December 15, 2017

Payday Loans Banned in Georgia? Not So Fast….

high interest short term loans allowed in GeorgiaIn 2004 the Georgia legislature passed legislation that was designed to outlaw “payday lending” – the practice of finance companies making high interest short term loans of a few hundred or a few thousand dollars.  According to the Georgia Department of Banking and Finance, a payday loan involves the practice of using a post-dated check or electronic checking account access to repay the loan.

Payday loans can have an effective interest rate of 300% and bad check and delinquency charges can quickly turn a $300 loan into a $1000 debt.

When payday loans were legal, most of the loan transactions were made by small, storefront lenders usually located in run down areas of town.

Lenders caught making payday loans (as defined by the statute) face possible felony racketeering charges and large fines.  Thus, if you search for “payday loans” in the Internet, most of the sites that come up will note that Georgia does not allow these types of loans anymore.

Interestingly, most states still do allow payday loans and I even found a report issued by the Federal Reserve Branch of New York which concludes that payday loans, while expensive, serve a need and should not be characterized as “predatory.” [Read more…]

Student Loan Debt may be a Bigger Problem than Credit Card Debt

how to pay student loan debtUSA Today recently reported that student loan debt in the United States, which totals $850 billion, now exceeds outstanding credit card debt in the U.S., which totals $828 billion.

USA Today gets its numbers from a web site publisher named Mark Kantrowitz, who publishes two scholarship matching services called FinAid.org and FastWeb.com.  I was unable to independently verify Mr. Kantrowitz’ numbers but if you Google “total credit card debt in U.S.” and “total student loan debt in the U.S.” you will get numbers in the range quoted in the USA Today article.

I actually thought that a more interesting element of this issue has to do with the monthly repayment numbers facing borrowers.  The USA Today article suggests that $30,000 of student loans, payable at 6.8% interest over ten years would amount to $350 per month.  At this level of debt, the average person would need to earn at least $42,000 per year.

In my practice I have frequently seen student loan debt far in excess of $100,000, with monthly payments over $1,000.

In a bankruptcy context, student loan debt is not dischargeable except in cases of “undue hardship.”  In the Northern District of Georgia, “extreme hardship” has essentially been limited to student loan debtors who have a medical issue that prevents them from working.   At this point in time, debtors in the Northern District have not been successful in arguing for hardship discharge on the grounds that they cannot find a job that pays enough to support their student loan obligations.  There was a recent Supreme Court decision involving student loans and bankruptcy, but that case did not address the substantive issue of what constitutes “undue hardship.” [Read more…]

Words of Wisdom for High School Graduates

avoid credit cardsYesterday, my son graduated from high school.   His class selected a math/environmental sciences teacher named Nicole Brite to deliver the faculty address to the senior class.  Ms. Brite delivered a spectacular address which was meaningful, witty and thoughtful (and she received a well deserved standing ovation from both the students and the audience).

In one part of her speech, Ms.  Brite turned to the graduates and said  “now I am going to offer you some words of advice that I wish someone had said to me when I was leaving high school.”   One of the points she made I think is applicable to everyone, not just high school students. [Read more…]

Tiny, Hidden Credit Report Errors Can Lead to Bankruptcy

Credit reporting mistakesThe Wall Street Journal recently published a new story entitled Hidden Medical Debt Trips Up Homeowners. The report documented several cases in which small medical bills that had been turned over to collection resulted in a more than 50 point drop in a homeowner’s credit score.

In one situation, a homeowner attempted to refinance his mortgage, only to discover that two unpaid medical bills totaling less than $50 had caused his credit score to drop.  As a result of the lowered credit score the refinancing bank demanded over $4,000 in closing costs.

In another situation, less than $500 of medical debt reported to a collection agency disqualified a homeowner from a favorable interest rate, which would have resulted in tens of thousands of extra interest charges.

In many of these situations, the consumer never knew about the unpaid medical debt – the provider simply turned the claim over to a collection agency which immediately reported it to the credit reporting agencies as delinquent debt.

According to the Journal, “otherwise well-qualified borrowers with good loan-to-value ratios and steady employment are increasingly finding it difficult to refinance because of medical billing mistakes marring their credit.”

If you or a loved one has been in the hospital, you probably know that a single visit can result in five, ten or even more bills from separate vendors – the hospital, the hospital pharmacist, the anesthesiologist, the ambulance service, etc.  I do not find it surprising at all that a patient would not know about one or more bills. [Read more…]

Authorities Halt “Unconscionable” Scam by Collection Agency

Unicredit scamMy Bankruptcy Law Network colleague Dana Wilkinson, who practices in South Carolina, reports on an unbelieveable scam perpetrated by a collection agency in Pennsylvania.   According to a press release issued by the state attorney general, the Unicredit Collection Agency created a bogus “court system” to trick consumers into paying debts.

Unicredit employees dressed like sheriff’s deputy’s and “served” papers resembling lawsuits on consumers

Unicredit issued fake “court notices” for hearings and depositions

Unicredit built a fake courtroom, complete with a fake judge, where debtors would be intimidated into providing access to bank accounts or surrendering car titles

The Pennsylvania attorney general has shut down Unicredit and has filed suit against the company seeking restitution for harmed consumers.

