debt collection

The expansion of Medicaid under the Affordable Care Act has lowered the burden of medical debt for some low-income consumers, according to a study from the National Bureau of Economic Research. The study looked at the medical-debt collection balances referred out to debt collectors in areas with high populations of low-income patients. The study's authors' estimates "'imply a reduction in collection balances of around $600 to $1,000 among those who gain Medicaid coverage.'"

The Montana Supreme Court has ruled that a plaintiff can pursue a lawsuit against the company that promised to help her with credit-card debt relief, the Montana Standard's Kathleen J. Bryan reports. The plaintiff alleges that Global Client Solutions used '“deceptive and fraudulent representations to solicit her participation in an illegal debt settlement plan.”'

The Supreme Court held that the plaintiff's contract with debt-relief firm Global Client Solutions included an arbitration clause that lacked mutuality and was therefore unenforceable, Bryan reports.

The difference in net worth between the typical white family and black family is $131,000, ProPublica's Paul Kiel reports. As a consequence of that racial wealth gap, black families have smaller financial reserves to fall back on and more likely to be sued over a debt or land in jail because of unpaid tickets and court fines.

Kiel and a reporting partner found that debt-collection lawsuits in three U.S. cities were twice as high in mostly black communities than they were in mostly white communities. 

He suggests reform to debt collection laws, such as reducing the amount of income subject to garnishment or setting a small sum in bank accounts as off limit to collectors.

Last month, the Second Circuit clarified when the statute of limitations begins to run under the Fair Debt Collection Practices Act, The New York Law Journal's Mark Hamblett reports. It is when the bank freezes a debtor's account, not when the notice of debt is served.

The plaintiff in the underlying case is suing attorney Todd Houslanger of Houslanger & Associates for freezing his account when it was allegedly another man with a similar name who was the judgment debtor.

The Connecticut Supreme Court has struck down a state law that gave the Department of Banking authority to regulate law firms engaged in debt collection, The Connecticut Law Tribune's Christian Nolan reports.

The Supreme Court ruled that only the judiciary can regulate the conduct of law firms. The law limited the fees that law firms could charge and required law firms to pay $800 annual licenses for helping consumers renegotiate credit card debt.

The Washington Post's Kenneth R. Harney reports that mortgage problems make up 28 percent of the 600,000 complaints posted on the Consumer Financial Protection Bureau's website. Complaints about mortgage lenders, debt collectors, credit-card companies and credit bureaus are logged on the site.

The CFPB started posting narratives for those complaints June 25, but lenders can't post their own narratives. David Stevens, president and chief executive of the Mortgage Bankers Association, told Harney the process is one-sided and uses '“unsubstantiated and unverified'” information that can be submitted by anyone, and the bureau does not “'validate the authenticity of the complaint or the individuals making the complaint.”'

Law firms engaged in debt collection can be regulated by New York City, the New York Court of Appeals has ruled. Christy Young Berger, blogging on Accounts Receivable Management's blog, notes that two law firms, Eric M. Berman and Lacy Katzen, argued New York's law encroached on the state's exclusive authority to regulate the legal profession. The New York Court of Appeals, in answering a question posed to it by the U.S. Court of Appeals for the Second Circuit, found that New York's law doesn't encroach on the state's authority to regulate lawyers.

The Second Circuit has upheld the certification of class actions against law firm Mel Harris and Associates, as well as a debt-buying company and a process serving agency, for allegedly intentionally failing to serve debtors in debt-collection cases and obtaining default judgments in New York City Civil Court, the New York Law Journal's Mark Hamblett reports.

The plaintiffs allege that more than 90 percent of the debtors were never served and the defendant provided bogus proof of service and affidavits of merit attesting to their personal knowledge of the debts to win default.

ProPublica and NPR published a joint report earlier this month on the problems with a 1968 federal law that allows debt collectors to take 25 percent of debtors' paychecks and every penny in their bank accounts to repay consumer debts, leaving "millions of workers" facing the struggle of how to live when a large part of their pay is diverted to pay a consumer debt. For example, "time has eroded what even then were modest protections [in the Credit Consumer Protection Act]. The law barred creditors from taking any wages from the very poorest of workers, but used a calculation based on the minimum wage to identify them. Since the federal minimum wage hasn't kept pace with inflation, today, only workers earning about $11,000 annually or less— a wage below the poverty line— are protected." The National Consumer Law Center argues that the cap should be reduced to 10 percent to ensure that low-income debtors still earn a living wage.

The Consumer Financial Protection Bureau entered a $19 million settlement with payday lender Cash America, the Washington Post reported. Among other faulty practices, Cash America used robosigned a lawyer's signature on court documents, helping "the company improperly squeeze money out of at least 14,397 Americans, who are entitled to millions of dollars in restitution," The Post further reported.