The Maryland Consumer Lawyer

Musings on Debt Collection Harassment, Foreclosure Defense, Debt Lawsuit Defense in Maryland

POST BANKRUPTCY DISCHARGE CREDIT REPORTING AND THE FCRA

If you are a Maryland resident and a credit rating agency or creditor refuses to update your credit report to reflect a bankruptcy discharge, email us at info@mdconsumerlawyer.net or visit us at www.mdconsumerlawyer.net for a free evaluation of your case.

This is the second in a series of posts concerning post bankruptcy discharge credit reporting. With respect to what can be reported on credit reports post discharge, under the FCRA the reporting of incomplete or inaccurate information on a consumer’s credit report is prohibited. Reporting a balance owed on a debt after a BK discharge is an FCRA violation and possibly also a violation of the discharge injunction. The FCRA and the ensuing regulations are quite clear that a credit report must accurately reflect the fact that a debt has been discharged in bankruptcy :

16 C.F.R. 600 app. § 607(b)(3)(F)(2) (“[A] consumer reporting agency may include delinquencies on debts discharged in bankruptcy in consumer reports, but must accurately note the status of the debt (e.g. discharged, voluntarily repaid).”)

There is also ample case law in this regard. For example, in In re Torres, 367 BR 478 – Bankr. Court, SD New York 2007 the court noted:  “However, a credit report that continues to show a discharged debt as “outstanding,” “charged off,” or “past due” is unquestionably inaccurate and misleading, because end users will construe it to mean that the lender still has the ability to enforce the debt personally against the debtor, that is, that the debtor has not received a discharge, that she has reaffirmed the debt notwithstanding the discharge, or that the debt has been declared non-dischargeable. See In re Helmes, 336 B.R. 105, 107 (Bankr.E.D.Va.2005):

A credit report entry that reflects a past due account is treated differently by prospective creditors in evaluating credit applications than an entry that reflects a debt that has been discharged in bankruptcy. The essential difference is that a discharged debt represents a historical fact, that the prospective borrower filed bankruptcy in the past and was relieved from the obligation. Nothing is now due. A past due debt represents a delinquent but legally enforceable obligation that must be resolved. See also Turner v. J.V.D.B. & Assocs., Inc., 330 F.3d 991, 995 (7th Cir.2003) (assertion that a person owed a debt that, because of the discharge, in effect no longer exists, is “on its face … false.”); White v. Trans Union, LLC, 462 F.Supp.2d 1079, 1082 (C.D.Cal.2006) (credit reports that do not reflect a bankruptcy discharge are inaccurate).

LOANS ISSUED BY UNLICENSED ONLINE PAYDAY LOAN COMPANIES MAY BE ILLEGAL AND THEREFORE NONCOLLECTABLE IN MARYLAND

If you are having issues with payday loan companies or their collectors in Maryland, email us at info@mdconsumerlawyer.net or visit www.mdconsumerlawyer.net

One of the more disturbing developments for Maryland consumers over the past few years has been the proliferation of online payday loan companies offering to deposited funds directly into consumers’ bank accounts.   Many of these online payday loan companies are unlicensed in Maryland. These companies typically require applicants to submit all manner of financial information online including bank account details. What happens next varies depending on the company but typically ends up badly for the consumer.  In some cases the consumer is required to pay an exorbitant amount of interest and or fees in the repayment of the payday loan. In other more extreme cases, the payday loan company fraudulently withdraws unauthorized amounts from the consumer’s bank account. As if this were not bad enough, these companies have been known to sell consumers’ financial information to all manner of unscrupulous and many times unlicensed entities that then use such information to harass and extort payments from the consumer.

What many consumers do not realize is that many of the online payday loan providers are not licensed in Maryland and thus the loans they provide may be illegal and therefore noncollectable in the first place. Section 11-204 of the Financial Institutions Article (“FI”) of the Maryland Code states:

…  “[u]nless a person is licensed by the Commissioner, the person may not: (1) [m]ake a loan . . . .”

Furthermore, Section 12-302 of the Commercial Law Article § 12-302, states:

…a “person may not engage in the business of making loans under this subtitle unless the person is licensed under or is exempt from the licensing requirements of Title 11, Subtitle 2 of the Financial Institutions Article, Annotated Code of Maryland, known as the Maryland Consumer Loan Law – Licensing Provisions.” [1]

With respect to collection on such loans, the Maryland Consumer Debt Collection act makes it unlawful for a collector to:

“…Claim, attempt, or threaten to enforce a right with knowledge that the right does not exist…”[2]

Simply put, if you have taken out an online payday loan with an unlicensed company, the company and or its collectors may not have any legal recourse to collect any unpaid amounts. Further if the unlicensed online payday loan company or subsequent collector harasses you in any way or tries to take you to court in connection with an illegal loan, you may be able to sue the company or collector for damages.

