Michigan Collection Law Blog

Scam du jour - refuse to take a case and then get blackmailed

2010-07-25T15:28:44Z

I was approached by email, last week, by "Lance Davidson" who represented himself as a Gulf war vet living in Indonesia. He presented a passport picture and a semi-burned promissory note allegedly signed by a well known and respected businessman here in Michigan who died a few years back. What are the chances, right? Sorry, I am not buying into this crap. I respectfully declined to represent him and then he went ballistic. This morning, he sent me the following email in which he demanded $150,000 from me or he would file a grievance against me. Beware of this person whoever he really is. The emails says:

RE: Pro Se Settlement Out Of Court Offer $150k
Let me know if your willing to settle out of court before I submit this grievance report

My name is Lance Thomas Davidson; I am a current gulf war-era veteran and I live in Bali, Indonesia. On or about 21JULY, I contacted Gary Nitzkin with the prospects of allocating his legal services for the purposes of collecting a debt that is owed to me.
Gary Nitzkin operates under the assumed name of Gary Nitzkin & Associates; his official Michigan corporate name is Gary D. Nitzkin P.C. Also, his registered corporate identification number is: 404325. Gary Nitzkin’s office is located at: 22142 West Nine Mile Road, Southfield Michigan 48034

Indonesia does not have a good reputation for international trade. It is in many ways it is stereo-typed as a country that is prevalent with fraud and white collar crime. Although the reputation may be somewhat deserved, it should not serve as the basis in which a single person is PROFILED. Just as racial profiling is unethical and violates ones civil rights, so is discriminating against a person based on which country they live. I am an American citizen, one by birth, whose American rights and freedoms are protected by the U.S. Constitution and the Bill of Rights. John Fitzgerald Kennedy once said, “The rights of every man are diminished when the rights of one man are threatened”. Holding a license from The State Bar of Michigan to practice law is a privilege, and one that should not be taken lightly sanctity of the law always on one’s mind . Gary D. Nitzkin did not perform his duties as a licensed attorney, within the State of Michigan in an ethical manner…
By accusing me of fraud, performing private investigations on me, then having that private (unsecured) data sent to his Blackberry hand phone, he (personally and professionally) violated my rights to seek and secure proper legal representation. What’s more; he shared his opinions about me with others including contacting the F.B.I. for which there was no evidence of wrongdoing… He did everything in his unethical powers to destroy me, defame my reputation, and my rights to seek and secure proper legal representation.
By contacting others and speaking about the details of my claim in a defaming tone with the F.B.I and contacting my debtor’s attorney’s without a signed retainer contract; I now cannot find a collection attorney in Southfield, Michigan to take my case; furthermore, my chances to submit evidence, secure the testimony of others, and to hire a reputable attorney for the purposes of having my case presented in court and tried in an unbiased setting before a judge and jury--- Are substantially damaged – if not completely destroyed. By his imprudent actions, he singly, side-stepped the complete due processes of law by accusing me of crime that I did not commit. Once more, he substantially damaged my ability to seek and obtain proper legal representation; thus disgracing the State Bar Of Michigan, The U.S. Constitution, The Bill of Rights, and my beloved - United States of America.

By showing a disgust and lack of reverence for the office in which he was appointed to by The State Bar of Michigan, I humbly request that he be disbarred with no chances of practicing law again within the State of Michigan.

the Civil Rights Act of 1866, which was originally declared unconstitutional but then upheld when reenacted in 1870, after the ratification of the Fourteenth Amendment. All citizens, the act declared, "have the right to make and enforce contracts, to sue, be parties and give evidence; to inherit, purchase, lease, sell, hold, and convey real property, and to full and equal benefit of all laws and proceedings for the security of person and property." All governments then, state and federal, are required to protect the rights of person, property, and contract, without interfering with rights of inheritance, property, judicial action, etc.
Complementing civil rights is the conception of civil law. Civil actions consist of legal actions by private citizens against private citizens: Civil wrongs are breaches of contract or torts, wrongs specified in common law and case law but not, originally, by statute law. Civil wrongs are remedied by monetary damages paid to the plaintiff. Typically, the criterion of judgment in civil cases is less stringent than in criminal cases, that a verdict is to be based on the "preponderance of the evidence" rather than "beyond a reasonable doubt."

He may be a legitimate psycho. I don't know, but he is out there.

Who looks silly, now, NPR?

2010-07-22T23:29:50Z

I was recently interviewed by National Public Radio ("NRP" to you nerds who regularly listen to it...o.k. I listen to it, too). The reporter from NPR was doing a story about how social media has affected the debt collection profession. As a debt collector, let me just get this out in the open once and for all, because I really don't care what the bleeding heart liberals of NPR think.

YES, MY OFFICE USES SOCIAL MEDIA TO TRACK DOWN DEBTORS. Yeah, I said it. What are you going to do about, NPR? I tell you, my dear readers, what they did do. NPR did the story and painted me as something beyond callous hard hearted. They characterized me as a violator of the Fair Debt Collection Practices Act ("FDCPA"). Well guess what, NPR, the joke is on you because I am an expert under the FDCPA and I am right in what I am doing. I may be a heartless debt collector (or "bottom feeder" as some of you like to say...but sticks and stones, right?), but I am good at my job and I do it well.

