Student loan debt is a hot topic that will likely only get hotter as the amount of student loan–currently over 1 trillion dollars–continues to rise.

The National Consumer Law Center recently published a report that criticizes the Department of Education and it’s contracted debt collection companies, saying that “the Department has created financial incentives for its contractors that encourage high collections at the expense of borrower rights.”

Complaints against student loan collectors are rising

The report was critical of the Department’s use of external collection companies to collect on defaulted student loans. All told, the Department of Education contracts with 23 collection companies to try and recover on the defaulted loans. In general, the report raised concerns about the level of oversight with the collectors.

Specifically, the report cited apparently rising numbers of complaints filed against student loan debt collectors. Notably, the report acknowledged that the current complaint system is not widely accessible, meaning the number of complaints could be an understatement.

The report also criticizes the current systems for evaluating the success of collectors, which appears to place an overwhelming emphasis on dollars collected, and an proportionately lower-value on customer service.

Nearly $1 billion dollars paid in commissions in 2011

The report details how the Department of Ed evaluates contractors with a series of metrics that result in a total score evaluating the collector’s performance. The report bases this analysis on Private Collection Agency (PCA) manuals. These manuals are provided to PCA once they have a contract with the Department of Education to collect student loans.

The most important metric used in that evaluation is the percentage of dollars collected on federal student loan accounts. This accounts for a possible 70 points.  The second most important metric is the number of accounts that have activity as a result of the collector’s efforts. This accounts for a potential 20 points.

Another 10 points are available for accounts for administrative resolution and 5 points are available for using small businesses on subcontracts to assist in collection efforts.

The metric for “service quality” is not defined. There is information indicating that if the Department receives a complaint about a collector, and then another complaint resembling the first, the Department will deduct 2 points on the next evaluation. The report suggests, however, that given the high number of complaints and high scores of collectors, the department does not automatically deduct those points.

In other words, there is evidence suggesting that complaints against the collectors have little to no bearing on the score used to evaluate collector performance.

Complaints? What complaints??

The PCA’s provide strict requirements for receiving, tracking, and dealing with consumer complaints. Specifically, the collectors must maintain records of all complaints, provide a fax number for complaints, designate at least two employees to receive and process complaints, and suspend all collection activity after a complaint is received. The collector must also forward complaints directly to the Department of Education. This can trigger a response from the Department of Education that may even lead to revoking the contract.

According to the report, consumers interacting some collectors will have difficulty locating information on how to file a complaint. In fact, for some consumers they may be wholly unable to find that information. For other collectors, the report suggests the procedures do not meet the Department of Education’s requirements for complaints. Allegedly, at least one company simply referred complaints directly to the Department of Education.

Given the potential penalties, however, the reports suggest that many collectors make it difficult to file complaints for that very reason. If the collector does not receive the complaint, they have no way of passing it  on to the Department of Education. As a result, this would theoretically limit any potential action from the Department of Education regarding the collection contract.

Bottom line: you have options and you have rights

It is unknown whether the report will lead to any changes in borrower rights or how student loans are collected. In the meantime, consumers and borrowers need to understand they have rights.

Student loans that are backed by the federal government provide borrowers with specific rights. In addition, whether a student loan is privately backed, or federally backed, all consumers have rights against debt collectors.

If you have questions or concerns about student loans or interactions with a debt collector, please contact me.

(photo: http://www.flickr.com/photos/owsposters/6539556293/)

Complaints against debt collectors have surged in recent years, which has somewhat masked another issue in the consumer credit realm: debt buyers. Debt buyers purchase charged-off debts from original creditors at a fraction of the price and then attempt to collect the full amount of the debt.

According to a recent article involving a debt buyer case in California, a sales agreement signed by Bank of America stated that Bank of America made no guarantees as to the accuracy of the credit records as part of a sale to a debt buyer. In other words, “buyer beware.”

Sold as is

According to the sales agreement submitted in California court, when Bank of America sold the charged off accounts, it made essentially no guarantees about the accuracy or completeness of the records.

Even worse, the agreement allegedly contained language stating that some of the debts may have been discharged in bankruptcy and some debts that may have already been paid back by the consumer.

In other words, they may have sold debts that were already satisfied or discharged in bankruptcy. All the more reason to do some due diligence when contacted by a debt buyer.

What you need to watch for

If you are contacted by a debt buyer, you can request validation of the debt. If you are sued by a debt buyer in Minnesota, you need to serve a written response within 20 days to protect your legal rights.