If you have any issues with online payday loan companies or if you are being harassed by a debt collector, contact us today for a free evaluation of your case.


[1] Pursuant to CL § 12-301(c), a “lender” “means a person who makes a loan under [Subtitle 3].” Pursuant to CL § 12-301(e), a “loan” “means any loan or advance of money or credit made under [Subtitle 3].”

[2] Md. Code Ann., Com. Law (“CL”) § 14-202(8).

CHARGE OFFS, BANKRUPTCIES AND YOUR CREDIT REPORT

CHARGE OFFS, BANKRUPTCIES AND YOUR CREDIT REPORT

I received a question recently concerning how charge offs prior to a bankruptcy discharge should be reported on a consumer’s credit report and felt that the topic merited a bit of a discussion here.

All debts discharged in bankruptcy should be reported as such with a balance of “zero” for the affected trade lines on the consumer’s credit report. Not doing so would amount to a violation of the requirement to provide accurate information on the consumer’s report (FCRA Section 623(a)(1)) as well as fail the “reasonable procedures” requirement of FCRA section 607(b).

Note that the FCRA does not prohibit the reporting of a “charge-off” in addition to the reporting of a discharge in bankruptcy for the same account. However, the report must still accurately reflect that the debt has been discharged in bankruptcy and the balance on the account is “zero”.

If a charged off debt has been discharged in bankruptcy and a consumer’s credit report only shows the charge off and outstanding balance and not the bankruptcy discharge with a balance of “0″, then the consumer should certainly dispute that trade line and pursue legal action if it is not corrected.

There was previously a little bit of confusion on this question due to two seemingly contradictory FTC Staff opinion letters:

1998 Lovern Letter: labeling an account that is discharged in bankruptcy as “charged off as bad debt” if the account was open and not charged off as bad debt when the consumer filed bankruptcy is not a “reasonable procedure.”

1999 McCorkell Letter: a creditor or consumer reporting agency is not prohibited from reporting that an account discharged in bankruptcy has been charged off, when it in fact has been charged off.

Reconciling the views in the Lovern Letter and the McCorkell Letter must lead to the conclusion that reporting a discharged loan as charged off in lieu of reporting it as discharged fails the “reasonable procedures” requirement of FCRA section 607(b), but that there is nothing unreasonable about reporting a loan discharged in bankruptcy as also charged off when the bankruptcy discharge is clearly reflected.

If you are a consumer who has completed the bankruptcy process, it is advisable that you request a copy of their credit report from all three credit bureaus. The credit report should indicate a zero balance next to all creditors listed in their bankruptcy petition, unless you acquired new debt during or subsequent to the bankruptcy or re-affirmed the existing debt during the bankruptcy. If your credit report indicates an error,contact us for a consultation, and we may assist you in cleaning up the report. If the credit bureau does not correct the error in the credit report upon request and you have suffered some harm, we may be able to file a lawsuit on your behalf for damages for violations of the Fair Credit Reporting Act.

If you would like to speak with a Maryland Consumer Lawyer about this or any other consumer law matter in Maryland, email us at info@mdconsumerlawyer.net or send us a note in the contact form below.

QUALIFIED WRITTEN REQUESTS UNDER THE REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)

There is confusion abound as to what constitutes a “qualified” written request or “QWR” and how such QWRs may be useful for homeowners (or those representing them) in the foreclosure defense arena. Unfortunately, the internet has contributed in no small measure to this confusion with well meaning but nevertheless non-expert commentators distributing all manner of “samples” some of which arguably bare little resemblance to a true QWR as contemplated by statute.

What follows are some tips as and a quick overview of pertinent sections of RESPA[1] for the practitioner and homeowner:

1.         What is a QWR?

The Statute defines QWRs very broadly as:

“…a written correspondence, other than notice on a payment coupon or other payment medium supplied by the servicer, that (i) includes, or otherwise enables the servicer to identify, the name and account of the homeowner; and (ii)  includes a statement of the reasons for the belief of the homeowner, to the extent applicable, that the account is in error or provides sufficient detail to the servicer regarding other information sought by the homeowner.”[2]

The statute’s definition of a QWR is broad but that does not necessarily mean that a QWR can ask for everything under the sun. There is still some dispute about this, but in general, a QWR should be limited to requests for information reasonably related to servicing. In this author’s view, targeted itemized requests are much more effective (and likely more supportive of a claim for damages based on RESPA’s QWR provisions) than a broad “discovery type” set of questions.