]]> You can view the article at NPR finds debt collectors using Facebook to track delinquent Borrowers. Here is what we do. We find debtors on Facebook and other social media and friend them. Why? Because people just loooove to talk about themselves. Hell, you get me talking about sailing or karate and you cannot get me to shut up either. Oh well. But here is the proverbial rub. The FDCPA requires that all communications from a debt collector in connection with the collection of a debt disclose to the consumer that the communication is from a debt collector. See 15 USC 1692e(11). So, the question is whether "friending" a debtor on Facebook is such a communication that requires us, as debt collectors, to disclose that we are friending the debtor for purposes of collecting money from him. NPR took the position that this was illegal and violated the FDCPA. The fact is that it does NOT.

We have an interesting opinion out of the United States District Court for the Eastern District of Michigan in the case of Mabbitt v Midwestern Audit Services, Judge Nancy Edmunds decided that a letter from a collection agency that merely informed a debtor that his old utilities balance would be added onto his new account was a communication not made in connection with the collection of a debt. Case No. 07-11550 (2008). Judge Edmunds held"

Plaintiff suggests that "the FDCPA should be interpreted to cover communications that convey, directly or indirectly, any information relating to a debt." (Pl.'s Resp. [*9] at 5.) This approach, however, ignores the plain language of the statute, which applies only to actions taken "in connection with the collection of any debt." (emphasis added). See, e.g., Estate of Gerson v. C.I.R., 507 F.3d 435, 438-39 (6th Cir. 2007) (when "Congress has directly spoken to the precise question at issue . . . we apply the plain language of the statute"). Thus, the question becomes whether Defendant's December 29 letter satisfied this criterion. 4
FOOTNOTES

4 Plaintiff focuses on whether the letter was a "communication" under the FDCPA. This argument misses the mark. The FDCPA defines a communication as "the conveying of information regarding a debt directly or indirectly to any person through any medium." § 1692a(2). This definition encompasses Defendant's letter. The question remains whether the communication was made in connection with the collection of any debt.

The FDCPA does not define "in connection with the collection of any debt." And while the Sixth Circuit has not addressed this issue, the Seventh Circuit has recognized "that a letter informing plaintiffs of the current status of their account and demanding no payment was not a communication 'in connection with the collection of any debt' under the FDCPA." McCready v. Jacobsen, 2007 U.S. App. LEXIS 9651, 2007 WL 1224616, *1 (7th Cir. April 25, 2007) (citing Bailey v. Security Nat'l Servicing Corp., 154 F.3d 384, 388-89 (7th Cir.1998)). Moreover, Black's Law Dictionary states that "to collect a debt or claim is to obtain payment or liquidation of it." 6th Ed. 1990 at 263. Defendant's December 29 letter makes no demand or attempt to obtain payment of a debt. Instead, it notifies Ms. Perry that an outstanding balance has been transferred to her new account. And while the letter states that the transfer was made for her "convenience in making payment," it contains no language that she is required to pay the debt. Instead, the letter specifically states that "should [she] have any questions concerning this matter, please contact your local Consumers Energy office." (Def.'s Mot., Ex. 2.)

Essentially then, the collection notice that does not ask for money ain't a collection notice and thus is not governed by the FDCPA. So how is "friending" someone on Facebook any different? We aren't asking for money as much as we are to be accepted and loved by our new best buddy, right?

So, NPR, who looks silly now, huh?

You got something to say to me??? Step up and say it. Email me, Gary Nitzkin at gnitzkin@creditor-law.com.

Has the Michigan Court of Appeals given safe harbor to would be debtors?

2010-06-27T12:31:58Z

In a recent opinion in Green v Ziegelman, 282 Mich App 292 (2009), the Michigan Court of Appeals took up the case of whether a creditor can pierce the corporate veil of a corporate creditor pursuant to the Proceedings Supplementary to Judgment Act and enter a judgment against the shareholder of that corporate judgment debtor. In an astonishing reversal, the Court of Appeals held that the creditor may NOT do so.

]]> The court stated:

MCR 2.621(A)(2) is the provision implicated in this case, and it directs attention to the PSJA. MCL 600.6104, which is the relevant statute here under the PSJA, provides:
After judgment for money has been rendered in an action in any court of this state, the judge may, on motion in that action or in a subsequent proceeding:

(1) Compel a discovery of any property or things in action belonging to a judgment debtor, and of any property, money, or things in action due to him, or held in trust for him;

(2) Prevent the transfer of any property, money, or things in action, or the payment or delivery thereof to the judgment debtor;

(3) Order the satisfaction of the judgment out of property, money, or other things in action, liquidated or unliquidated, not exempt from execution;

(4) Appoint a receiver of any property the judgment debtor has or may thereafter acquire; and

(5) Make any order as within his discretion seems appropriate in regard to carrying out the full intent and purpose of these provisions to subject any nonexempt assets of any judgment debtor to the satisfaction of any judgment against the judgment debtor.

The court may permit the proceedings under this chapter to be taken although execution may not issue and other proceedings may not be taken for the enforcement of the judgment. It is not necessary that execution be returned unsatisfied before proceedings under this chapter are commenced.

For purposes of the question posed to us, § 6104(5) is the only provision that could conceivably support the circuit court's ruling; however, on close examination of the language in § 6104(5), it is clear that it did not authorize the entry of the judgment against Ziegelman.

However, the court clearly lacked imagination in holding that 6104(5) was the only language that could allow a trial court to use Proceedings Supplementary to Judgment ("PSJ") to pierce a corporate veil. Indeed, the structure of 6104(1) is not aimed at the judgment debtor, but rather at anyone or any entity that is holding property belonging to the judgment debtor. The Green Court's ruling was correct in holding that the language of 6104(5) is broad., But its attention, in my opinion, did not need to be focused on 6104(5), but it should have considered the entire statute and its purpose in aiding creditors to seek relief from judgment debtors and any third parties aiding them.

