Michigan Collection Law Blog

I tip my hat to Ms. Michelle McLean, an associate with the law firm of Klyczynski, Girtz and Vogelzang in Grand Rapids. Ms. McLean is a lawyer who wrote a great article about resources available to consumers who face foreclosure, in the Michigan Lawyers Weekly of May 25, 2009.
In her article, Michelle suggests that homeowners facing foreclosure should consult the following free resources:

Michigan State Housing Development Authority has established a "Save the Dream" program that can be reached at (866) 946-7432. They will connect you with a local housing counselor.

Another resource is the HopeNow Alliance. This is a non profit organization comprised of some of the largest lenders in the United States. Most lenders want people to stay in their homes because the cost of owning a home for a lender is extraordinary. When a lender takes a property back, it must still pay the taxes and utilities on it. Further still, it has to hire a property management company to go through the house, clean it up for resale and then periodically check on the property to make sure that nothing has happened to it. These costs only drag a bank's profits downward which makes for very unhappy shareholders and a nervous FDIC.
It is a great idea to consult with these free resources in conjunction with a credit and collection attorney. If you simply do not have the resources to stay in your home, you should think about the following:

a. Is there any deal that you can make with the bank that will allow you to keep your home:
b. If you cannot keep the home, how much time can you expect to stay in the home before you absolutely have to leave;
c. an exit strategy that causes minimal disruption to your family and credit;
d. new housing for your family in light of your future income prospects and expectations;

I don't want to sound like an infomercial, but these items should be discussed and decided in advance of approaching your lender for a loan modification. Gary Nitzkin at Nitzkin and Associates can help you through these issues.

Lessons to be learned

1. If you are a homeowner facing foreclosure, do not go it alone. There are valuable resources out there to help you stay in your home...USE THEM. Remember, the lenders want you to stay in your home as much as you want to stay there. The banks do NOT profit from taking your home and evicting you.

2. In conjunction with working with these free resources, it is wise to consult a credit and collection attorney. He or she can help you formulate a negotiation strategy and if necessary, an exit plan. These are your best resources.

Since January 1, 2008, the Federal Trade Commission Red Flag Rules has required businesses to establish policies and procedures for identifying identity theft. These rules require 4 things: 1. That business have reasonable policies and procedures in place to identify the red flags of i.d. theft; 2. the business must have a program designed that actually implements the program of identifying the red flags; 3. The businesses' program must have policies that identify the specific action that business will take when it spots the red flags of i.d. theft; and 4. the businesses' program must include a procedure for periodically reevaluating the red flag program. So the big question is who has to have such a red flag program. According to the FTC, the program applies to "financial institutions" and "creditors." The word "creditors" appears to include those businesses that don't even think of themselves as creditors. Indeed, the FTC states:

The definition of “creditor” is broad and includes businesses or organizations that regularly defer payment for goods or services or provide goods or services and bill customers later. Utility companies, health care providers, and telecommunications companies are among the entities that may fall within this definition, depending on how and when they collect payment for their services. The Rule also defines a “creditor” as one who regularly grants loans, arranges for loans or the extension of credit, or makes credit decisions. Examples include finance companies, mortgage brokers, real estate agents, automobile dealers, and retailers that offer financing or help consumers get financing from others, say, by processing credit applications. In addition, the definition includes anyone who regularly participates in the decision to extend, renew, or continue credit, including setting the terms of credit – for example, a third-party debt collector who regularly renegotiates the terms of a debt. If you regularly extend credit to other businesses, you also are covered under this definition.

Once you are deemed to be covered by these rules, you have to see if you have any "covered accounts." There are two kinds of covered accounts. The first type are consumer accounts for which your customer incurs debt for personal, family or household use and is designed to permit multiple payments or transactions. The FTC gives examples such as utility bills, credit card accounts, and mortgages. The second type of account are those "for which there is a a reasonably foreseeable risk to customers or to the safety and soundness of the financial institution or creditor from identity theft including financial, operational, compliance, reputation or litigation risks.

So what does this mean to us lawyers and you business owners? We are no longer able to cast a blind eye to what may appear to be red flags of identity theft. We are now participants in the game of helping to catch the bad guy. This means that we can no longer sit on the side lines and hope that the authorities do their job as we look idly on. So whats next? If I were you, I would start developing my program. I certainly don't want to the be the first test case that the FTC accuses of violating this new law.

I just read the Sixth Circuit's opinion in Miller v Javitch, Block & Rathbone, 561 F.3d 588 (2009). This case holds good news for debt collection lawyers. In that case, Miller contends that JBR violated the Fair Debt Collection Practices Act by using false, deceptive, and misleading language in a debt-collection complaint. The state court "COMPLAINT [*3] FOR MONEY LOANED" read as follows:

1. Plaintiff acquired, for a valuable consideration, all right, title and interest in and to the claim set forth below originally owed by Defendant(s) to ASTA II/PROVIDIAN -03 /NAT As a result of the assignment, Plaintiff became, and now is, the owner of funds loaned on account number xxxx-xxxx-xxxx-0736.

WHEREFORE, Plaintiff prays for judgment against Defendant (s) in the amount of $ 4,604.56 with statutory interest from the date of judgment, costs of this action, and such other and further relief as the Court deems just and proper under the circumstances.

The FDCPA uses the "least sophisticated consumer" standard to determine whether something is confusing or misleading. This is a very low standard and hence, its very easy to violate. One would think that the the part of the complaint that refers to "ASTA II/PROVIDIAN -03 /NAT As a result of the assignment," would easily qualify as a violation of the FDCPA. The court did not think so.

