion dollar settlement reached in February 2012 with the five largest mortgage servicers will hopefully encourage the mortgage industry to correct the defects in their procedures.

If you need help considering bankruptcy options, or are dealing with over aggressive creditors, call us at 408-296-0400.

Court Rules That Bankruptcy Discharge Does Not Prevent Consumer's Ability To File FDCPA Lawsuit

Magistrate Judge Dennis J. Hubel found that a lawsuit filed by Kevin Walch against Columbia Collection Service, Inc. ("Columbia") for violations of the federal Fair Debt Collection Practices Act (FDCPA) should be referred to the Bankruptcy Court only for resolution of the claims that fall within the jurisdiction of the Bankruptcy Court and that the Bankruptcy Court should then refer the remaining claims back to the District Court for resolution. Kevin Walch v. Columbia Collection Service, Inc., 2012 U.S. Dist. LEXIS 132281.

Kevin Walch Received A Bankruptcy Discharge

On July 21, 2010, Kevin Walch filed a petition under Chapter 7 of the Bankruptcy Code. His bankruptcy schedules included both Silverton Hospital and Columbia (the collection agency that was attempting to collect the debt owed to Silverton Hospital). Mr. Walch received a discharge in his bankruptcy on October 25, 2010.

Despite The Discharge, Columbia Collection Service, Inc. Continued Collection Activity

On January 23, 2012, Mr. Walch filed a lawsuit against Columbia in Clackamas County, Oregon. His lawsuit claimed that even though Columbia received notice of his discharge, they continued their collection efforts including obtaining a default judgment against him for the amount of the debt plus attorney's fees and costs, and garnishing his wages. He also alleged that Columbia unlawfully contacted his employer, threatened and harassed him, caused him to suffer emotional distress and damaged his reputation. On February 27, 2012, Columbia had the case reassigned to the District Court and then moved to dismiss Mr. Walch's lawsuit.

Columbia Argued The District Court Lacked Jurisdiction; The District Court Disagreed

Columbia argued that pursuant to Walls v. Wells Fargo Bank, N.A. 276 F.3d 502 (9th Cir. 2002) the District Court lacked subject matter jurisdiction and that the proper forum for Mr. Walch to raise any alleged violations was the Bankruptcy Court. The district court disagreed. Judge Hubel reviewed each of Mr. Walch's claims for relief. He found that certain claims were preempted, and some were not. Judge Hubel reasoned that only those claims that "necessarily entail bankruptcy-laden determinations are preempted or precluded". He went on to say that "consumer protection claims are properly heard in the district courts when those claims do not directly allege a violation of the bankruptcy discharge order". Church, 2011 U.S. Dist. LEXIS 68718, 2011 WL 2444719. Simply put, claims that would exist regardless of the bankruptcy should be heard by the district court.

The Violations By Columbia That Did Not Directly Relate To The Discharge Of The Debt Are Claims That Should Be Decided By The District Court

Judge Hubel listed the following claims alleged by Mr. Walch as matters that should be heard by the District Court:

1- Columbia increased the debt amount by adding attorney fees, in violation of ORS §646.639(2)(m) and the Oregon Rules of Professional Conduct.
2- Columbia unlawfully attempted to collect charges and fees in excess of the actual debt, in violation of ORS §646.639(2)(n).
3- Columbia unlawfully communicated directly with Mr. Walch despite knowing he was represented by an attorney.

Judge Hubel recommended the Bankruptcy Court determine the scope of its jurisdiction, render decisions on those claims that it has jurisdiction and then submit findings and recommendations to the District Court on the remaining claims.