Frequently, consumers sued by debt buyers ignore the lawsuits, which results in a default judgment. If you have been sued by a debt collector or a debt buyer, you should immediately contact an attorney.

Consumers frequently ignore debt buyer lawsuits for any number of reasons: they don’t recognize the company, they think they paid it off, or they think the lawsuit is fake.

In Minnesota, however, a lawsuit can be initiated without filing it with the court. In other words, a summons and complaint without a court number is very likely a legitimate lawsuit. Failure to respond within 20 days means you the debt buyer can get a default judgment—which means you lose before your case even starts.

You can fight debt buyer lawsuits

Debt buyers frequently have problems producing the necessary evidence to substantiate their claims. In some cases, the only evidence they produce is attached to what appears to be a robo-signed affidavit. That evidence may ultimately be deemed not admissible.

I help consumers fight these cases and depending on the facts of your case, you may be able to get the debt buyer lawsuit dismissed, or settled for significantly less than the amount requested.

If you are in Minnesota, contact me today for a free case evaluation.

Debt collectors are strictly regulated under the Fair Debt Collection Practices Act, which protects consumers against unfair, deceptive, and abusive debt collection.

Consumers frequently complain about debt collectors trying to collect on old debts. In fact, debt buyer Asset Acceptance paid $2.5 million dollars to settle a FTC lawsuit, which alleged that Asset Acceptance failed to tell consumers that certain debts were too old to be legally enforceable.

The FTC released a guide to help consumers understand old debts, here are some key things to know.

Can a debt collector call me about an old debt?

Debt collectors are allowed to call consumers about old debts, with certain limitations. A debt collector cannot threaten to sue you, or actually sue you on a time-barred debt—those are violations of the Fair Debt Collection Practices Act (FDCPA). Depending on what state you live in, it may also be illegal for collector to even call you about a time-barred debt.

If you think a debt is old or beyond the statute of limitations, ask the debt collector. Among other things, the Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from making any false or misleading statements. In other words, if you ask if a debt is beyond the statute of limitations, they have to give you an honest answer. If not, they have likely violated the FCDPA.

Can I be sued on an old debt?

A lawsuit on a time-barred debt is a violation of the FDCPA. Depending on your state, debt collectors may still attempt to collect the debt. Some states forbid the collection of time-barred debts, but some states allow debt collectors to try and collect (not sue) on time-barred debts.

If you think a debt is time-barred, you should contact an attorney to make sure it a valid defense. The statute of limitations usually starts when you miss a payment (called default). The definition of default is usually defined the terms and conditions of the contract. In other words, the “age” of the debt really depends on when default started.

The applicable statute of limitations depends on the choice of law in the terms and conditions and the statute of limitations in your state. Some credit card contracts elect the law of another state. In addition, the statute of limitations varies from state to state, from 3-10 years. You will want to check the terms of your contact very carefully. In addition, be aware that student loans may have a completely different applicable statute of limitations, depending on what type of loan you have.

The bottom line is that if you are being sued on an old debt, or are subject to collection efforts on an old debt, you should contact a local attorney to help you sort things out. If you are in Minnesota, please contact me for a free case evaluation.

(photo: http://www.flickr.com/photos/gc_photography/3207883698/)

Debt collectors are strictly regulated in how they collect debts from consumers. One common consumer complaint is that debt collectors are calling a consumer at their workplace, harassing a consumer and/or co-workers, or revealing the debt to co-workers.

If debt collectors have contacted someone else about your debt, here is what you need to know about your rights under the Fair Debt Collection Practices Act (FDCPA).

Does your employer prohibit collection calls at work?

If a debt collector knows, or has reason to know, that a consumer’s employer prohibits calls from a debt collector, or personal calls, they cannot contact the consumer at work.

Debt collectors usually learn this one of two ways. One, if a consumer tells a debt collector they are not allowed to take collection calls at work, that puts them on notice. Two, if a debt collector talks to a co-worker, and the co-worker informs the debt collector that the employer prohibits collection calls at work, that also puts them on notice.

Did you tell the debt collector to stop calling your workplace?

As noted above, if you tell a debt collector to stop calling you at work, they have to stop. This is actually covered by two separate provisions of the FDCPA: prohibited calls to the workplace and calls at an inconvenient or unusual time or place.

If you told a debt collector to stop calling your workplace, make a note of it. If they continue to call you, you will want to know when you first told them to stop calling.

Did you consent to receive collection calls at work?

A debt collector may only contact a consumer at their workplace if the consumer gives them consent, or with the express permission of a court of a competent jurisdiction.