As attorneys, we know that if a creditor obtains a judgment against a corporate debtor and that corporation is merely the alter-ego of an individual, then clearly that individual is holding assets or property that belongs to the entity. Actions to pierce a corporate veil are usually aimed at convincing a court to disregard a corporate entity and reach an individual. The PSJ rules are , if not harmonious with actions to pierce a corporate veil and hence, I think the court's opinion in Green was incorrect.

This holding as several unpleasant implications for creditors Section 6104(1) allows a court to reach the assets of third parties that are holding assets for the benefit of a judgment debtor. However, the Green Court's holding now forbids the entry of a judgment against a party not originally named in the underlying complaint. This makes no sense. There has never been a requirement to name a party in an underlying complaint as a prerequisite to obtaining a judgment against that party, post judgment. We know this is true because the whole structure of garnishments contemplates obtaining property from third parties who owe money or hold property of the judgment debtor. If a garnishee fails to respond to a garnishment within 14 days, the Plaintiff can obtain a judgment against that third party.

A the trial court's powers to enter a judgment against a third party is not circumscribed anywhere under Section 6104(1). It is only because the Green Court held that the trial court did not have the power to enter a judgment against a third party, that this Court may have unwittingly taken a large sanction away from the lower court to enforce its own judgments.

So where does this leave us? I don't rightly know. It seems to me that the the Green Court requires creditors to plead a piercing the corporate veil in the substance of their complaints or to file a new lawsuit post judgment to pierce the corporate veil. Judicial economy would favor allowing such issues to be decided in the underlying case pursuant to the PSJ Act. But, if creditors have to file such lawsuits against third parties, do they not have a Res Judicata defense to the action? Remember Res Judicata bars subsequent actions between parties or their privies that involve the same issues that could have or should have been brought in the prior action. If corporate shareholders are able to defeat Plaintiffs pursuing an action to pierce the corporate veil using the Res Judicata defense, then the Court of Appeals will have created a large and certainly unanticipated safe harbor for shareholders to defeat creditor claims.

In many instances, this is the same as putting the proverbial cart before the hoarse. Plaintiffs, many times, have a action against a corporate defendant for breach of contract claims. Yet these cases do not involve an issue of the corporation's financial position, solvency or whether its shareholders respected the corporate formalities. Defense counsel, in these cases, are well within their rights to object to questions directed at these irrelevant issues. Lets face it; until this case, if defense posited an objection to questions related to the corporate structure in a breach of contract action and instructed her client to not answer those questions, which one of us Plaintiffs' attorneys would really file a Motion to Compel the answer to such a question? Its unlikely that very many of us would do so.

2. In order to preserve the issue of a piercing the corporate veil claim, you must plead that claim in your underlying complaint or it will be waived. As harsh as a position as this might be, the Green case puts most Plaintiffs in a position to have to plead this cause of action even though we usually don't have sufficient facts to plead such a claim prior to conducing a creditors examination.

Moral of the Story to Plaintiff's attorneys - If you have any opportunity to plead a piercing of the corporate veil claim in your complaint, you must plead it or risk losing that claim forever. You can no longer rely upon the PSJ Act to pursue a piercing of the corporate veil claim. If you file a subsequent lawsuit, you may have to address the Res Judicata defense and there is certainly no guaranty that you will win.

The Supreme Court Rules that the Bona Fide Error Defense does NOT apply to mistakes of law

2010-04-22T13:02:43Z

The Supreme Court ruled today, in a 7-2 ruling in JERMAN v. CARLISLE, McNELLIE, RINI, KRAMER & ULRICH LPA. held that the Bona Fide Error Defense ("BFE") in the Fair Debt Collection Practices Act ("FDCPA") does not apply to mistakes of law.

]]> The FDCPA requires a debt collector to issue a validation notice to a debtor within five days of initially contacting him or her. In that validation notice, the collector is required to tell the debt that the debtor will assume that the debt is valid if the consumer does not posit an objection to it within 30 days. In this case, Ms. Jerman was dunned by the defendant, a debt collection law firm with a letter that required the Plaintiff to posit her dispute to the debt in writing. The FDCPA contains no such requirement that the consumer must posit that dispute in writing.

Jerman sued the Carlisle firm and sought to turn it into a class action. Carlisle successfully asserted the BFE defense in the trial court. On appeal, the 6th Circuit upheld the lower court's finding that the BFE defense extended to mistakes of law as well as mistakes of fact. The Supreme Court reversed the 6th Circuit as it took a much narrower view of the BFE defense.

The FDCPA is a consumer protection statute designed to protect debtors from nefarious debt collectors. Because the FDCPA can be unintentionally violated, Congress inserted a defense for debt collectors as 15. U.S.C. 1692j, as follows:

A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.

The Court's rationale for maintaining a distinction between mistakes of fact which are covered by the BFE Defense and mistakes of law was fascinating and, in my opinion (for whatever that is worth), well reasoned. The Court began its opinion by holding that ignorance of the law is no excuse. It then discusses laws that show that one may violate a civil law unintentionally and yet may still be held liable. Analyzing the statutory scheme of the FDCPA, the Court reasoned, there is private cause of action by a debtor/consumer for violations of the statute. Further, the Federal Trade Commission can also pursue that same debt collectors for intentional violations of the statute. Hence, all violations may be pursued by a consumer except as provided for by the BFE Defense.

