Debt Collection Law Ranks High in Safety and Security

Debt collection law gets a bad rep. Just Google “debt collection,” and you’ll stumble across a thousand stories about crooked collectors, deceptive ruses and stringent regulations to maintain the climate of lending, borrowing and repayment.

If you’ve been following our blog, you likely already know that debt collectors must follow specific federal guidelines to avoid violating consumer rights and maintain their own responsibilities. Well-known laws that we’ve discussed include the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and the Gramm-Leach-Bliley Act (GLBA).

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However, what you might not know is that in the entire field of law, the legal debt collection industry is in the top 10 percent for IT security, data security, physical security and third party vendor management.

Because of the nature of the practice, collections tops all other areas of law in disaster preparedness, disaster recovery plans and employee training and conduct.

The industry as a whole is more likely to have superior call recording capabilities that record 100 percent of incoming and outgoing calls, email encryption and email programs that recognize and restrict the sending of a 16-digit sequential number (ie—credit card numbers).

The licensed and recognized creditors bar is the least likely to be hacked among all law firms nationwide, and although there have been attempted website hacks, there are no known data breaches in the entire industry of legal collections.

While the stringent standards placed on collectors are to protect the consumers, they make the practice of debt collection very expensive. Collectors rank high in the areas of safety and security, and that is a positive thing, but they pay handsomely to do so.

The bottom line after paying out for security systems and other third party vendors depends entirely on a collectors’ ability to connect with debtors and work toward a payment plan that benefits both parties.

Despite the horror stories, these statistics shine a positive light on the field of legal debt collection. Collectors are doing their best to ensure a safe and secure relationship with debtors, protect important and private information and collect money in order to regain economic balance in the area of lending.

Escaping Debt: Consumers Considering Moving Abroad

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Debt can be overwhelming. While most people don’t intend to enter into a debt that they cannot repay, life gets in the way, and things happen that are outside of our control.

For some with a very large debt, it may be tempting to escape it; some people even take extreme measures by moving to another state or country. Here we’ve broken down some of the most common questions about the collection of debts in the United States and abroad.

What happens to my debt when I move to another state?

Assuming you have been found liable for your debt and there is a valid “judgment” for it recorded in the state in which you live, the collections company will get a triple sealed authenticated copy of that judgment and mail it to a collections company in the new state. The company will file a new action called a filing for a foreign judgment. Even if you have not yet been found liable for your debt, these proceedings can occur at a later date, even after you have moved to another state.

What happens to my debt when I leave the country?

Debt remains outstanding until it is paid, and interest and penalties continue to accrue. While it is technically illegal for a creditor to sue you in a country or state in which you no longer reside, sometimes this issue rests on the language of the contract or the sentiment of the court. Most contracts and loan agreements specify in which states legal arguments and court cases must be settled.

If a lawsuit against you does go uncontested while you’re away, the collections process will continue as it would if you were stateside. Leaving the country can cause serious problems with your credit rating if you do decide to return. Creditors can begin the judgment process on your last known address (despite legality), and your debt will be waiting for you if and when you return.

If you still have assets in the country, the creditor can secure these as partial payment. You could return to a judgment against you or the repossession of your belongings. The IRS expects U.S. citizens to file tax returns and pay what is owed. If you leave the country with unpaid debts, eventually those balances will be written off and your creditor may file a 1099-C form with the IRS reporting these unpaid amounts as “income.” The IRS will expect payment of this phantom income.

Another consequence of leaving the country could be causing the burden of your debt to fall on your family or co-signer(s). In addition, a collector could sell your debt to an agency in another country, and foreign creditors can order a copy of your United States credit report.

Are contracts for debt enforceable outside of the United States?

Contracts for debt are not enforceable outside the United States. So essentially, it is true that leaving the country is a way to leave your debts behind. While foreign countries will not seek to extradite you for debt, there are other actions that may be taken.

Some debt collection agencies operate in multiple countries, expanding their reach. However, that is not typically the case. You may find that the country you’ve chosen has a reciprocal agreement when it comes to tracing debtors, like Germany, Canada and the UK. HM Revenue & Customs, the UK’s tax and customs authority, has a long reach. HM has a mutual assistance agreement with several countries to recover money owed.

While relocating may help you outrun your debt, it is not as simple as it sounds. Not only will you have to come up with the money to purchase a plane ticket, invest in housing and sustain yourself, but if you plan to stay in a foreign country for a long period of time, you will have to secure residency, which requires income. You have to prove that you have a reliable source of monthly income to meet the country’s minimum requirements.

Also, lenders are not as generous and quick to extend credit in other countries as they are in the United States. If you have become accustomed to using your credit card when money gets tight, building a new and better credit history elsewhere may prove difficult.