In other words, if you tell them to stop calling you at work, that should be the end of it. Subsequent phone calls to your workplace may be violations of the FDCPA.

What did the debt collector tell your co-workers?

If someone else at your workplace was contacted by a debt collector about your alleged debt, the debt collector may have violated other provisions of the FDPCA. For example, debt collectors cannot reveal a consumer’s indebtedness to a third-party.

If one of your co-workers is receiving collection calls about your alleged debt, find out everything the debt collector told them. If the debt collector revealed the debt, they may have violated the FDCPA.

If you think your rights have been violated, please contact me.

(photo:http://www.flickr.com/photos/dennissylvesterhurd/126701929/)

Debt collectors are strictly regulated in how they collect debts from consumers. One common consumer complaint is that debt collectors have been harassing family, friends, or co-workers in an attempt to collect a debt.

If debt collectors have contacted someone else about your debt, here is what you need to know about your rights under the Fair Debt Collection Practices Act (FDCPA).

Debt collectors can only acquire location information

Location information is defined as a consumer’s home address and home phone number or workplace and workplace address. A debt collector must identify themselves, but should only reveal their employer (the name of the debt collector) if a third-party asks for the information.

In other words, if a debt collector already knows how to contact a consumer (they have location information), then there is no reason to call a family member, friend, or co-worker. The collector cannot ask the third-party to pass on a message, ask for other information, or harass the third-party.

In fact, third-parties have standing to bring claims under the FDCPA if they are harassed. That means a person who has been harassed—regardless of whether the debt is theirs—can bring a claim under the FDCPA.

Debt collectors can only call third-parties once

A debt collector is not allowed to contact a third-party more than once unless requested to do so by the third party. In other words, if a debt collector calls a consumer’s parents, or sister, or co-worker, they cannot call again unless that person asks them to call them again. There’s a pretty slim chance of that happening.

If a debt collector has called someone else about your debt, ask that person how many times the debt collector called. There’s a decent chance it happened more than once.

Debt collectors cannot reveal a consumer’s debt to a third-party

If a debt collector contacts a third party, they cannot reveal the consumers debt. Congress was specifically concerned with debt collectors harassing other people to pressure a consumer to repay a debt.

In reality, revelation of the debt happens often. A collector may not reveal the specific debt and dollar amount, but they sometimes mention “they owe money” or “they owe a debt.” That is not allowed under the FDCPA.

Debt collector contacts to third parties are a frequent source of FDCPA violations. Although debt collectors are tightly regulated in what they can say, they frequently stray from the script. If you think your rights have been violated, please contact me.

(photo:http://www.flickr.com/photos/didmyself/6173148336/)

For most people, the decision to file bankruptcy is a difficult one. While bankruptcy makes financial sense for many individuals, the social stigma can feel overwhelming. At the same time, many individuals feel the need to file bankruptcy to stop repeated calls from debt collectors.

Filing bankruptcy should stop debt collection. Unfortunately, it’s not always that simple. Here is what you need to know.

Upon filing, the automatic stay goes into effect

Once a bankruptcy petition is filed, all debt collection efforts must cease. It is that simple. Creditors and debt collectors listed on your bankruptcy petition should receive notice directly from the bankruptcy court—and should stop any and all collection efforts.

It does not matter if your bankruptcy has been discharged. Once you file your petition, the automatic stay goes into effect. During the period between when you file and when your petition is discharged you are protected.

If you have been contacted by a debt collector after filing bankruptcy, there is a chance the creditor or debt collector has violated the bankruptcy code and the Fair Debt Collection Practices Act (FDCPA). If this happens to you, immediately contact your bankruptcy attorney or a consumer rights attorney.

Asking for information about your bankruptcy attorney

Once a debt collector knows you are represented by an attorney and they have contact information for your attorney, they cannot contact you. The debt collector is not allowed to ask details about your bankruptcy attorney—like whether you have paid them, when you are filing, etc. All they need to know is the attorney’s name and contact information.

If a debt collector continues to ask questions about your bankruptcy attorney, or if they continue collecting on a debt after learning you have an attorney, they may have violated the FDCPA.

Once your debts are discharged, they cannot be collected

Certain debt collectors are notorious for trying to get one last bite at the apple—trying to collect a discharged debt one last time. That is a big no-no. Once the debt is discharged in bankruptcy, it is not be collected and you do not owe it. In rare situations, a creditor may not have received notice of the bankruptcy, and may have a justified reason for attempting to collect—but that excuse only works once. Once they have notice, they cannot collect.