United States District Court Finds Consumers Have Valid Claims Against Portfolio Recovery Associates For Violating The Fair Debt Collection Practices Act

Consumers, Gordon and Majolis Swearingen sued Portfolio Recovery Associates alleging violations of the Fair Debt Collection Practices Act (FDCPA). The FDCPA was passed to protect consumers against both abusive and mistaken collection activity. The Swearingens claimed Portfolio's phone calls were harassing because Portfolio's representatives used deceptive practices. Specifically, they threatened to file a lawsuit on the outstanding debt even though the statute of limitations had passed. Simply put, the debt was too old and Portfolio knew that a lawsuit was unwinnable. Portfolio moved to have the Swearingens' lawsuit dismissed and also asked for attorney fees. The United States District Court for the Northern District of Illinois denied Portfolio's motion. Gordon Swearingen and Majolis Swearingen v. Portfolio Recovery Associates, LLC 2012 U.S. Dist. LEXIS 136434.

The Original Debt Was Over 20 Years Old

In the 1980s, Majolis Swearingen (Majolis) incurred two debts. Portfolio subsequently purchased the debts from the original creditors and on October 14, 2010, began placing phone calls in an attempt to collect the debt. Approximately 22 calls were placed between October 14, 2010 and December 28, 2010. Gordon Swearingen (Gordon) received calls from Portfolio at both their home telephone number and his personal cell phone despite the fact that Gordon informed Portfolio that it was his personal cell phone, and that Majolis could not be reached by calling it. Portfolio never spoke to Majolis; Gordon answered each and every telephone call.

Majolis Can Sue Portfolio Even If They Never Spoke To Her And Gordon Can Sue Portfolio Even If He Was Not The Debtor

Portfolio argued that it could not be liable to Majolis under FDCPA §1692e because it's representatives never spoke to her. Furthermore, Portfolio argued that the threats made in phone calls answered by Gordon cannot be a basis for liability because Gordon is not the debtor and therefore does not have standing to sue under FDCPA §1692e. The District Court disagreed. The court held that non-debtors can sue a debt collector for abusive and mistaken attempts to collect debts pursuant to the FDCPA, where prohibited conduct was either experienced by or directed toward the non-debtor. The court went on to say that any other ruling would not only violate the purposes of the FDCPA, but would allow debt collectors to escape liability, no matter how egregious their conduct.

Court Rules That Bankruptcy Discharge Does Not Prevent Consumer's Ability To File a Lawsuit For Inaccurate Reporting on Credit Report

Magistrate Judge Joseph Spero found that a lawsuit filed by Karen King against Bank of America for violations of the Fair Credit Reporting Act ("FCRA"), California Consumer Credit Reporting Agencies Act ("CCRAA") and California Unfair Competition Law ("UCL") fell within the jurisdiction of the District Court. Karen King v. Bank of America, N.A., 2012 U.S. Dist. LEXIS 141963.

Karen King Received A Bankruptcy Discharge

On July 21, 2010, Karen King received a bankruptcy discharge pursuant to 11 U.S.C. §727. Included in her discharge was a $50,877.00 debt owed to Bank of America, N.A. On July 23, 2010, the Bankruptcy Court sent Bank of America notice of her discharge.

Despite The Discharge, Bank of America Continued to Report the Debt as Delinquent on Karen King's Credit Report

On or about May 5, 2011 Ms. King sent Experian written notice that Bank of America was inaccurately reporting that she was delinquent on payments for a debt that was discharged in bankruptcy. Simply put, Ms. King could not be delinquent on payments for a debt she no longer owed. On June 6, 2011 Ms. King received a copy of her Experian credit report. The credit report reflected that Bank of America was still reporting the debt incorrectly.

On July 6, 2012 Karen King Sued Bank Of America

On July 6, 2012, Ms. King filed a lawsuit against Bank of America in Superior Court. Her lawsuit claimed that Bank of America failed to investigate her dispute of the debt, failed to remove the inaccurate derogatory information and conducted unfair and unlawful business practices. Ms. King claimed that Bank of America's actions were intentional and in reckless disregard of it's duty. On August 8, 2012, Bank of America had the case reassigned to the District Court and then moved to dismiss Ms. King's lawsuit.