In the News 04/21/2015

The 2015 West Virginia legislative session saw significant changes for the debt collection industry. The WV Legislature passed Senate Bill No. 542, which amended several sections of the West Virginia Consumer Credit Protection Act (WVCCPA). The bill, which was signed into law by Governor Tomblin on March 31, made concessions regarding when and how often consumers can be contacted, how collectors must be notified when a consumer has obtained attorney representation and minimized the interest rate on collections’ penalties, which will be effective on September 1.

For more information, you can read the bill in its entirety here: https://legiscan.com/WV/text/SB542/2015.

Or check out our blog this Thursday for a breakdown of the WVCCPA amendments and how they will affect collections in the Mountain State.

In the News 04/07/2015

The Consumer Financial Protection Bureau (CFPB) recently announced that they will be taking action against a nationwide debt collection operation and it’s CEO for threatening consumers with criminal prosecution and jail time for writing bounced checks. National Corrective Group, a privately-held corporation based in California, is also charged with misleading consumers to believe that they were required to enroll in an expensive financial education program to avoid the criminal charges.

The CFPB’s proposed order is currently being reviewed by the federal district court. The order would end all illegal activity, impose a civil penalty of $50,000 and require new regulations on consumer disclosure and strong supervision of the bounced check program.

For more information, check out the following press:

http://www.lexology.com/library/detail.aspx?g=13641bb6-9b06-4422-b078-d44104647fb6

http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-bad-check-debt-collector/

Corporate Social Responsibility: Atkins & Ogle in the Community

According to an article by Entrepreneur.com, companies that encourage community involvement distinguish themselves from their competitors and reap the benefits of loyal customers and happier employees. In 2013, Cone Communications and Echo Research reported a study in which they found that 82 percent of American consumers consider corporate social responsibility when deciding which products or services they want to buy.

At Atkins & Ogle Law Offices, LC, social responsibility is part of the fabric of our company not because of our business structure, but because of the type of employees the community provides. Our employees are top notch in their skills and responsibilities, but they are also dedicated to making the Putnam County and surrounding areas a better place.

In the past, Atkins & Ogle has financially supported many sports teams and extracurricular activities in Putnam County. These donations of both time and money include buying advertisements in team programs and yearbooks, sponsoring local t-ball teams and putting together a course on the collections’ process for the Law Explorers, a high school student group run by a local judge.

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Managing attorneys Jamie Atkins and Bree Ogle are both currently serving as baseball coaches in the community, and Atkins is the sitting president of the Putnam County Bar Association, which does a lot of behind-the-scenes work for the good of the county, including fundraising for ALS research.

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Atkins & Ogle also provides the opportunity for Putnam County seniors interested in a career in law to complete a work-based experience at the office for a credit toward graduation. Participants gain experiences attending court hearings, listening in on important phone calls and working in an office setting. AO also hires many high school students for part-time, after school positions.

By extension, our employees better the reputation of AO by being involved in other aspects of the community, such as local churches, Putnam County 4-H, career days, planning and executing charitable 5 and 10ks and serving as coaches for wrestling and cheerleading teams. In essence, our employees leave their 9 to 5 job and give of their additional time and resources to make their communities a better place.

While the resonance of community involvement is hard to measure, the second and third degree effects of corporate social responsibility are clear. Doing quality work for our clients while never losing sight of our community responsibilities consistently result in Atkins & Ogle attracting quality employees and upholding a positive reputation in and around the state of West Virginia.

Collecting Corporate Debts, Part III

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After the service of process, a consumer has 20 days to answer the court before a default judgment is filed, but corporations are given 30 days to respond. There are a variety of ways to attempt to collect on a corporate debt. Collectors can freeze the bank accounts of corporations, file a writ to attach inventory or file a writ for a till tap.

When collectors file to freeze a corporate bank account, they usually try to catch the bank right before payroll to get the attention of management quickly.

To attach inventory is rare, but in this case, a sheriff would be dispatched to put tags on inventory at the business’s location. For example, if the judgment was for $10,000, the sheriff would tag enough inventory to equal that amount. Tagged items cannot be sold, and those assets are “frozen.” This would be similar to garnishing the wages of an individual consumer.

Filing a writ for a till tap is another antiquated practice that is rarely used. Again, say the debt owed is $10,000. The sheriff’s department would dispatch a deputy to the store site for the day. The deputy would stand behind the counter and watch the cash register, and at the end of the day, he or she would seize the profits made that day and take it to the collector. This is not necessarily used to collect the entirety of the debt, but to let the business know that you are serious about collecting and that they need to take the appropriate steps to make the debt a priority.

Settlements are often the best way to resolve a corporate debt for several reasons. Large corporations are usually concerned with keeping their names out of the news. A settlement allows the debt to be resolved quickly, without dragging out the process with monthly payments.

While the lender is usually the only person that would not want a settlement, cooler heads normally prevail in this situation. Lenders realize that they are more likely to get the largest amount of their money back by settling.