2.         What are a Servicer’s Obligations Upon Receiving a QWR

With rather surprising regularity, QWRs go unanswered by servicers. This should certainly not be the case as servicers have very clear obligations under RESPA in this regard. Upon receipt of a QWR, the Servicer must:

  • Within 5 days (20 days pre-Dodd-Frank) (excluding weekends and legal holidays) –provide a written response acknowledging receipt of the QWR.[3]
  • Within 10 business days – respond within to a request from a homeowner to provide the identity, address, and other relevant contact information about the owner or assignee of the loan.[4]
  • Not later than 30 days (60 days pre-Dodd-Frank) (excluding weekends and legal public holidays) –  if applicable, before taking any action with respect to the inquiry of the homeowner, the servicer must[5]:
  • (A)  make appropriate corrections in the account of the homeowner, including the crediting of any late charges or penalties, and transmit to the homeowner a written notification of such correction (which must include the name and telephone number of a representative of the servicer who can provide assistance to the homeowner);
  • (B)  after conducting an investigation, provide the homeowner with a written explanation or clarification that includes–
  • (i)  to the extent applicable, a statement of the reasons for which the servicer believes the account of the homeowner is correct as determined by the servicer; and
  • (ii)  the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the homeowner; or
  • (C)  after conducting an investigation, provide the homeowner with a written explanation or clarification that includes–
  • (i)  information requested by the homeowner or an explanation of why the information requested is unavailable or cannot be obtained by the servicer; and
  • (ii)  the name and telephone number of an individual employed by, or the office or department of, the servicer who can provide assistance to the homeowner.

It is important to note that under the regulations, a servicer may designate in a notice of transfer of servicing or in some other communication a separate address where qualified written requests must be sent.[6] It is therefore possible that a servicer may not be liable for not answering a QWR that was not sent to the correct address.

3.         Consequences for RESPA Violations

There are rather severe consequences for RESPA violations by a servicer. Section 2605 (f) of RESPA states:

“DAMAGES AND COSTS.—Whoever fails to comply with any provision of this section shall be liable to the homeowner for each such failure in the following amounts:

(1)  INDIVIDUALS.—In the case of any action by an individual, an amount equal to the sum of–

(A)  any actual damages to the homeowner as a result of the failure; and

(B)  any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not to exceed $2,000 ($1,000 pre Dodd-Frank).

(2)  CLASS ACTIONS.—In the case of a class action, an amount equal to the sum of–

(A)  any actual damages to each of the homeowners in the class as a result of the failure; and

(B)  any additional damages, as the court may allow, in the case of a pattern or practice of noncompliance with the requirements of this section, in an amount not greater than $2,000 for each member of the class, except that the total amount of damages under this subparagraph in any class action may not exceed the lesser of–

(i)  $1,000,000 ($500,000 pre Dodd-Frank); or

(ii)  1 percent of the net worth of the servicer.”

In addition, RESPA Section 2605(f)(3) allows for the recovery of attorneys fees and costs in a successful action.

4.         RESPA and Dodd-Frank

This article references RESPA provisions which include amendments to the law made by the Dodd-Frank Act. Note that implementing regulations for the Dodd-Frank amendments are scheduled to be finalized by the Consumer Financial Protection Bureau (CFPB) no later than January 21, 2013 with possible effective dates as late as January 21, 2014. For a comparison of pertinent RESPA sections before and after Dodd-Frank, see table 1 below.

Table 1: Comparison Between Current RESPA Provisions and Dodd-Frank RESPA Amendments

Current RESPA Dodd-Frank Amendments
Acknowledgment of QWR 20 days 5 days
Time to Respond to QWR 60 days 30 days (15 day extension possible)
Damages for Each Violation  – Individuals Actual Damages plus up to $1,000 Actual Damages plus up to $2,000
Damages for Each Violation  – Class Actions The lesser of $500,000 or 1% of servicer net worth. The lesser of $1,000,000 or 1% of servicer net worth.
For more information, visit us at www.mdconsumerlawyer.net or contact us using the form below:


[1] 12 U.S.C. 2601 et seq, full text of RESPA is available online at: http://www.fdic.gov/regulations/laws/rules/6500-2530.html . This article references RESPA provisions which include revisions to the law made by the Dodd-Frank Act. Note that implementing regulations are scheduled to be finalized by the Consumer Financial Protection Bureau (CFPB) no later than January 21, 2013 with possible effective dates as lat as January 21, 2014.