Bank of America Stated Several Reasons for Dismissing the Lawsuit; the District Court Disagreed With All of Their Reasons

Bank of America claimed that Ms. King failed to state a claim or allege any loss of money or property. They also argued that Ms. King could not bring a lawsuit until she suffered actual harm by Bank of America's actions. Bank of America further argued that pursuant to Walls v. Wells Fargo Bank, N.A. 276 F.3d 502 (9th Cir. 2002) the District Court lacked jurisdiction and that the proper forum for Ms. King to raise any alleged violations was the Bankruptcy Court. Judge Spero disagreed with all of their arguments. In part, Judge Spero cited Hanks v. Talbots Classics Nat'l Bank, 2012 U.S. Dist. LEXIS 109934, 2012 WL 3236323 "while FCRA and the discharge stay are similar, they are not identical. They differ in their objectives. The FCRA seeks to minimize credit reporting errors and to cure those that are made in a prompt and efficient manner. The discharge stay is directed to enforcing the bankruptcy discharge". Judge Spero ruled that the two laws can coexist. Therefore, Bank of America's motion to dismiss Karen King's lawsuit was denied.

A California federal judge found a bankrupt consumer had bali claims against creditors who incorrectly reported his debts to credit reporting agencies after bankruptcy. Browndorf v. TD Bank, N.A., Et Al., 2012 U.S. Dist. LEXIS 99237 (C.D. Cal. 2012).

Matthew Browndorf filed a chapter 7 bankruptcy in February 2011. His bankruptcy filing was successful and on May 20, 2011 the court issued him a bankruptcy discharge order.

Creditors Incorrectly Reporting Debts

However, in August 2011 Mr. Browndorf checked his credit report to make sure that his bankruptcy discharge order was being properly reported. After he reviewed his credit reports he realized that the credit reporting agencies were reporting invalid information. So, he contacted them to dispute the inaccuracies and sent copies of his bankruptcy discharge order to the creditors who were inaccurately reporting his debt. Unfortunately, his efforts were unsuccessful. As a result of the inaccurate information on his credit report, he was paying high interest rates on his consumer debts.

The Consumer Sued Under Credit Reporting Laws

Mr. Browndorf filed a lawsuit against four of his creditors, TD Bank N.A., BMW Bank of North America, BMW Financial Services, N.A., LLC and Saxon Mortgage Services, Inc. claiming that they violated California's Consumer Credit Reporting Act, California Civil Code §1785.25(a), as well as other laws. In response to his lawsuit, the four creditors filed a motion to dismiss his lawsuit.

The Court Reasoned:

California Civil Code §1785.25 states that a party shall not furnish information regarding a specific transaction or experience to any consumer credit reporting agency if the party knows or should have known that the information was incomplete or inaccurate. Mr. Browndorf disputed the credit information directly with the creditors (by sending them a copy of his bankruptcy discharge order). Therefore, the court ruled that the creditors had knowledge of the inaccuracies.

Before the federal judge could reach the above conclusion, a number of other factors had to be considered:

1- The creditors tried to claim that the California Civil Code is preempted (or superseded) by the Fair Credit Reporting Act (FCRA). Simply stated, the creditors argued Mr. Browndorf was barred from arguing that there was a violation of California Civil Code §1785.25, since federal law blocked that claim. The California federal judge disagreed and pointed out that there have been two recent cases in the 9th Circuit (which governs cases in California) that expressly rejected that argument. Carvalho v. Equifax Info. Services, LLC, 629 F.3d 876, 888 (9th Cir. 2010); Gorman v. Wolpoff & Abramson, LLP, 584 F. 3d 1147, 1171-72 (9th Cir. 2009).

2- Also, the court said bankruptcy law did not block Mr. Browndorf's lawsuit since he was not seeking to enforce a bankruptcy discharge, but rather, his lawsuit revolved around the creditors' failure to adequately address the credit reporting information that he disputed.

What this means to you

If you filed bankruptcy, received your discharge order and your credit report is showing inaccurate information, the law is on your side. However, it is very important that you follow the proper procedures when disputing the inaccurate information or you may not get the result that you deserve.

A federal judge in San Francisco refused the throw out a wrongful foreclosure case, despite the fact the consumer failed to reveal the potential lawsuit in her bankruptcy schedules.

