San Jose Bankruptcy & Fair Debt Collection Practices Act Lawyer Blog

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.