Michigan Collection Law Blog

My cousin, Aubrey Tobin, is a lawyer. He recently sent me the following email regarding tips as to how to avoid being a victim of identity theft. I thought it was worth passing on to you. He said:

Read this and make a copy for your files in case you need to refer to it someday. Maybe we should all take some of his advice! A corporate Attorney sent the following out to the employees in his company.

1. Do not sign the back of your credit cards. Instead, put "PHOTO ID REQUIRED" or "SEE ID."

2. When you are writing checks to pay on your credit card accounts, DO NOT put the complete account number on the "For" line. Instead, just put the last four numbers. Your credit card company knows the rest of the number, and anyone who might be handling your check as it passes through all the check processing channels won't have access to it.

3. Put your work phone number on your checks instead of your home phone. If you have a P.O. Box use that instead of your home address. If you do not have a P.O. Box, use your work address. Never have your social security number printed on your checks. You can add it if it is necessary.

4. Place the contents of your wallet on a photocopy machine. Do both sides of each license, credit card, etc. You will know what you had in your wallet and all of the account numbers and phone numbers to Call and cancel. Keep the photocopy in a safe place.

Also carry a photocopy of your passport when you travel either here or abroad. We've all heard horror stories about fraud that's committed on us in stealing a name, address, social security number, credit cards.

The attorney that originally wrote this had his wallet stolen. Within a week, the thieve(s) ordered an expensive monthly cell phone package, applied for a VISA credit card, had a credit line approved to buy a Gateway computer, received a PIN number from DMV to change my driving record information online, and more.

But here's some critical information to limit the damage in case this happens to you or someone you know:

5. We have been told we should cancel our credit cards immediately. But the key is having the toll free numbers and your card Numbers handy so you know whom to call. Keep those where you can find them.

6. File a police report immediately in the jurisdiction where your credit cards, etc., were stolen. This proves to credit providers you were diligent, and this is a first step toward an Investigation (if there ever is one).


But here's what is perhaps most important of all:

7. Call any one of the national credit reporting organizations, Experian, Trans Union, or Equifax immediately to place a fraud alert on your name. By placing a temporary fraud alert on one of your credit reports, you have effectively notified all three bureaus as the one that you have notified is required to notify the others as well. You should also call the Social Security Fraud Department. I had never heard of doing that until advised by a bank that called to tell me an application for credit was made over the internet in my name. The alert means any company that checks your credit knows your information was stolen, and they have to contact you by phone to authorize new credit.

By the time the attorney who originally wrote this was advised to do this, (almost two weeks after the theft of his wallet), the damage had been done. There are records of all the credit checks initiated by the thieves' purchases, none of which he knew about before placing the alert. Since then, no additional damage has been done. It seems to have stopped them dead in their tracks.

Now, here are the numbers you always need to contact about your wallet, etc., has been stolen:

1.) Equifax: 800-525-6285

2.) Experian 888-397-3742

3.) Trans Union : 800-6807289

4.) Social Security Administration (fraud line): 800-269-0271

We pass along jokes on the Internet; we pass along just about everything.

If you are willing to pass this information along, it could really help someone that you care about.

Aubrey H. Tobin
Attorney at Law, P.C.
2140 Walnut Lake Road
West Bloomfield, MI 48323
Telephone: 248.932.3070
Telecopier: 248.855.0430

My cousin Aubrey is older than I. As we were kids, he always looked out for me. He still does which is why I love him. Please heed my cousin's advice as it is sound and keep these numbers handy.

I just read an interesting article in the National Law Journal of April 6, 2009 about Payday loan companies that are affiliating with Tribal American nations in order to avoid regulation by the United States. Is this legal one may ask?