Advice to Debt Collectors - The mistake made the Carlisle firm in requiring debtors to posit their disputes in writing is an old trap and easily avoidable. I don't mean any disrespect to the firm. I am just surprised that it made this mistake. I have blogged about this trap previously and this case is a good reminder to us all.

My second bit of advice is for you to be sure that you have policies and procedures in place so that if you do get sued, you can raise the BFE defense (assuming that you are accused of making a mistake of fact and not law). Get your collection letters reviewed, have a written policy and procedures policy in place and train your collectors.

While ignorance of law is no excuse, as the Court found, it is equally true that an ounce of prevention is worth a pound of cure, right?

If you have any questions or comments, contact me, Gary Nitzkin at (888) 293-2882, toll free or email me. If you would like more information about debt collection or our collection services, please visit our website at www.creditor-law.com.

Attorneys - Beware of the scam d'jour - The over seas client asking you to enforce her divorce settlement

2010-03-29T13:02:49Z

In the last few months, I have noticed that I have been getting similar emails from people who claim to be stuck over seas (usually in Japan, they say) and would like me to enforce their divorce settlement. This mornings' read like this:

Name: Jennifer Lunyang Email: aaxtos@yahoo.com Phone: +81-3-3423-8001 Interested In: Dear Counsel,
I am contacting your firm in regards to my divorce settlement with my ex husband (Frank McCain) who resides in your country. I am currently relocated to Japan because of financial problems which I encountered after he abandoned us in Europe. We had an out of court agreement for him to pay $380,000.00 plus legal fees. He has only paid me $24,000 since which was not enough to settle the bills,legal fees and the childrens school fees .I am hereby seeking your firm to represent me in collecting the balance from him.

He has agreed already to pay me the balance but it is my belief that a Law firm like yours is needed to help me collect the payment faster from my ex-husband or litigate this matter if he fails to pay as promised. The payment has been overdue for over 3months.

I await your urgent response and also let me know what your rates are as well as your agreement /retainer form.

Sincerely,

Jennifer Lunyang

I highly doubt that there is a Jennifer Lunyang in Japan. Her account is at yahoo.com. I would suspect that if she were stuck in Japan, that she would have a more Japanese sounding ISP hosting her free email account.

I dont know for a fact as to how the scam works, but I can easily see her having me send a demand letter to her "ex- spouse" and magically, i get a check for a huge amount of money. Presciently, she notifies me that she learns that her ex has sent me the money and then tells me a sob story about how she is destitute and needs her share as soon as possible and if wouldn't mind send it her ASAP. It would only be after I deposited the check and sent her the share, that I learned that the underlying check is bogus.

Attorneys - please be careful of this scan. its the newest flavor for getting hurt.

Debt Collectors (and yeah..you lawyers too) take my message before you leave a message you might regret

2010-03-28T18:41:54Z

In Foti v NCO Financial 424 F. Supp2d 643 (S.D.N.Y. 2006), the United States District Court in New York properly held that all communications from a debt collector must contain a warning that it is a communication from a debt collector. The Fair Debt Collection Practices Act (FDCPA) , itself, at 15 U.S.C. 1622e requires this. However, the FDCPA also prohibits a debt collector from communicating about the debt with anyone other than the debtor, the debtor's spouse or attorney at 15 U.S.C. 1892(c)(b). In Foti, the debt collector attempted to reach the debtor by leaving a message. The court held:

"Thus, .given the choice of language by Congress, the FDCPA should be interpreted to cover communications that convey, directly or indirectly, any information relating to a debt, and not just when the debt collector discloses specific information about the particular debt being collected.

The court's language in Foti would appear to taint any voicemail message left by a debt collector as a violation of the FDCPA. This may be, indeed an incredibly broad view of the word "communication: under the FDCPA and this court's opinion has no formal binding precedential value outside of 2nd Circuit...BUT....the law in this area is far from settled and the District Court in 2nd Circuit stepped up to the plate and rendered an opinion. Any other circuit that is presented with this same issue will undoubtedly review the Foti case and its well reasoned opinion in formulating its own holding. This case is one large strike against debt collectors leaving messages. In my opinion, I would not wait for strikes 2 and 3 before advising my consumer debt collector clients to NOT leave messages on debt collectors' phones.

My question is then, is why would any debt collector in his or her right mind ever leave a voicemail message for a debtor? I think the short answer is that no collector with some familiarity with Foti would ever leave a message for a debtor. Yes, I understand that the telephone is still the number one tool for collect debts without litigation. I also understand the value of auto dialers in debt collection agencies. What I don't understand is why a collector would leave a message for a call back today.

Here is my best advice to you Consumer Debt Collectors and Attorneys who collect consumer debt - DON'T LEAVE VOICEMAIL MESSAGES FOR YOUR DEBTORS. Its just not worth the risk of getting hit with an FDCPA action.

Collection Attorneys - Do NOT pimp out your letterhead to your collection agency clients

2010-03-22T13:05:27Z

Mr. Yaple, a California collection attorney represents (or may be represented) a California collection agency called TK Financial. Ms. Vlach, an Ohio consumer received a letter from Attorney Yaple in May of 2008 in which he informed her that he had been retained by TK Financial to pursue a debt against her. The letter also said that he intended to sue her and collect costs of the litigation and attorneys' fees. The letter was not signed by Mr. Yaple himself, but rather a typed signature. She is suing Mr. Yaple for violation of the Fair Debt Collection Practices Act.

She also presented the court with two emails that purportedly came from Yaple that represented that he intended to file a lawsuit against her.