[2] RESPA Section

[3] RESPA Section 2605(e)(1)(A)

[4] RESPA Section 2605(k)(1(D)

[5] RESPA Section 2605(e)(2)(A)-(C). Note that per RESPA section 2605(e)(4)the servicer may extend this 30 day period by an additional 15 days if the servicer notifies the homeowner of the extension and the reasons for the delay in responding. Note also that per RESPA Section 2605(e)(3) upon receipt of a QWR, a servicer may not provide information regarding any overdue payment, owed by a homeowner, to any consumer reporting agency for 60 days.

[6] See 24CFR 3500.21(d)(3)(ii)

Fair Credit Reporting Act (FCRA) – Common Credit Reporting Violations

           The federal Fair Credit Reporting Act (FCRA) provides consumers with certain protections concerning the fairness and privacy of information in the files of consumer reporting agencies (“CRA”). A consumer may bring an action for a violation of the FCRA and recover actual damages plus attorney’s fees and costs for a negligent violation of the Act.  The FCRA also provides that a consumer may recover statutory damages of between $100 and $1,000 per violation as well as attorneys fees and costs, and possibly punitive damages for defendant’s willful violation of the FCRA.

Below are some common issues which could point to the existence of a potential FCRA violation:

1.         Common CRA Violations

  • CRA fails to a perform reasonable investigation into disputed items or fails to delete disputed items from consumer’s file before the end of the 30-day  period (or 45 days in some cases) beginning on the date on which the CRA receives the notice of the dispute from the consumer.
  • CRA reinserts a removed item from consumer’s credit report without notifying consumer in writing within 5 business days.
  • CRA reports outdated information on a consumer credit file (e.g. bankruptcies older than 10 years, judgments older than 7 years, etc).
  • CRA fails to notify debt collector that the debt is the result of identity theft.

2.         Common “Furnisher” Violations

  • Furnisher (the one who “furnishes” the information to the CRA) reports information to a CRA with actual knowledge of errors.
  • Furnisher fails to provide a notice of dispute to any CRA where consumer has provided notice that the alleged debt is disputed.
  • Furnisher fails to provide CRA with notice that an account has been closed.
  • Furnisher fails to conduct a written investigation into the account upon notification of dispute.
  • Debt collector attempts to sell, transfer for consideration, or place for collection a debt after debt collector has been notified under section 605B that such debt arose as a result identity theft.

As noted, these are just a few common violations under the FCRA. The above list is not by any means an exhaustive portrayal of FCRA violations. For example, this note does not discuss the responsibilities of certain “users” of consumer reports under the Act. Furthermore, the potential violations noted above could also signal violations of other Federal laws such as the Fair Debt Collection Practices Act (FDCPA), and State Consumer Protection Laws. Note that in most cases, there is a 2-year statute of limitations on bringing claims under the FCRA.

About the Author: Ayodeji Badaki is a Maryland licensed attorney who focuses his practice on consumer protection matters including representing consumers in debt harassment casesdebt lawsuit defensemortgage modification and foreclosure defense. Ayodeji holds an LL.M. in Securities and Financial Regulation from the Georgetown University Law Center as well as a J.D. from the University of Baltimore School of Law.

If you would like to speak with a Maryland Consumer Lawyer, Contact us today by visiting www.mdconsumerlawyer.net or by filing out the form below:

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Fair Credit Reporting Act (FCRA) – Common Credit Reporting Violations

Maryland Consumers Win $575,000 Debt Collection Settlement

Maryland state residents involved in a class action lawsuit against a group of debt collection agencies (including Worldwide Asset Purchasing LLC, Worldwide Asset Purchasing II, West Receivable Services Inc. and West Corp. Worldwide and Worldwide II) will have their debts erased and lawsuits against them dropped as part of a settlement agreement.

The proposed class action settlement agreement in the case of Winemiller et al. v. Worldwide asset purchasing llc et al., was reached on March 26, and Judge Richard D. Bennett issued a final order on the agreement in U.S. District Court on Aug. 24.

Within 10 days of the judge’s final order, each class member’s debt will be completely eliminated, lawsuits against them will be dropped with prejudice, all judgments against them will be satisfied and all judgment liens released. The debts will also be removed from the members’ credit scores. The $575,000 will also be distributed to class members after attorneys fees and costs.

The settlement is the latest of several reached this year under state and federal debt-collection laws by Maryland consumer lawyers.

If you have been harassed by debt collectors or if you have a debt collection lawsuit brought against you, don’t delay,contact us today for a consultation.

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