Consumer Andrea Chancellor brought a lawsuit against OneWest Bank ("OneWest") and Cal-Western Reconveyance Corporation ("Cal-Western") stemming from OneWest's failure to permanently modify her mortgage loan and Cal-Western's initiation of foreclosure proceedings.

Consumer Takes Out IndyMac Loan

Back in 1993 Chancellor bought a condominium in Hayward, California. Then in February 2007, she obtained an adjustable rate mortgage from IndyMac Bank an adjustable rate mortgage in the amount of $400,000, and a second in the amount of $50,000. Id. at 6, ¶ 14, Ex. A. Then in March 2009, OneWest acquired IndyMac's loans and servicing rights. See Failed Bank Information, Information for IndyMac Bank, F.S.B., and IndyMac Federal Bank, F.S.B., Pasadena, CA. http://www.fdic.gov/bank/individual/failed/IndyMac.html (last visited May 22, 2012).

Consumer Gets Temporary Loan Modification

By April 2009, Ms. Chancellor was having difficulty staying current on her loan payments, so she sought either a special forbearance agreement or a loan modification from OneWest. Eventually, in October 2009, OneWest offered her a temporary loan modification through a Trial Period Plan ("TPP") under the Home Affordable Modification Program ("HAMP"), to which she agreed. Under the terms, Ms. Chancellor was to make three monthly payments of $1,159.15 on or before November 1, 2009, December 1, 2009, and January 1, 2010.

OneWest Starts Foreclosure Process Despite the Loan Modification

Ms. Chancellor made the first payment by November 1, 2009. But, on November 4, 2009, OneWest, through its trustee Cal-Western, basically took the first step toward foreclosure by recording a Notice of Default. Ms. Chancellor alleges OneWest broke oral and written agreements not to attempt to foreclose.

Also she alleges that she not only made the three payments by November 1, 2009, December 1, 2009, and January 1, 2010, but also made seven additional payments through September 2010. Id. OneWest accepted all of these payments and applied them to the balance of her loan but never approved Ms. Chancellor for a permanent loan modification. She was also told she did not qualify for a permanent loan modification. She alleges she was not given a reason for the denial.

Ms. Chancellor then filed series of chapter 13 bankruptcies in an attempt to stop OneWest's efforts to foreclose.

Consumer Files Federal Lawsuit in San Francisco for Wrongful Foreclosure

Ms. Chancellor filed a federal lawsuit San Francisco against OneWest and Cal-Western for wrongful foreclosure, breach of contract, unfair and deceptivive business practices, and some other related claims.

OneWest asked the court to throw the case out in light of the doctrine of judicial estoppel. Basically, OneWest argued that since Ms. Chancellor did not list her potential lawsuit in her bankruptcy schedules, she should not be allowed to proceed with the lawsuit.

Federal Court Refuses to Throw Out the Wrongful Foreclosure Lawsuit

However, the court refused to throw the consumer's case out. The court reasoned that none of the bankruptcy courts presiding over Ms. Chancellor's cases has certified any bankruptcy plans, and OneWest has not shown the court issued in any of Ms. Chancellor's bankruptcy cases that relied on the bankruptcy schedules Ms. Chancellor submitted.

The court reasoned that the Ninth Circuit Court of Appeals "has restricted the application of judicial estoppel to cases where the court relied on, or 'accepted,' the party's previous inconsistent position." Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 782-83 (9th Cir. 2001). In such a factual context, the court finds that Ms. Chancellor has not "gain[ed] an advantage by asserting one position, and then later seeking an advantage by taking a clearly inconsistent position," Hamilton, 270 F.3d at 782, and that judicial estoppel is not appropriate here.

The U.S. District Court in Oregon recently decided that a law office working for Midland Credit Management, Inc. may be a debt collector, and thus would have to abide by the Fair Debt Collection Practices Act. Watters v. Midland Credit Management, Inc. and Bennett Law, PLLC, 2012 U.S. Dist. LEXIS 65268 (D. OR. 2012). The U.S. District Court in Oregon is within the Ninth Circuit, which also governs other states including California and Washington.

