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Supreme Court Knocks a Hole in the Fair Debt Collection Practices Act On June 12, 2017, the Supreme Court knocked a hole in consumers’ rights under the Fair Debt Collection Practices Act. Starting now, debt buyers, like Midland, Portfolio Recovery, and Cavalry are free of the regulations under the FDCPA.  Here’s my list of the […]

According to an article in USA Today “Wells Fargo faces new accusations that it tried to capitalize financially on its customers without their permission — this time by allegedly modifying mortgage terms for people who had filed for bankruptcy protection.
With the smoke still lingering from the firestorm that erupted from the bank’s opening of fake consumer accounts, Wells was hit with multiple lawsuits alleging that the bank surreptitiously extended loan lengths, potentially costing some homeowners tens of thousands of dollars.”
On June 7, 2017 plaintiff attorneys alleged “illegal stealth modifications” of mortgage loans.  The attorneys are seeking to establish a class action group in the bankruptcy court detailing actions taken by Wells Fargo in more than 100 bankruptcy cases.
Surprise – Wells Fargo “strongly denies the claims”.
In a separate article in the L.A. Times, Elizabeth Warren calls on Feds to use their powers to remove Wells Fargo board members over the earlier false accounts scandal.

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About the Author:
Diane L. Drain is a well known and respected Arizona bankruptcy attorney. She is an expert in both consumer bankruptcy and Arizona foreclosure. Since 1985 she has been a dedicated advocate for her clients and spokesperson for Arizona citizens. Diane is a retired professor of law teaching bankruptcy for more than 20 years. As a teacher she believes in offering everyone, not just her clients, advice about the Arizona bankruptcy laws. She is also a mentor to hundreds of Arizona attorneys.
I would be flattered if you connected with me on GOOGLE+
*From Diane: This article/blog is available for educational purposes only and does not provide specific legal advice. By using this information, you agree there is no attorney client relationship between you and me, and that this information should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state.*

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The post Wells Fargo in Trouble Again – appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

By Jessica Silver-Greenberg and Michael Corkery

More than a decade after Yvette Harris’s 1997 Mitsubishi was repossessed, she is still
paying off her car loan.

She has no choice. Her auto lender took her to court and won the right to seize a
portion of her income to cover her debt. The lender has so far been able to garnish
$4,133 from her paychecks — a drain that at one point forced Ms. Harris, a single
mother who lives in the Bronx, to go on public assistance to support her two sons.

“How am I still paying for a car I don’t have?” she asked.

For millions of Americans like Ms. Harris who have shaky credit and had to turn
to subprime auto loans with high interest rates and hefty fees to buy a car, there is no
getting out.

Many of these auto loans, it turns out, have a habit of haunting people long after
their cars have been repossessed.

The reason: Unable to recover the balance of the loans by repossessing and
reselling the cars, some subprime lenders are aggressively suing borrowers to collect
what remains — even 13 years later.

Ms. Harris’s predicament goes a long way toward explaining how lenders,
working hand in hand with auto dealers, have made billions of dollars extending
high-interest loans to Americans on the financial margins.

These are people desperate enough to take on thousands of dollars of debt at
interest rates as high as 24 percent for one simple reason: Without a car, they have
no way to get to work or to doctors.

With their low credit scores, buying or leasing a new car is not an option. And
when all the interest and fees of a subprime loan are added up, even a used car with
mechanical defects and many miles on the odometer can end up costing more than a
new car.

Subprime lenders are willing to take a chance on these risky borrowers because
when they default, the lenders can repossess their cars and persuade judges in 46
states to give them the power to seize borrowers’ paychecks to cover the balance of
the car loan.

Now, with defaults rising, federal banking regulators and economists are
worried how the strain of these loans will spill over into the broader economy.

For low-income Americans, the fallout could, in some ways, be worse than the
mortgage crisis.

With mortgages, people could turn in the keys to their house and walk away. But
with auto debt, there is increasingly no exit. Repossession, rather than being the end,
is just the beginning.

“Low-income earners are shackled to this debt,” said Shanna Tallarico, a
consumer lawyer with the New York Legal Assistance Group.

There are no national tallies of how many borrowers face the collection lawsuits,
known within the industry as deficiency cases. But state records show that the courts
are becoming flooded with such lawsuits.