Mr. Yaple contends that he did not compose these communications. Rather, he states that a rogue collector at TK Financial had created mock letterhead and set up an email account. In any event, he is now in trouble whether he is culpable or not. Although he is a California attorney, he was to defend himself in federal court in Ohio as a defendant in a class action. The case has since been settled and dismissed. Missing from the court's docket was Mr. Yaple's third party complaint against TK Financial and the allegedly rogue collector. This glaring omission speaks to whether there was truly a rogue collector or whether Mr. Yaple was pimping out his letterhead.

]]> I don't like speaking ill of my colleagues. It makes me sound as if I think I am better than they are and I am not. May be I am just a bit older and more seasoned than some. I wonder if Mr. Yaple actually allowed his name and letterhead to be used by what appeared to be a very good client, for a price. If so, he made a grievous if not illegal mistake. I don't know that he did that. I just know that if I were Mr. Yaple and had received that complaint, I would not be able to file a Third Party Complaint against TK Financial fast enough. Mr. Yaple had ample opportunity to do so, but did not file it. I just have to wonder why.

Moral of the story -Collection Attorneys - Do NOT pimp out your letterhead or name to a client for any reason or any price...at all...ever. You are a professional trained in the law and your client is not. No good can come from it. You are far better off keeping the line between your collection agency client and you clear and bright. If you ever get a sense that someone is using your name or letterhead without your permission, you had better put a stop to that immediately even if it means filing a complaint against that person or entity.

I don't know how much this lawsuit ultimately cost Mr. Yaple, but I am certain it was not cheap. The threat of being a defendant in a class action suit is overwhelming. The damages can threaten not only one's assets, but one's ability to practice law in the future. My dear colleagues, I urge to guard your name and reputation jealously.

Collection Agencies and managers - If you get wind that one of your collectors is going rogue by using an attorney's name and letterhead, you had better learn the phrase "vicarious liability" in a hurry. Simply stated, this means that if your employ is a screw up, you can be held accountable.

My speech today was a success, except for...

2010-03-19T21:47:17Z

Today my good friend and occasional opposing counsel, Charity A. Olson and I gave a speech to the Oakland County Bench/Bar convention. I sue debt collectors under the Fair Debt Collection Practices Act and Charity defends them. She is as good as it gets when it comes to defense counsel. We presented a joint talk from both of our perspectives. Its was great fun, until....I took a question from Chiara F. Mattieson. She is a collection attorney with Holzman, Ritter and Corkery, PLLC.

During my speech, I informed the crowd how I had located a ghost debtor on Facebook. A ghost debtor is someone who is off the grid. He has no home address that I could find, no car registered in his name and no real estate. I could not find this guy until I found him on Facebook and then I was able to locate all sorts of information on him. Anyways, I sent this debtor a friend invitation which he accepted. Ms. Mattieson then asked me "Weren't you required to give him the mini-Miranda when you send your friend invitation on FB?" This requirement under the FDCPA is where you have to warn a debtor that your communication to him is from a debt collector.

Boy...she got me right there...on the spot...uh...uh....may be. She might have been right. But, as I thought about it through lunch, it occurred to me that no, I did not need to give this guy the mini-Miranda when I sent him a friend invitation through FB because my communication was not in connection with the collection of a debt.

After lunch, I saw Chiara in the parking lot. As some of you may know, I hold a first degree black belt in karate. I told Chiara that as long as we were in the parking lot....that I had an answer for her question. She was as gracious and friendly as could me as we discussed the pros and cons of the Fair Debt Collection Practices Act.

Kudos to Holzman Ritter and Corkery for hiring as an intelligent and astute attorney as Chiara Mattieson. Chiara, if you read this post, I want you to know that it is attorneys like you that make me proud to be part of our profession. You intellectually challenged me and by making me thinking through an answer, you made me that much of a better lawyer. Thank you.

I will be ready for yournquestions next time! :)

I am announcing the formation of Michigan Consumer Credit Lawyers and its new blog

2010-03-15T19:58:56Z

For the past several years, I have blogged about issues affecting debt collectors and their opponents, consumers. Some people have taken issue with the fact that I help both the proverbial Coyote and Road Runner. Too bad. Running a successful law firm such as Nitzkin and Associates has its advantages such as taking the cases that I want to take and representing the people that I want to represent.

I have decided to form an division in my firm dedicated strictly to helping consumers; its called Michigan Consumer Credit Lawyers. The website is still under construction. When it is complete, I will let you know. I anticipate that it will be live in the next few weeks. This new website will contain several self help videos for consumers on issues from what to do when they get sued to how to handle an abusive debt collector. Take heart as we also republishing our Nitzkin and Associates website with many instructional videos too.

The MCCL blog is already up at www.micreditlawyerblog.com. On this new blog, I will talk only about issues that affect consumers who have been wronged by debt collectors, banks, credit reporting agencies and anyone else that would treat a consumer like crap. MCCL's website will be up shortly to coach consumers on what to do when they are faced down by their larger and financially better heeled opponents. We are here for them to even those odds.

We are still and will always be debt collection attorneys. However, we mostly represent businesses and do commercial debt collection and hence, we really have no conflict of interest. I, Gary Nitzkin, will continue to write this blog coaching debt collectors on how to avoid violating the FDCPA and the FCRA.

If you have any questions, please feel free to email me, Attorney Gary Nitzkin or call me, tool free at 877-293-2882.