In a very well worded opinion that court held:

[Not] everything a lawyer writes during the course of litigation must be stated in plain English understandable by unsophisticated consumers. However desirable that might be, it is not a command to be found in the FDCPA.. Section 1692e does not require clarity in all writings. What it says is that "[a] debt collector may not use any false, deceptive, or misleading representation or means in connection with the collection of any debt. A rule against trickery differs from a command to use plain English and write at a sixth-grade level. . . . Whatever shorthand appeared in the complaint--the payments system through which credit-card slips flow is complex, and even many lawyers don't grasp all of its details--was harmless rather than an effort to lead anyone astray. It was the judge, not [the plaintiff], who had to be able to determine to whom the debt was owed, for it is the judge (or clerk of court) rather than the defendant who prepares the judgment specifying the relief to which the prevailing party is entitled.

So what does this mean to us collection attorneys? On the surface it appears that the court is holding that the FDCPA is inapplicable to pleadings. When the court states that it is only imporant for the judge or the clerk of the court to know what you are talking about in pleadings, the Sixth Circuit is pushing aside the communication strictures of the statute. Yet, I think this would be too broad of an interpretation because the court fell short of plainly stating that the FDCPA does not apply to pleadings. If it had meant to say that, it would and could have done so in a much more direct fashion. The court simply did not go that far. How do we read this case to stay out of trouble?

I think Javitch could have done away with the gibberish about the assignee and simply named it plainly. By failing to do so, it simply opened the door and invited an FDCPA claim in. Had Javitch simply named the assignee of the Plaintiff's credit card debt, Ms. Miller could never have been heard to complain about any FDCPA violation.

Moral of the story for collection attorneys - Do not think that this case gives you carte blanche to write your pleadings in legalese or in industry short hand. While the court sided with Javitch in this matter, it did NOT go as far as to say that the FDCPA does not apply to pleadings. The better practice is to write your pleadings in plain English as if you were explaining the complaint to the least sophisticated consumer. Your malpractice insurance carrier will thank you.

Social networking websites such as Facebook and Myspace have offered us new opportunities to reach out and communicate with one another. For the less scrupulous collection agencies, it has offered many other possibilities.
Consider the the case of JP Morgan Chase and its collection agency, Universal Tracing Services, Inc. Chase's customer, Mr. James Ricobene fell behind on his Mercedes payment. Chase hired UTS to collect on this debt. UTS, priding itself on using "the latest technology" to track down "the harest to find missing persons and debtors" decided to post the following demand letter on Mr. Ricobene's daughter's Myspace account:

We have been retained by, JPMorgan Chase Bank, to locate and repossess their missing collateral a 2007 Mercedes GL 450. Please contact our office immediately so we can discuss the peaceful recovery of the collateral. Failure to contact me will result in further action against your father James Ricobene. Legal options range from having a replevin order served on you or even worse reporting the collateral as stolen to local authorities in Illinois under the A.R.S. act 18-5-504. Failure to comply with this notice of surrender is a class 5 felony and carries a maximum penalty of imprisonment for two years plus all applicable surcharges. You must contact the writer within 5 days to prevent this action from taking place. You can contact me directly at 800-667-7704 ext 222 or directly at 604-267-1581 ext. 222

Chris Flanagan
Senior investigator

This was posted on March 20, 2009. Not only did UTS violate a host of Fair Debt Collection Practices Act laws, it has embarrassed and mortified the daughter as well. This makes two new Plaintiffs who can and should sue UTS and JP Morgan Chase. UTS obviously views social networking as an opportunity to cyberstalk. Gina Ricobene has filed her lawsuit against Chase and UTS. Her father also filed his complaint as well. There are certain lines that no one should ever cross. Using a daughter to reach a father in order to collect a debt is shameful, vile and as a father, it infuriates me. Click here for more information about this story.

But wait...I got another for you. Auto Financing Network is developing a reputation for its "no hostages taken" policy towards debt collection. It financed a car for Ms. Jennifer Dicks. When she two payments on her car note, APN repossessed it. When she went to pick up the car from APN, they informed her that they had hidden a GPS device in her car to track its whereabouts. It gets better. APN decided to shame Ms. Dicks when she fell behind again in her payment, by purchasing an URL that matches her name with the site titled "Jennifer Dicks isn't paying for her Cavalier."
If this weren't enough, APN then began a campaign of sending text messages to Ms. Dicks. Some excerpts, allegedly are as follows:

You need to call me. This has put me in a bad spot. I know you don't give a shit but I do. I need the car back.

April 10:

Can you quit playing games and give me the car?

April 11:

I'm 2 miles away coming to your house...are you home? Neeee the car.

April 15:

You need to call me...This isn't fair to me. Do you have no soul?

April 18:

All you do is lie. It isn't registered to you so call again. I wish you died when you fell off the roof. If ur not married good. He can do soooo much better.

And:

LOL. I'm sure he is really good. You will need him because az allows us to call the car in stolen. Please send him this, you are fucked!

As you can see, social networking has really provided people with new opportunities to connect and cyber stalkers with new opportunities to step into crap and get in trouble.

Moral of the story:

Debt Collectors - Web 2.0 does NOT provide you with any special exemptions from the FDCPA. IT STILL APPLIES which means you have to treat debtors as human beings. Next, remember that debtors are not failing to pay because they don't like you, so stop making debt collection a personal thing. Its about business and dollars. There no room for hurt feelings and such in debt collection. Just like Tom Hanks said "There's no crying in baseball" and there's no whining in debt collection. Here is my last bit of advice for you in this post; charm, kindness and consideration always win the day. Be kind and charming always and you will always avoid getting into trouble. Seriously...think about it.

Debtors - Learn from Mr. Ricobene and his daughter. They stood up to these tyrannical if not manical debt collectors. They will ultimately prevail and win sizable awards. If you have been disrespected, email me, Gary Nitzkin or call me at (888) 293-2882.