What can we learn from the Unicredit story?  [Read more…]

New Credit Card Protections Trigger Higher Fees by Card Issuers

As you may know, last year Congress passed a law called the Credit Card Accountability Responsibility and Disclosure Act of 2009.  This law, nicknamed the CARD Act of 2009, was designed to regulate a variety of unpopular credit card tactics, such as interest rate increases without notice, inactivity fees and unfair interest calculations.

According to credit card industry analysts, the CARD Act of 2009 will eliminate over $390 million in fees for credit card issuers.  Not surprisingly, the credit card companies do not intend to walk away from this fee income.  For every fee and penalty eliminated by the CARD Act, credit card issuers are finding replacements.   For example the annual fee for many cards has been increased, sometimes dramatically.  Card issuers are also sending corporate card applications (called “professional cards”) to consumers.  Corporate cards are not included in the CARD Act.

The Wall Street Journal recently ran a story explaining how the credit card companies intends to recoup their lost fee income.   The bottom line: the CARD Act of 2009 will eliminate some consumer-unfriendly tactics used by the credit card companies, but it will trigger an equal number of new consumer-unfriendly tactics.  Caveat Emptor.

Afraid that You Could Lose Your Job if You File Bankrutpcy? The Law Says “No,” but….

Last month, my friend and colleague, Charleston bankruptcy attorney Russ Demott published an interesting article on his web site entitled “Fired for Filing Bankrutcy? No way!” This article was written by Elyria, Ohio bankruptcy lawyer Bill Balena, who notes that the Bankruptcy Code specifically forbids “employee discrimination” based on a bankruptcy filing if:

  • You are, or have gone through a bankruptcy proceeding
  • You are insolvent either before filing a bankruptcy or while your petition is pending;
  • You have not paid a dischargeable debt

Let’s take a closer look at what the Code actually says.  Pay particular attention to the different language that applies to government employers vs. private employers.

Section 525 of the Bankruptcy Code contains the following language:

As to governmental units:

[with limited exceptions] a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

As to private employers:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt— [Read more…]

FDCPA Does Not Give Debt Collector the Right to Leave Messages on Your Phone Answering Machine

Answering machine blinkingAs you may know, there are both federal and state laws that offer a variety of protections to individuals who are in debt and who are being dunned by debt collectors.  The Fair Debt Collection Practices Act offers a variety of protections in cases involving collection agencies (as opposed to the actual creditor).  In other words, a credit card company can do and say certain things and remain legal, but if a collection agency does or says the exact same things, those actions would be a violation of the FDCPA and make the collection agency subject to a claim for damages.

Two of the protections provided by the FDCPA include:

  • a prohibition against communicating with a debtor when the collection agency employee does not identify himself as a debt collector; and
  • communicating about your debt with third parties

The 11th Circuit Court of Appeals (which provides controlling precedent for Georgia) recently issued an important decision that struck down a somewhat bizarre argument by a debt collector regarding phone messages.  This case benefits consumers by clarifying the rules about telephone messages by bill collectors.

The case of Edwards v. Niagara Credit Solutions involved a situation in which the debt collector (Niagara) left “bare bones” messages on a phone answering machine asking Ms. Edwards to call back about an “important matter.”

Niagara argued that its employee did not identify itself as a debt collector because someone other than the debtor might hear the message, thus violating the “third party communications” prohibition. [Read more…]

Loan Modification Myths Busted

Can you modify your mortgage loan to reduce your principal balance? your interest rate?  other terms of your mortgage?  Over the past few months, I have heard a lot about mortgage modifications but very few details have emerged and I know of no one who has actually and successfully modified his mortgage.

I may be on the right track in obtaining more information.  One of my new colleagues at Solo Practice University (where I teach a class about creating a Social Security disability practice) is an attorney in New York who has actually represented clients and has obtained mortgage modifications.  She will be teaching a class about real estate law at SPU and I hope to be able to pick her brain about mortgage modifications.

In the meantime, here is a link to a recent blog post that Stefanie wrote entitled The Top 5 Loan Modification Myths.   I hope that more solid information from legitimate professionals who understand mortgage modification becomes available so I can bring it to you in the pages of this bankruptcy blog.

“Debt Settlement” vs. Bankruptcy

Although I am a bankruptcy lawyer, I tell everyone who visits my office for a consultation the same thing:  “bankruptcy is a last resort – do not file for bankruptcy unless you have no other choice.  It will damage your credit and negatively affect your financial future for months or years to come.”

What, then, are the alternatives to bankruptcy if you are struggling with out-of-control debt?

One of the best known but least understood solutions to debt is known as “debt settlement.”  In general terms, debt settlement refers to a process by which you or a representative negotiates with a creditor for:

  • a lower balance/forgiveness of debt
  • a reduced interest rate
  • a reduced monthly payment
  • some or all of the above

Unfortunately it is easy to speak of debt settlement in the abstract – as always “the devil is in the details.”   Here are my observations: [Read more…]

Page optimized by WP Minify WordPress Plugin