The consumer alleged that Bennett Law, PLLC, violated several sections of the Fair Debt Collection Practices Act, including: 15 U.S.C. §§ 1692e(2)(A)(making false, deceptive or misleading statements in an attempt to collect a debt, including the false representation of the character, amount or legal status of any debt), 1692e(10)( use any false, deceptive, or misleading representation or means in connection with the collection of any debt., and 1692f (using any unfair or unconscionable means in an attempt to collect a debt).

One of the major points the Court had to decide was whether the consumer sufficiently alleged that Bennett Law was a "debt collector" under the Fair Debt Collection Practices Act (FDCPA).

Defendant Bennett Law is a "debt collector" pursuant to 15 U.S.C. § 1692a(6)

The Court noted that in its answer to the consumer's complaint, Bennett Law denied the allegation that it is a "debt collector", saying it "is without sufficient information or belief to respond to this allegation." However, the Court stated, "facts in the record indicate that Bennett Law is, in fact, a debt collector."

To be a debt collector, a person or organization must (1) use an instrumentality of interstate commerce or the mails, (2) for the principal or regular purpose of attempting to collect debts, (3) asserted to be owed to another.

Interstate Commerce
The Court stated that using a telephone to attempt to collect debts was using an instrumentality of interstate commerce.

Regular
The Court then reasoned that in interpreting the term "regular," one court held that an attorney was "regularly engaged in debt collection practices under the FDCPA by consistently accepting at least 10 debt collection matters every year." Silva v. Mid-Atlantic Mgmt. Corp., 277 F. Supp. 2d 460, 466 (E.D. Pa. 2003).That same court also held that "'debt collection services may be rendered "regularly" even though these services may amount to a small fraction of the firm's total activity.'"

Similarly, another court held that even though a law firm's debt collection activity made up less than four percent of the firm's total business, it satisfied the "regularly" standard set forth in the statute. Stojanovski v. Strobl & Manoogian, P.C., 783 F. Supp. 319, 322 (E.D. Mich. 1992).

The Court concluded:

"As corporate counsel for Midland, and as debt collection counsel for Wal-Mart, Shopko, and Target, and as evinced by Bennett Law's business structure, it is evident that Bennett Law is "regularly" engaged in the collection of debts, whether through litigation or over the telephone. Certainly Bennett Law is "regularly" engaged in the collection of debts if an entire group of the firm is devoted to the collection of debts via telephone, while the other group is engaged in the collection of debts via litigation. Indeed, the court is unaware that Bennett Law practices anything other than debt collection law."

The Court also added, the U.S. Supreme Court has unanimously held that the term "debt collector" "applies to a lawyer who 'regularly,' through litigation, tries to collect consumer debts" on behalf of a client. Heintz v. Jenkins, 514 U.S. 291, 292, 115 S. Ct. 1489, 131 L. Ed. 2d 395 (1995).

A federal judge held Ocwen must comply with the Fair Debt Collection Practices Act ("FDCPA"). Zervos v. Ocwen Loan Servicing, LLC, 2012 U.S. Dist. LEXIS 44869 (D. MD 2012).

A husband and wife brought a lawsuit against Ocwen Loan Servicing falsely stating their home had been foreclosed on when it had not. Ocwen is a debt buyer that had bought the couple's mortgage loan from the original mortgage creditor. The couple claimed, in part, that Ocwen violated the Fair Debt Collection Practices Act- a federal law that governs how collection agencies are allowed to collect debts (and also covers those collection agencies attempting to collect debts here in California). The FDCPA provide consumers powerful rights to fight back against abusive debt collectors, without having to file bankruptcy.

Ocwen tried to get the case thrown out, arguing that the company is not a debt collector under federal law, and that they don't need to abide by the FDCPA. The federal court disagreed with Ocwen and refused to throw the case out.

Many consumers have complained about Ocwen's mortgage loan modification procedures. See video.