In the News 03/10/2015

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Under the Servicemembers Civil Relief Act (SCRA), active duty military members and their families are protected from legal action relating to rental agreements, security deposits, prepaid rent, eviction, installment contracts, credit card interest rates, mortgage interest rates, mortgage foreclosure, civil judicial proceedings, automobile leases, life insurance, health insurance and income tax payments.

The United States Department of Justice (USDOJ) recently announced that military service members will receive more than $123 million for unlawful foreclosures, which will affect approximately 952 service members and their co-borrowers.

The SCRA caps interest rates on most loans, including home mortgages and credit cards, at six percent and postpones foreclosures and debt collection lawsuits while a service member is deployed. This settlement is the result of a national settlement for violation of the SCRA between the U.S. Government and five of the United States’ largest mortgage services, including JP Morgan Chase Bank, Wells Fargo Bank and Citibank.

Read here for more information: http://www.justice.gov/opa/pr/service-members-receive-over-123-million-unlawful-foreclosures-under-servicemembers-civil

Atkins & Ogle Law Offices, LC offers its sincerest gratitude to all of our nation’s servicemen and women.

Collecting Corporate Debts, Part II

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As we discussed last week, collecting the debt of a corporation is significantly different than collecting the debt of an individual. Over the course of this blog, we’ve discussed at length the authority and regulations of the Fair Debt Collection Practices Act (FDCPA), and this might be the most considerable difference between consumer and corporate debt collection.

A lower degree of compliance is required when dealing with corporate debt. The regulations put in place by the FDCPA do not apply to commercial debts, and even the West Virginia Consumer Protection Act excludes commercial transactions.

As a result, collectors are able to pursue commercial clients more persistently, without fear of violating FDCPA standards or even fear of the nuisance lawsuits that are rampant throughout the industry today. Collectors should still use good business sense when pursuing these interests; however, they are allowed more leeway and flexibility in engaging corporations.

Commercial debtors are also typically held to higher standards in court. Contracts are more strictly interpreted and enforced in terms of interest rates, payment due dates, attorney fees, equipment levees, creditor bills, receiverships, liabilities and other clauses. Any of these may be enforceable and valid but are much less likely to be imposed against an individual consumer.

Lawyers often cite the hypothetical least sophisticated consumer standard when representing individual debtors. This standard was created to protect all consumers (no matter their education level or understanding of their debt or contract) by suggesting that even the least sophisticated consumer would have been deceived or misled by the terminology and true meaning of a given contract. However, it is assumed that corporations would be much savvier in understanding the agreement into which they were entering.

What do you think? Should corporations be held to a higher standard of contractual obligation than individual consumers? Tell us your thoughts in our comment section, and check in next week for the final installation of our series on collecting corporate debt.

In the News 03/03/2015

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In Tuesday’s post on Collecting Corporate Debts, we discussed the least sophisticated consumer standard. This week in the news, Attorney John Rossman expands on that concept on insideARM.com. This standard is an established tenet in FDCPA law, as it suggests that all debt collection communication must be approached this way.

However, many practitioners also recognize that the exception to this rule is collection communication with a consumer’s attorney. This has been debated in the past, but recently the 11th Circuit Court of Appeals stated that “statements in a proof of claim filed in a Chapter 13 Bankruptcy are subjected to the least-sophisticated consumer standard” in the Crawford decision.

While the Crawford decision is most widely known for its interpretation of the crossroads between bankruptcy law and the FDCPA, the implications regarding communications between consumers and attorneys are also notable. For more information, visit: http://tinyurl.com/mm6y2r6.

Collecting Corporate Debts, Part I

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Approximately 77 million Americans are in some form of debt. Most debt collection agencies and law firms focus a lot of their time, energy and resources on collecting these retail consumer debts. However, businesses and corporations can also default on loans and mortgages and purchase inventory they cannot afford.

For collectors, compelling a commercial debt can be significantly different than collecting an individual consumer debt (although many firms use the same processes). Depending on the corporate structure, using your tried and true policies and procedures may be the best course of action for continuity for your employees and records.

An important step in collecting a corporate debt is finding the right person to contact. For a small business, it’s usually the owner, but for a corporation or chain, it is typically someone in the accounts payable department. When a collector is researching the appropriate contact, he or she might find that there are actually two debtors: the named corporation and a personal guarantor, an individual who also signed their name to the purchase or contract.

Corporate debts are often easier to collect, and corporations are often more likely to pay than individual consumers. There are fewer restrictions on the collector and often, more money is involved.

However, depending on the size of the debt and the stability of the company, corporate debts also have a shorter life. While a personal debt can be pursued until the debtor passes away (and even then, certain debts are inherited by relatives) or the statute of limitations expires, if a company goes out of business, files bankruptcy or becomes defunct, time expires for the collector.

Over the course of this three part series, we will look at the unique differences and practices involved in the collection commercial debts. Be sure to check in next week for more information!