In many cases, however, the creditor or collector received notice of the bankruptcy is simply making one last attempt to collect. Many consumers are caught off guard and not only feel harassed, but they agree to make a payment. If a debt collector is trying to collect on a debt that you have discharged in bankruptcy, they may have violated the bankruptcy code and the Fair Debt Collection Practices Act.

If you have discharged a debt in bankruptcy and you are still being contacted by debt collectors or if you have questions about your rights against debt collectors, please contact me.

(photo:http://consumerlawyer.mn/wp-content/uploads/bankruptcy-debt-collector-debt-collection.jpg)

When most people think of consumer debt, they think of credit card debt. Recently, however, student loan debt surpassed the total amount of consumer credit debt—totaling more than $ 1 trillion dollars.

Depending on the type of loans, consumers have a variety of repayment options and rights during the collection process. Randall Ryder, along with another local consumer attorney, recently discussed student loan repayment options during a CLE presentation at the University of St. Thomas Law School.

Student loan repayment options

Depending on the what type of student loans you have—government or private loans—there are usually more than one way to repay your loans. A good starting point for information is the student debt repayment assistant on the consumer financial protection bureau’s website. The assistant provides a quick and easy way to learn what repayment options might be available to you.

In addition to a variety of repayment options, there are also ways to defer payments, request a forbearance, and even potentially have your loans discharged. By researching online, you can get a good idea of what repayment options you have, and which options might be best for you. At the same time, it is also a good idea to consult with a a tax adviser, tax attorney, and even a consumer rights attorney that handles student loans before making a decision.

Rights during the collection process

According to one source, there are currently $33 billion dollars in loans that are in default and in collections. This reportedly includes approximately 3 million borrowers. The bad news is that if your government loans are in default, you lose a number of governmentally-provided rights on those loans. For example, if your loans are in default, you cannot select a different payment plan and you are ineligible for additional government student loans.

The good news is that the collection companies that contract with the Department of Education still have to follow federal law—the Fair Debt Collection Practices Act (FDCPA). The FDCPA protects consumers against unfair, abusive, and harassing debt collectors. Some common violations include calling your family members about your debt, calling your workplace, and providing misleading information during a collection call.

Bottom line: you have options and you have rights

Student loan debt can be overwhelming, but depending on the type of loans, and the status of your loans, you should have more than one repayment option.

If you need help understanding and choosing a repayment plan or if your student loans are in collections, please contact me.

(photo:http://www.flickr.com/photos/58687716@N05/6207566816)

Midland Funding, LLC, one of the largest debt buyers in the country, recently dismissed a debt collection lawsuit in excess of $22,000 against one of the firm’s clients.

The client was thrilled with the result, to put it mildly.

The lawsuit alleged that Midland Funding had purchased a line of credit debt that was allegedly opened by the client and their ex-spouse. The client, however, had a paper trail showing that they were not responsible for the debt and had been disputing it’s validity for years.

Upon learning that the client was represented by The Ryder Law Firm, LLC, opposing counsel reached out in an attempt to amicably resolve the matter. Bringing the proverbial bazooka to a gunfight, we produced a 5 page affidavit with 70 pages of exhibits to prove the client was not liable.

Not long after that, Midland Funding agreed to dismiss the case with prejudice against the client. If you are involved in a debt collection lawsuit, please contact me to see how I can help.

Randall Ryder got a local debt collection law firm to dismiss a debt collection lawsuit after one phone call.

A local small business owner met with Randall Ryder to discuss a Summons and Complaint he received. After reviewing the documents, along with a collection letter, it was apparent that the lawsuit was outside the statute of limitations. In particular, the alleged unpaid services were last performed in 2004.

In Minnesota, depending on the claim, the statute of limitations is either 4 or 6 years. Either way, it was apparent this case was beyond either one.

Within a half-hour of Ryder explaining the problem to the local debt collection law firm, the firm called back and agreed to dismiss the case with prejudice—agreeing that it appeared the case was outside the statute of limitations.

Understandably, the client was thrilled. The client said “I heard he [Ryder] sticks up for the little guy and I was impressed at how fast he resolved my case.”

Randall Ryder met with Minnesota residents to discuss consumer rights against debt collectors. As part of a program offered by the Washington County Law Library, Randall met with consumers at a Washington County Library branch to discuss consumer debt relief.

Randall discussed consumer rights against debt collectors and answered questions on the Fair Debt Collection Practices Act, how to find the appropriate debt collection resources, and when to contact a consumer rights lawyer.

By all accounts, the presentation was well received and attendees were thankful to learn about their rights under the Fair Debt Collection Practices Act.