Background

The consumers were in the process of modifying their mortgage with their original mortgage creditor. During this time Ocwen acquired the defaulted mortgage loan. The consumers tried to modify their loan with Ocwen but Ocwen refused. Indeed, the consumers attempted to continue negotiations with Ocwen by sending it their loan modification package, but Ocwen denied the modification and allegedly attempted to foreclose on the the Property.

On September 21, 2011, the consumers received a letter from Ocwen that said the home would not be foreclosed if the husband and wife contacted Ocwen in the next 30 days. However, when the consumers attempted to contact Ocwen they were unable to do so because the automated phone system informed them there were over 200 callers ahead of them. Also, although the consumers were told they had 30 days to contact Ocwen, a representative showed up at the consumer's residence to change the locks, saying that the property had already been foreclosed on.

Additionally, on September 22, 2011, Ocwen sent another letter, this time saying that there was a foreclosure sale set within the next 60 days. The consumer's lawsuit alleged that Ocwen's statements were false, and that no foreclosure proceedings had ever occurred and no sale was ever scheduled.

Court Holds Ocwen May Be a Debt Collector

Ocwen asked the court to throw out the lawsuit, arguing that the company could not be sued under the FDCPA because it is not a debt collector. However, the court disagreed with Ocwen.

Ocwen argued that the consumers could not state a valid claim against the company under the Fair Debt Collection Practices Act because loan servicers are not considered "debt collectors" under that law. But, the court ruled that exemption, does not apply where a loan servicer acquires a loan after it has already gone into default. Allen v. Bank of America Corp., Civil No. CCB-11-33, 2011 WL 3654451 at *7 n.9 (D. Md. Aug. 18, 2011)(citing Schlosser v. Fairbanks Capital Corp., 323 F.3d 534, 536-39 (7th Cir. 2003);
Shugart v. Ocwen Loan Servicing, LLC, 747 F.Supp.2d 938, 942-43 (S.D. Ohio
2010)).

Ocwen also argue the consumer's lawsuit complaint did not allege that the mortgage was in default when Ocwen acquired it, but the Court found that default can be easily inferred from the alleged fact that Ocwen sent the consumers letters threatening foreclosure only days after acquiring the mortgage. The court held that Ocwen could be a debt collector under the FDCPA since the company acquires debts in default for the purposes of attempting to collect on those debts.

The court also determined that Ocwen can be in violation of the FDCPA (15 U.S.C. section 1692d) by engaging in conduct the natural consequence which is to harass, oppress, or abuse, in connection with the collection of the defaulted mortgage loan. The lawsuit claimed Ocwen informed the consumers that their home had been foreclosed and that a sale date was scheduled, when in fact there was no such foreclosure.

Additionally, Ocwen's attempt to foreclosure and evict the consumers by changing the locks without allowing consumers the 30 day response time promised in its first letter could be construed as abuse and or harassment. Similarly, Defendant's alleged attempt to effect foreclosure and eviction of Plaintiffs from their home by changing the locks without allowing Plaintiffs the thirty days response time allegedly promised in the first letter could be construed as abuse and or harassment, in violation of 15 U.S. 1692d of the FDCPA.

The court also found that the consumers properly stated claims that Ocwen used deceptive practices in an attempt to collect a debt, in violation of 15 U.S.C. 1692e of the FDCPA; falsely represented the legal status of a debt, in violation of 15 U.S.C. 1692e(2) of the FDCPA; threatened action it did not intent to take, in violation of the 15 U.S.C. 1692e(5).

Wells Fargo Home Mortgage, Inc. (d.b.a. America's Servicing Company) failed in its attempt to have a consumer's Fair Credit Reporting Act ("FCRA") claims thrown out of court. The federal judge ruled the consumer's complaint was clear enough to put Wells Fargo on notice as to why it was being sued for violating the Fair Credit Reporting Act. Jones v. U.S. Bank N.A., Wells Fargo Home Mortgage, Inc., et al., 2012 U.S. Dist. LEXIS 34873 (N.D. IL 2012).