Its a small thing to plead but failure to plead it can lead to dismissal of your case

2010-03-10T00:33:42Z

Attorneys, when you file a complaint under the Fair Credit Reporting Act ("FCRA"), be sure that you can make the following allegations in good faith:

a. Your client posited its consumer dispute with the credit reporting agency (and not just the creditor/furnisher directly). You or your client's failure to notify the credit reporting agency of your client's dispute is fatal to your FCRA claim. You see, under the statute, a credit reporting agency's duty to conduct a reasonable reinvestigation does not begin until it receives notice of the dispute. Notifying the furnisher of the dispute is insufficient to trigger any duty to conduct a reasonable reinvestigation by the credit reporting agency.

b. Be sure to plead that that the credit reporting agency notified the furnisher of your dispute. If you are uncertain as to whether this happened, look for facts that would support a good faith believe to allege that this happened "upon information and belief." Under the FCRA, a furnisher's duty to conduct its reinvestigation is not triggered until the credit reporting agency notifies it of your client's dispute. Some courts do not require this to be pled in the complaint, but yet, some courts do. For example, Judge Avern Cohen who sits in the United States District Court for the Eastern District of Michigan requires this allegation in FCRA complaints. I just finished reading an opinion in which he dismissed the Plaintiff's complaint for failing to allege that the credit reporting agency notified the furnisher. I have a world of respect for Judge Cohen and his opinions. I can safely say that he is an incredibly intelligent man and history will undoubtedly remember him as an excellent jurist. BUT......if you are going to file an FCRA complaint in the Eastern District of Michigan and your case is assigned to Judge Cohen, be sure that you follow my advice.

Debt Buyers should be very careful in bankruptcy court

2010-02-11T00:12:37Z

My colleague, David Lerner, has been described by our mutual friends as "blisteringly smart." I have cross swords with Mr. Lerner and have a great deal of respect for his abilities as do most attorneys that know him. Mr. Lerner made the cover of Michigan Lawyers Weekly on February 8, 2010 for his commentary on the case of In Re: Wingerter.

In this case, the debtors had challenged a proof of claim that had been filed by a debt buyer. When the debt buyer could not produce the original documents to support the claim, it withdrew its claim. The debtors were not happy with that result, alone. The debtors asked the court for sanctions against B-Line, the debt buyer for not adequately investigating its claim prior to filing it, pursuant to Bankruptcy Rule 9011(b). B-Line dodged a bullet in the trial court as the judge said that B-Line in fact did not adequately investigate its claim but did not award sanctions.

On appeal, the 6th Circuit court reversed the lower court and held that B-Line's pre-filing investigation was reasonable. The court found the fact that B-Line received a warranty as to the validity of claims it purchased, coupled with B-Line's cursory review of the claims, as persuasive that the claims that B-Line filed in the bankruptcy court, were filed in good faith and in compliance with its pre-filing obligations under Rule 9011(b). While the court did not find that these claims were, in fact valid, the court did find that having received such warranties from its seller, made B-Line's reliance upon the validity of these claims, reasonable and hence, its pre-filing investigation requirements were met in good faith.

Moral of the story to those filing claims on purchased debt in the bankruptcy court.- I am no fan of purchased debt. But if you are filing proofs of claims on these debts in bankruptcy court, be sure that the debt buyer's purchase agreement through which it bought these debts contains warranties that the claims are valid. Furthermore, be sure that your client has thoroughly vetted these claims for obvious anomalies such as incorrect social security numbers and bad addresses.

Query for you consumer lawyers: If this case had gone the other way and the 6th Circuit held that B-Line had violated its duties under Bankruptcy Rule 9011(b), do you think the debtors would be potential plaintiffs for a claim under Fair Debt Collection Practices Act?

Oral Argument on the Bona Fide Error Defense

2010-01-21T15:59:00Z

The United States Supreme Court has taken up the issue of whether the Bona Fide Error (“BFE”) defense under the Fair Debt Collection Practices Act (“FDCPA”) applies to mistakes of law committed by debt collectors.
In Jerman v Carlisle, et al, the defendant law firm transmitted a collection letter to Ms. Jerman that may not have complied with the FDCPA. It was a minor error in their demand letter that caused this brouhaha. The defendant law firm’s demand letter informed Ms. Jerman (and others as they had sent this letter to other debtors as well) that unless they disputed the debt in writing, that the law firm would assume that the debt was valid. The FDCPA makes no requirement for a debtor to posit such a dispute in writing. You can read the oral argument before the Supreme Court by clicking on Jerman v Carlisle. This lawsuit was certified as a class action which may explain why the Supreme Court took this case.

The Sixth Circuit Court of Appeals dismissed the case by holding that the BFE defense applies to mistakes of law as well as mistakes of fact Jerman v Carlisle, 538 F.3d 469 (2008). The Sixth Circuit held that a plain reading of the FDPCA shows that the BFE defense does not exclude mistakes of law and so, neither should the court. This is a very interesting holding, indeed. Cases that have examined the BFE defense under the FDCPA, have mostly held that this defense applies only to errors of fact. The Sixth Circuit holding in Jerman was really breaking new ground with this holding.

So why did the United States Supreme Court accept this case for review? Ms. Jerman had turned her FDPCA lawsuit into a class action against the defendant law firm. If the defendant loses this case, it stands to pay a huge sum in attorneys’ fees plus class action damages of $500,000 or 1% of the law firm’s net worth, whichever is lesser. As I read the oral argument, it became apparent to me that at least one Justice had an agenda for protecting attorneys.

Three attorneys argued this case before the Supreme Court. Mr. Kevin Russell argued on behalf of Karen Jerman, the Plaintiff/Petitioner. Mr. William Jay argued on behalf of the Solicitor General, Department of Justice, supporting Ms. Jerman’s position. Finally Mr. George Coakley argued on behalf of the Defendant/Respondent law firm.

