Just a few days ago, the Federal Trade Commission (FTC) issued a report detailing numerous problems with American’s debt collectors, along with recommendations on how to improve the system to make it more fair for consumers.  The report is entitled “Repairing a Broken System: Protecting Consumers in Debt Collection Litigation and Arbitration”.  The information in the report included feedback gathered from consumer advocates and others during roundtable discussions across the US in 2009.

The major problems highlighted in the report include:

• Debt collectors fail to properly notify consumers about lawasuits filed against them
• Debt collectors filing lawsuits without enough evidence about the debt
• Courts granting default judgments (meaning debt collectors win withoout a trial) when consumers do not show up in court to defend themselves
• Debt collectors filing lawsuits on debts that are past the statute of limitations (which means the debt can no longer be sued on)
• Debt collectors seizing money and freezing bank accounts that are exempt from such debt collection efforts (this includes exemptions for head-of-household, social security income, unemployment benefits, and many other exemptions)
• Debt collectors forcing consumers to resolve disputes in private arbitrations that are biased, unfair and deceptive, and without adequate court supervision

To address these issues, the Federal Trade Commission made a number of recommendations, including:

• States should adopt measures to make it more likely consumers will defend themselves when they are sued, resulting in fewer default judgments
• States should require debt collectors to include more information about the alleged debt when they file their lawsuits
• States should take steps to ensure that debt collectors are not filing lawsuits for debts on which the statute of limitations has expired
• Changes should be made to federal and state laws that would prevent a certain amount of money in a bank account from being frozen, and make that amount exempt from garnishment

The problems identified above are happening every day here in Seminole County (including Lake Mary, Longwood, Altamonte Springs, Sanford, Oviedo, Winter Springs, Casselberry), as well as throughout Central Florida, including Orange County, Volusia County, Brevard County, Lake County, Flagler County and the cities of Bunnell, Cocoa, Daytona Beach, DeBary, DeLand, Melbourne, New Smyrna Beach, Orlando, Tavares, Titusville, and many others.

If you have experienced these problems, or any other problems relating to debt collection, we are here to help!  You can put our experience in representing consumers against debt collectors to work for you.  Please feel free to contact us by phone, fax or by filling out our simple web contact form for a free no-obligation consulation.  We’ll tell you about your rights and your ability to fight back against debt collectors.

Debt settlement companies (debt relief companies) have been getting a lot of scrutiny lately, and with good reason.  Although they are making lots of money during this difficult economy, it is usually from the people who can least afford it – consumers who are already behind on their payments.

Often, these debt settlement companies will advertise that they can settle your debt at a significant discount from what you owe.  However, in most cases, this is simply a scam.  What many such companies do is convince the consumer to stop paying on their debts to credit card companies, home finance companies, store charge accounts, and sometimes even on their car payments and mortgages.  Instead, the consumer is instructed to send in just one payment – to them, of course.

At first, consumers feel relieved – they are now paying only one company instead of 3 or 4 or even more creditors.  Sometimes the creditors will send a letter asking why you’ve stopped paying.  When the consumer calls the debt relief company to find out, they are often told not to worry about it, since they are “in the middle of negotiations”.  Many times, this is simply false.

Instead, the debt settlement companies take a major share of the payments you have made to them, even though you thought the payments were going to pay down your debts.  In the meantime, your creditors usually escalate their contacts with you.  After a few months, it is not unusual to be sued by one of those creditors that you thought was being paid by the debt settlement company on your behalf.  Then, when you call the debt settlement company about the lawsuit, they tell you that they are not lawyers, and can no longer assist you.  You’re left on your own, at the receiving end of a lawsuit, and without your hard-earned cash to either pay your debt or retain an attorney to help you out.

By the time you realize what has happened and try to get your money back, most of it has been taken by the debt settlement company as their up-front fee for their “services”.  Even if you get some money back, you almost always lose a significant portion of it, and you end up with even more debt!  This is because the interest kept increasing while your debt settlement company was not paying your creditors.

Most consumers don’t know that their creditors have no obligation to deal with such debt settlement companies – and many simply refuse to deal with them.  Instead, many creditors will just file a lawsuit against you in an attempt to make you pay.  Virtually always, the debt settlement company can do nothing to force your creditors from suing you.

This does not mean that every debt settlement company is a scammer.  I myself have not personally experienced a legitimate debt settlement company, but there may be some non-profits or governmental agencies that may legitimately assist you.  On the other hand, I have represented many consumers who were taken advantage of by such debt settlement companies, leaving them in a much worse financial, legal and emotional condition than they were before.  If you are contacted by a debt settlement company, and are considering signing up, be sure to get a detailed explanation of how much they charge, when they charge it, and the exact dollar amounts that will be going to each specific creditor.  If they refuse to tell you the numbers in dollars and cents (beware those that deal only in percentages), or if they don’t promise to pay any set amount to specific creditors (and instead only talk about paying down debt generally without specifying the amounts for each creditor), or if they insist on getting paid up-front before your creditors, the debt settlement service may be just a scam.

If you have been defrauded by such a company, you may want to speak with consumer attorney near you, who should be able to advise you of your rights, and the possibility of recovering some of your money.

A recent study published by the National Consumer Law Center shed new light on the abuses that can arise from forced arbitration.  Arbitration is a process where the parties avoid going to court by using a private process to resolve disputes that would otherwise normally end up in court.  Arbitration is a private process, with lots of secrecy and without many of the most important rights you would have in court.  Unfortunately, many agreements have forced arbitration buried in the fine print of your contract, including credit card agreements, car purchase agreements, bank agreements, phone company agreements and many others.

Millions of consumers have given up their right to have a court resolve any disputes, along with the protections provided by the court.  Instead, the big business gets to choose the arbitrator.  Often, big businesses chose arbitrators that had previously given them what they wanted in such cases.  Simply put, the deck is stacked against consumers in those cases, no matter what the facts are and no matter what the law says.  Once big business wins in arbitration, it is generally very difficult for a court to set that win aside.

The study showed that, back in 2006, a Wall Street Investor to stack the deck even more.  He helped facilitate a direct financial connection between a law firm who often represented big business in those arbitrations and the arbitration companies themselves.  This corrupt arrangement was finally uncovered by the Minnesota Attorney General in the summer of 2009.

As a result of the work by the Attorney General and her staff, the National Arbitration Forum (NAF) was exposed, and agreed to stop doing most consumer arbitrations.  At least four giant banks also agreed to stop enforcing the arbitration provisions.  The giant debt collection law firm, Mann Bracken, collapsed from the fraud charges.  Please click here to read the full NCLC report.

Now that the fraudulent practices of forced arbitration have been exposed, I hope that they will disappear.  However, the banks’ pledge not to enforce arbitration agreements expires in 2013.  That is why it is important to put legislation in place to prevent companies from forcing you into arbitration through the use of fine print.  There has been some discussion of this in Congress recently, but only time will tell if it becomes the law of the land.