For the past few years, many states have begun to regulate these payday loan companies. Between the processing fees, interest rates and short terms of the loans, their effective rate of return is often between 600% - 800%. It is an obnoxious way to gouge a necessitous borrower. Yeah, yeah, whine whine, the payday lenders will cry "its all about risk and there is a lot of it with these borrowers." Screw them. Its all about the bottom line and there is even more of that than there is risk. I don't begrudge anyone a fair rate of return. It just turns my stomach when a fat cat lender holds his dollars over a borrower's head and makes him jump through rings of fire for the loan. I am a collection attorney and yet this kind of debt nauseates me. I used to collect that crap and now I won't touch it. Old age, I guess...ok...back to our story.

In the past two years, many states out west, such as Colorado, West Virgina, California, Nebraska and Oklahoma have passed laws that regulate these payday loan companies and the fees that they can charge. Indeed, Michigan is now one of those states that regulates these payday loans. Not having the desire to be regulated or the conscience to do the right thing, some of these lenders have decided to incorporate under the laws of Indian. Humorously, some consumer groups have labeled these Indian groups as "rent-a-tribes." Anyways, these payday lenders are now claiming sovereign immunity when served with state court subpoenas. Essentially, the payday cowboys are telling the states to buzz off with their regulations and such, and that the states cannot touch them. Are they right? They may legally be correct.

Colorado has decided to take on this challenge to see who is ultimately correct. Its court of appeals has held that if a payday loan company is not "sufficiently affiliated" with an Indian tribe, that it may be subject to a court's subpoena and subsequently, it may be regulated. The court then set forth a test to define what "sufficiently affiliated" means. Naturally, neither the payday loan companies nor the Indians care to have their claims to sovereign immunity questioned. This is a fascinating issue that I will follow and report upon later. I will keep you posted as events unfold.

So, what do you think? Should payday loan companies be allowed to scalp the under privileged with the help of our Tribal American brothers? Does anyone else see irony in this?

My wife and I are on vacation in New York. She would kill me if she knew that I was doing any sort of work including posting anything to my blog. She is still sleeping, so now I can send this note to you.

Today, there is a very interesting article in the USA Today. It talks about banks lowering credit to credit card holders. If/when a bank lowers a consumer's borrowing limit, it will have the unintended consequence of lowering the consumer's credit score (FICO) score. If you do not already know, your FICO score is made up of a number of factors. The thing that makes this article disturbing is that it is not something that the consumer can control. For example, a consumer's credit necessarily takes a hit when the consumer submits a late payment. In this case, the consumer's credit gets dinged by the bank just for lowering the credit limit.

In my experience a bank will most likely look at a consumer's payment history and look at the balance carried and for how long it has been carried before it makes a decision to lower a consumer's maximum credit. In my opinion, if you are carrying a significant balance on your credit card, I would recommend that you find a way to refinance that balance with another lender. While a home equity loan may be a very difficult thing to do today, you may want to consider tapping into your home to pay off your credit card balances. Just be sure not to rack up a large credit card balance again.

My colleagues at Credit Slips write a blog that generally bashes credit grantors and bleeds left wing sympathy for the poor. OK. I am closer to being a rich guy that a poor one, but so what? I ain't apologizing. I grew up in a nice home, had my parents to pay for my undergraduate and law school degrees. I have thus far had a wonderful and privileged life. I am pleased as G-d has been good to me.

My colleagues at Credit Slips have recently taken to bashing the Payday loan industry in blog entry entitled Predatory Lending: Robin Hood in Reverse posted by Keith Kilty. I don't know Mr. Kilty or the amount of experience he has talking with the owners of these business. I represent one such entity as its lawyer. I can tell you that it takes a lot of money to pay the start up costs of the the business, pay employees, rent, security and other over items. Pushing all of that aside, Mr. Kilty may not know that a good deal of the checks that are written by Payday customers go bad. When they do, someone has to eat that loss. If the business owner were to eat that ENTIRE loss, he would find himself out of business. The Payday loan business owners protect themselves against these eventual and unavoidable losses with a higher interest rate. Hence, everyone pays a premium to cover the losses that are bourne by the business owner due to the relatively high frequency of these Payday loans going bad. If their interest rates were cut by law, many Payday business owners would simply close up shop. Hence, a Payday customer needing cash immediately would have one less available option to solve the pressing cash need. Is that a solution that Mr. Kilty would prefer? While I understand that some state legislatures are beginning to examine the business operations of the Payday loan industry, one can be sure if that interest rates get cut by statute, many of these business owners will close and do something else with their investment. Is this a direction that Mr. Kilty things would be good for the poor? I sure don't think so.