In my opinion, Justice Breyer’s pointed questions and comments indicated that he was interested in protecting lawyers. In my opinion, he seemed to be leaning towards affirming the Sixth Circuit. Unfortunately, I think that Mssrs. Russell and Jay had the better arguments before the court. I found Mr. Russell’s arguments quite persuasive when he pointed out that:

 The bona fide error defense speaks only to mistakes of fact and not to mistakes of law;
 Had Congress intended to include mistakes of law in the Bona Fide Error Defense, it would have expressly included such language in the statutue;
 Courts should not expand the Bona Fide Error Defense to include mistakes of law simply because it may result in an unfair consequence to the lawyer defendants;

Mr. Jay advanced an excellent argument against extending the BFE defense to include mistakes of law. He noted that several other statutes, including the Truth in Lending Act, a companion consumer credit statute, include a BFE Defense and none of the other statutes or the cases construing them have included mistakes of law as part of those BFE defenses.

As a collection attorney, I was rooting for Mr. Coakley. My colleagues and I are depending upon him to represent us and convince the Supreme Court that the Sixth Circuit decision in Jerman was correct. Unfortunately, I did not find Mr. Coakley’s arguments nearly as persuasive as Mssrs Russell’s or Mr. Jay’s.

Mr. Coakley began his argument by looking at a plain reading of the statute and then moved quickly into conceptual analogies that were more heady than persuasive. He then argued that some courts had construed the TILA’s BFE defense to include mistakes of law as well as fact. He then argued that Congress amended the TILA to definitively exclude mistakes of law from the TILA’s BFE defense. Although Mr. Coakley properly argued that this indicated that Congress intended to treat the FDPCA and the TILA as different statutes, this argument proved too much and subsequently, was Mr. Coakley’s undoing.

Justice Scalia noted that there were no appellate decisions construing the TILA BFE defense to include mistakes of law prior to the 1980 Congressional amendment to that statute. Justice Scalia then accused Mr. Coakley of misleading the court by implying that Congress had amended the TILA in light of court decisions construing that statute’s BFE defense as including mistakes of law. Any litigator knows that his ability to persuade a court is directly tied to his credibility. If the judge does not trust you, the court will put little credence in what you have to say. Mr. Coakley, in my opinion, shot himself in the foot by advancing the argument that Congress amended TILA’s BFE defense due to court decisions construing that defense as including mistakes of law.

I will let you know when the court rules on this case.

The FDCPA Bona Error Defense goes before the Supreme Court early next year

2009-12-15T12:37:54Z

The Fair Debt Collection Practices Act is a federal statute that governs every debt collector involved in collecting debts related to personal, home or consumer items. In 1995, the United States Supreme Court in Heinz v Jenkins, made clear that the FDCPA applies to attorneys as well.

The FDCPA contains a defense to debt collectors who get sued for violation of this statute. The "Bona Fide Error" Defense ("BFE Defense") as it is commonly called, states:

A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error."

15 U.S.C. 1692k(c)

There is a major issue with the Bona Fide Error Defense upon which the circuit courts disagree. The major question with the BFE Defense is whether it applies to mistakes of law as well as mistakes of fact (clerical mistakes). Not only are the circuits in disagreement on this issue, but we have competing and contrary decisions from within our circuit (6th Circuit) alone. The United States Supreme Court in Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA is going to take up the issue. This is going to be a real nail biter for every debt collector (and the defendant law firm.).

In Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA, ("Carlisle"), the defendant law firm was hired by Countrywide Bank to foreclose on Ms. Jerman's mortgage. In connection with its lawsuit to foreclose on Jerman's mortgage, Carlisle attached a Notice Under the Fair Debt Collection Practices Act which provided, among other things, that:

the debt described herein will be assumed to be valid by the creditor’s law firm [Carlisle] unless the debtor(s) . . . within thirty (30) days after receipt of this notice, dispute, in writing, the validity of the debt or some portion thereof.

The FDCPA does NOT require a consumer to dispute a debt in writing. The statute does require a consumer who wants validation of the debt, to make that demand in writing, but there is no like requirement for disputing the debt. Sounds a lot like splitting hairs, huh? Nevertheless, this fearsome fight has a lot at stake as the BFE Defense is substantial. Frequently, it is the only defense that a debt collector has to a FDCPA lawsuit. Hence, the scope of this defense will have a major impact on the outcomes of future cases.

Ms. Jerman (and her attorneys') have asked the District Court for class action certification of this lawsuit. Carlisle has argued, persuasively, that it is entitled to the BFE Defense because such defense applies not only to mistakes of fact, but mistakes of law. Again, whether this is true or not is currently up for grabs. There are cases around the country that hold that the BFE Defense only applies to clerical mistakes. In fact, this view was starting to gain momentum amongst the circuits and is well on its way to becoming the majority view.

There are, however, other cases, that state that the BFE Defense applies only to clerical mistakes. These cases typically rely upon the BFE Defense cited in the Truth in Lending Law, a companion Consumer Protection Statute to the FDCPA. The BFE Defense in TILA, indisputably applies only to clerical sorts of mistakes.

The Supreme Court has docketed a hearing on Jerman v. Carlisle, McNellie, Rini, Kramer & Ulrich, LPA for January 13, 2010. I will keep you, my good reader, posted as to what happens next!

Collection agency posing as prosecuting attorney gets caught and pays $2.55 million

2009-12-14T16:32:09Z

Some states have a bad check diversion program that is designed to facilitate the payment of bad checks to merchant victims. These programs usually involve a district attorney and sometimes even, a private collection agency. The idea behind these programs is to give the bad check writers a chance to make their bounced checks good without further escalation of the issue to the DA’s office. Pennsylvania has one such program and it was abused by a collection agency.