Background

On August 6, 2004, Selena Jones entered into two "consumer mortgage refinance loans with AHL Acquisition, LLC, a.k.a. Aames Home Loan ("Aames"). The first loan was in the amount of $155,200 ("First Loan"), and the second loan was in the amount of $38,800 ("Second Loan"). The loans were packaged together with other loans, and sold off to investors. However, no assignment of either mortgage had been recorded in the county property records. Also, Aames sold Jones' loans to U.S. Bank, despite the fact that Aames had "already been paid in full" for these same documents.

On April 12, 2005, U.S. Bank brought a foreclosure suit against Jones in the Circuit Court of Cook County, Illinois, ("the Foreclosure Case") based on an alleged default on the First Loan. However, U.S. Bank was not an assignee of the mortgage for the First Loan, nor was U.S. Bank the owner or holder of the associated note. Additionally, Jones was never served with a notice of default, and no notice of default was filed in the county property records.

On June 9, 2008, U.S. Bank obtained a judgment of foreclosure against Jones' home in Illinois ("the Property") which had been mortgaged in support of both loans.

Between July 21, 2008 and October 21, 2008 Jones entered into a forbearance agreement with U.S. Bank. The forbearance agreement was successfully completed, but U.S. Bank and Wells Fargo (who at some point in time was servicing one of the mortgage loans, and sending negative information to credit reporting agencies about Jones) refused to negotiate a payment plan thereafter.

As a result of the foreclosure judgment, the property was sold on January 6, 2010. (Jones was never served with a notice of sale prior to the January 6, 2010 sale, and no notice of sale was ever recorded in the county property records).

Fair Credit Reporting Act Claims

Jones claimed that she filed disputes with credit reporting agencies who in turn provided notice to Wells Fargo that she was disputing the debts. 15 U.S.C. 1681s2(b).

Jones further alleged that Wells Fargo "made false statements to credit bureaus and neglected to make true statements to credit bureaus, including but not limited to an excessive amount of debt for which she was tricked and deceived into signing, resulting in having negative information on [her] credit." (Of course, negatively reporting a debt is just another form of debt collection, since the creditor's goal is to have the consumer make payment to clear up the negative credit reporting).

The Court stated that under § 1681s-2(b):

When a consumer reporting agency notifies a furnisher of a dispute with regard to an account, the furnisher of information must:

1. conduct an investigation with respect to the disputed information;
2. review all relevant information provided to it by the consumer reporting agency;
3. report the results of the investigation to the agency; and
4. if the information is found to be inaccurate or incomplete, report the results to all consumer reporting agencies to which it originally provided the erroneous information.

Citing Westra v. Credit Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005).

Under federal law, the complaint must "give the defendant fair notice of what the . . claim is and the grounds upon which it rests." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)

So, Wells Fargo argued that from Jones' allegations, "it is unclear whether she is alleging that [Wells Fargo] never conducted an investigation at all . . .conducted an investigation but never reported the results to the credit reporting agencies . . . or [is alleging that Wells Fargo] committed some other wrongdoing." However, Jones responded that she was alleging that Wells Fargo committed at least one of these wrongs, but she needed further discovery to determine which one.

The court refused to throw out the FCRA claim, and stated:

"Although this count is somewhat thinly pleaded, the court finds it sufficient at this stage of the case. Twombly does not require fact pleading, and Jones' allegations that she disputed the debt and that [Wells Fargo] had notice of that debt but failed to take the proper actions are enough to put [Wells Fargo] on notice of the claims against it and raise a plausible right to relief."

A Federal District Court in San Jose, California, refused to dismiss a consumer's lawsuit against LVNV Funding, LLC and the Brachfeld Law Group. Santos v. LVNV Funding, LLC and Brachfeld Law Group, P.C., 2012 U.S. Dist. LEXIS 8090 (N.D. Cal. San Jose, January 24, 2012).