A friend of mine got into deep trouble with his credit cards last year...$100,000 worth of trouble on 2 credit cards (my friends, this is not at typo). He was pursued by American Express for $50,000 and another company. I settled these cases for about $5,000 each (again...this is not a typo). Here is the problem.

I sent a demand to American Express to provide me copies of his credit card statements. Looking over his statements for the past several years, it was painfully clear that he was living on this card. He took large cash withdrawals to pay his mortgage, car note and other general living expenses. He had absolutely no ability to repay this debt. Even if you never met this guy and knew nothing of his situation, you could look at these statements and see that these balances were simply climbing higher and higher. So what's my problem? I'll tell you.

1. If it was obvious to me (and things are rarely obvious to me) that this guy had no ability to repay the draws on this credit, it had to be clear as day to the folks at AE. So why did they lure this poor schmuck into a financial corner? Why didn't they simply cut him off at the point when his interest payments were over $1,000 per month? Did they take advantage of a necessitous borrower or a mentally sick man? In either case, it made me think of how many people are out there that are in this same position but are being bled to death by these credit card lenders. Even as a debt collector, this nauseates me; almost to the point of offering my services free to credit card customers that have been taken advantage of in this fashion...almost...almost....

2. When a credit card customer charges $100,000 to his card and walks away from $90,000 of the debt thanks to great counsel (please forgive that shameless self serving commercial plug), who do you think foots the bill for that difference? You and I do. In the collection business, we have a saying; there is no such thing as an unpaid bill. Again, more injustice.

I tried to find a cause of action to pursue these credit granting vampires who clearly feast at the necks of the weak and poor. However, these monsters of darkness have a very strong lobby and, as far as I can tell, there has not been any successful cause of action against these parasites. Don't get me wrong. I have credit and am very thankful for it. I just don't like lenders that target needy borrowers, put them in a hole and slowly bleed them to death.

Does anyone else feel this way? If you think about, doesn't anger you?

I am not a particular eloquent writer, but Professor Elizabeth Warren is. I would recommend that anyone interested in this article follow her blog "Credit Slips."

This last weekend, I was in Chicago attending the American Bar Association conference on Technology. While in Chicago, I saw the movie, Maxed Out. It is the only feature movie that I am aware of that deals with consumer credit. The movie was a documentary about consumers that got into trouble with their loans and credit cards. I left the movie shaken and I am a collection attorney.

Maxed out was a documentary that pointed the finger for consumer woes on the credit granting policies of the the likes of Citibank and MBNA. For example, two mothers spoke of how their children, new to college campuses, arrived to find the credit card companies signing up college kids who have no income and are probably drowning in student loans. These two mothers found out that their kids received several credit cards and could not pay them back. These kids committed suicide. Extreme? Probably. Is it the credit card company's fault? Who knows. Should credit card companies target college kids that generally have no income to repay debt? Absolutely not!

Professor Elizabeth Warren, from Harvard, commented throughout the movie. She stated that the credit card companies make their money by putting people deep into debt so that people spend the rest of their lives making the minimum payments. In other words $1 loaned usually equals $2 repaid. The credit card companies and banks make their money targeting lower to middle income people. It was absolutely nauseating. I highly recommend Maxed Out. I think it should be required viewing before someone takes out a credit card.

The movie had a lot to say and really exposed the soft slimey underside of predatory lending. In fact, this movie has led me to create a new topic category on this blog that I will call Disturbing Trends in Lending. There has been a lot of controversy regarding predatory lending as of late and I think it is high time that we all discuss it. More to come....