American Corrective Counseling Services is a collection agency based in California. It was involved in helping Pennsylvania merchants recoup funds on bad checks. Unfortunately, it got a little carried away. It, allegedly, sent letters to debtors on letterhead that was purportedly from district attorneys. These letters threatened the debtors with criminal action if they failed to not only pay the bad check, but if they failed to pay a $170 fee for an “accountability class.” Indeed, according to a report by the Associated Press, one elderly woman who wrote a check for $27 to Kmart, which bounced, was told she would have to pay fees of $72 to clear the matter up, "plus another $170 for the accountability class." The case is entitled Del Campo v American Corrective Counseling, in the 9th Circuit. The violations of the Fair Debt Collection Practices Act, in this case, are enoromous.

A class action lawsuit was filed against American Corrective Counseling Services. It settled the case for $2.55 million.

Nice try, but I know about scams already

2009-12-09T15:40:24Z

Last week I received a call from an "attorney" calling himself David Cook, from Ontario. He asked if I was interested in collecting a $500,000 case against a local steel company. Of course I am interested! But, I don't like pursuing a debtor without knowing my client or the forwarding attorney involved. So I decided to check Mr. Cook out on line at http://www.criminalbusinesslawyers.com/. I reviewed his website in which he held himself out to be an expert in "most areas" of the law. I also noted the numerous grammatical and spelling errors that could not be excused as aberrations of Canadian usage. Now I am on notice that something is amiss here. I asked my secretary to call the Canadian Bar Association to see if there was a David Cook. She called and learned that they would not disclose the identity of other solicitors and barristers to those who were neither.

This morning, I received the following email from Mr. Cook:

Dear Gary, I recieved (sic) an email this morning from Mr. Liguo regarding an email that was sent to him stateing (sic) that the payment has been sent to your office in the full amount that was requested. According to the agreement please deduct your precentage (sic) , my client will be sending me the account information for the transfer of the balance. I will then be sending you the account information for the balance transfer.

Sincerely,

David Cook
481 University Avenue, Suite 510
Toronto, Ontario M5G 2E9
Phone: (647) 831 6954
Fax: (416) 800 9908
Email: attorneydavidcook@aol.es
www.criminalbusinesslawyers.com

Magically, I also received a check from the alleged debtor, Ideal Fabricators, for $550,700 this morning, drawn on a bank called California Bank & Trust. The package arrives from an expediter named "Purolator." The check contains no address for Ideal Fabricators. The package has a return address of Ideal Fabricators, Inc. 481 University Ave, Mississauga, Ontario, M5G2K1. The package contains a cove letter from Ideal Fabricators (no address or telephone number on the letterhead), apologizing for the late payment, informing me that they had a bad year but are now on the road to prosperity. They wish me a good year, too. Am I going to deposit this check?? NOOOOOOOOO!!!!!!!!!

Why not?

This is a scam. I called Ideal Fabricators. The have never head of me, Mr. Cook or the alleged creditor in this case. They never wrote such a check. OK, I think, its time to do my civic duty and get the authorities involved.

I called the F.B.I. this morning and explained that I was the target of this scam, but did not get taken. I was 1 minute into my story when the young lady told me that this is a Secret Service type of case. She gave me the phone number of that agency and I called.

The Secret Service told me that they could not do anything about this case because the alleged bad guy was in Canada. They referred me on to the Federal Trade Commission. The FTC has no more authority to after these bad guys than our heavy hitters such as the F.B.I. or the Secret Service.

Nevertheless, I tried to call the FTC, but could not get through. OK, I tried to do my duty, but no one was interested in helping me. So here I am now, telling you about this scam so I can help you.

I know that in the next few days, I am going to get a call or email from David Cook asking telling me that his client has an immediate financial need and if I would not mind wire transferring the proceeds to a certain bank for him. This is how the scam works. In ordinary circumstances, I go on line and verify whether this check has cleared or not. I will notice that it has cleared and then wire transfer this guy several hundreds of thousands of dollars. When the check comes back as no good, the bank is going to ask me to reimburse it. By not depositing this check, I am going to save a lot of nice people, some large head aches.

LAWYERS - Moral of the Story -

1. Be very careful with whom you do business, especially over the internet. Everyone has a website today. Look your client or referring attorney's website to see if it makes sense. Mr. Cook claims to be an expert in most areas of the law. Pretty impressive, huh? That alone was enough to put me on guard regarding this guy. The bad guy may have gone to great lengths to prove that he is who he purports to be, except for getting an education. "David Cook" had a website to show that he was an attorney, albeit fraught with spelling and grammatical errors.

2. Verify that the debtor actually owes money. Pick up a telephone and call the debtor that you are pursuing. In this case, the "debtor" made a $550,000 check payable to me, without even knowing who I am. I know that the holidays bring about good cheer, but even that has its limits.

3. Stay alert to little things that just don't make sense. For instance, in this case, the client (whom I had never met), purportedly had a its debtor make a check out to me for $500,000 and told me to take my fee of 1/3 from it? Why? I have not even written a demand letter. I believe in the kindness of strangers but, again, this too, has its limits.

4. The scariest thought of this process, besides potentially getting stuck for money that you paid out to con artists, is that you do not have law enforcement agencies to help you. You are on your own. Use your wits, your intelligence and ask as many questions as you need to satisfy yourself that everyone is who they purport to be.