Apparently, a California consumer, Blanca Santos, became delinquent on a consumer credit card account that had been assigned to the collection agency LVNV. LVNV had its law firm, Brachfeld Law Group, P.C. file a lawsuit against Santos in Santa Clara County Superior Court. Santos called Brachfeld Law Group and worked out a payment planto resolve the debt. Brachfeld Law Group informed Santos that if she made the agreed upon payments, she would not need to go to court and could disregard the summons she had been served with. Santos completed the payments on or about February 28, 2009, which Defendants obviously knew.

However, despite the completed settlement, LVNV and Brachfeld told the court Santos never answered the lawsuit, and thus they were entitled to win by default. The Court entered a default judgment in favor of LVNV and against Santos in the amount of $4,210.75. LVNV and Brachfeld then levied Santos's bank account to get the money. Santos then had to take action to get this wrongful default judgment set aside.

After that Santos, brought a lawsuit against LVNV and Brachfeld alleging that they:

1) violated the Federal Fair Debt Collection Practice Act ("FDCPA", 15 U.S.C. § 1692, by representing that Santos owed a debt that Defendants knew was not owed, by engaging in conduct that had the natural consequences of harassing, oppressing, and abusing Santos, and by attempting to collect additional fees and interest in contravention to the settlement agreement, and

(2) violated the Rosenthal Fair Debt Collection Practices Act ("RFDCPA"), Cal. Civ. Code § 1788, by violating the Federal Fair Debt Collection Practice Act as set forth above, by communicating with Santos in the name of an attorney without the approval or authorization of any attorney, and by attempting to collect charges not permitted by law.

On July 29, 2011, LVNV and Brachfeld filed a motion asking the court to throw out the consumer's lawsuit. Defendants made several arguments in their effort to have the case dismissed, all of which were rejected by the San Jose federal judge.

The defendants argued that California's "litigation privilege" somehow made them immune for their wrongful collection practices. In essence they argued that their wrongful acts all arose from filing legal documents, seeking a default, and attempting to levy bank accounts and garnish wages. They claimed such acts were protected statements made as part of a judicial proceeding. Cal. Civ. Code § 47(b).

In very well reasoned analysis the Court rejected these arguments, stating:

"The California litigation privilege, however, does not apply to FDCPA claims. See Welker v. Law Office of Horwitz, 626 F. Supp. 2d 1068, 1072 (S.D. Cal. 2009); Oei v. N. Star Capital Acquisitions, LLC, 486 F. Supp. 2d 1089, 1098 (C.D. Cal. 2006). This rule is especially clear in light of the Supreme Court's decision in Heintz v. Jenkins, 514 U.S. 291, 115 S. Ct. 1489, 131 L. Ed. 2d 395 (1995) that the Supreme Court held that the FDCPA "applies to attorneys who 'regularly' engage in consumer-debt-collection activity, even when that activity consists of litigation." Although the Heintz decision does not expressly address litigation privilege, the decision "leaves little room for the proposition that an attorney's litigation activities are immune and thus not subject to the FDCPA." Reyes v. Kenosian & Miele, LLP, 619 F. Supp. 2d 796, 803 (N.D. Cal. 2008).

The California litigation privilege also does not apply to RFDCPA violations. See Komarova v. National Credit Acceptance, Inc., 175 Cal. App. 4th 324, 337, 95 Cal. Rptr. 3d 880 (App. Ct. 2009) (finding that the litigation privilege "cannot be used to shield violations of the [RFDCPA])."

In Komarova, the California Court of Appeals held that an exception to the litigation privilege existed because (1) the RFDCPA is more specific the California litigation privilege and (2) the RFDCPA would be "significantly inoperable if it did not prevail over the privilege where, as here, the two conflict." Id. at 339-40. Here, as in Komarova, if the court were to apply the litigation privilege to protect Defendants' filings, which allegedly sought to improperly collect the debt, that decision would in effect render the RFDCPA inoperable. See also, Welker v. Law Office of Daniel J. Horwitz, 699 F. Supp. 2d 1164, 1174 (S.D. Cal. 2010)."

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.