For example, the large subprime lender Credit Acceptance has filed more than
17,000 lawsuits against borrowers in New York alone since 2010, court records
show. And debt buyers — companies that scoop up huge numbers of soured loans for
pennies on the dollar — bring their own cases, breathing new life into old bills.

Portfolio Recovery Associates, one of the nation’s largest debt buyers, purchased
about $30.2 million of auto deficiencies in the first quarter of this year, up from
$411,000 just a year earlier.

One of the people Credit Acceptance sued is Nagham Jawad, a refugee from
Iraq, who moved to Syracuse after her father was killed. Soon after settling into her
new home in 2009, Ms. Jawad took out a loan for $5,900 and bought a used car.

After only a few months on the road, the transmission on the 10-year-old Chevy
Tahoe gave out. The vehicle was in such bad shape that her lender didn’t bother to
repossess it when Ms. Jawad, 39, fell behind on payments.

“These are garbage cars sold at outrageous interest rates,” said her lawyer, Gary
J. Pieples, director of the consumer law clinic at the Syracuse University College of
Law.

The value of any car typically starts to decline the moment it leaves the dealer’s
lot. In the subprime market, however, the value of the cars is often beside the point.

A dealership in Queens refused to cancel Theresa Robinson’s loan of nearly
$8,000 and give her a refund for a car that broke down days after she drove it off the
lot.

Instead, Ms. Robinson, a Staten Island resident who is physically disabled and
was desperate for a car to get to her doctors’ appointments, was told to pick a
different car from the lot.

The second car she selected — a 2005 Chrysler Pacifica — eventually broke
down as well. Unable to afford the loan payments after sinking thousands of dollars
into repairs, Ms. Robinson defaulted.

Her subprime lender took her to court and won the right to garnish her income
from babysitting her grandson to cover her loan payments.

Ms. Robinson and her lawyer, Ms. Tallarico, are now fighting to get the
judgment overturned.

“Essentially, the dealers are not selling cars. They are selling bad loans,” said

Adam Taub, a lawyer in Detroit who has defended consumers in hundreds of these
cases.

Many lawyers assisting poor borrowers like Ms. Robinson say they learn about
the lawsuits only after a judge has issued a decision in favor of the lender.

Most borrowers can’t afford lawyers and don’t show up to court to challenge the
lawsuits. That means the collectors win many cases, transforming the debts into
judgments they can use to garnish wages.

The lenders argue that they are just recouping through the courts what they are
legally owed. They also argue that subprime auto lending meets an important need.

And collecting on the debt is a critical part of the business. The first item on the
quarterly earnings of Credit Acceptance, the large subprime auto lender, is not the
amount of loans it makes, but what it expects to collect on the debt.

The company, for example, expects a 72 percent collection rate on loans made in
2014 — the year that a used 2009 Volkswagen Tiguan was repossessed from Nina
Lysloff of Ypsilanti, Mich.

With all the interest and fees on her Credit Acceptance loan factored in, the car
ended up costing her $28,383. Ms. Lysloff could have bought a brand-new
Volkswagen Tiguan for $22,149, according to Kelley Blue Book.

When Ms. Lysloff fell behind, the trade-in value on the car was a fraction of
what she still owed. Last year, Credit Acceptance sued her for $15,755.

The strategy at Credit Acceptance, which has a market value of $4.4 billion, is
yielding big profits. The Michigan company said its return on equity, a measure of
profitability, was 31 percent last year — more than four times Bank of America’s
return.

Credit Acceptance did not respond to requests for comment.

Some of the people who got subprime loans lacked enough income to qualify for
any loan.

U.S. Bank is pursuing Tara Pearson for the $9,339 left after her 2011 Hyundai
Accent was stolen and she could not pay the fee to get it from the impound lot. When
she purchased the car in 2015 at a dealership in Winchester, Ky., Ms. Pearson said,
she explained that her only income was about $722 from Social Security.

Her loan application listed things differently. Her employer was identified as
“S.S.I.,” and her income was put at $2,750, court records show.

Citing continuing litigation, U.S. Bank declined to comment about Ms. Pearson.

Auto lending was one of the few types of credit that did not dry up during the
financial crisis. It now stands at more than $1.1 trillion.

Despite many signs that the market is overheating, securities tied to the loans
are so profitable — yielding twice as much as certain Treasury securities — that they
remain a sought-after investment on Wall Street.

“The dog keeps eating until its stomach explodes,” said Daniel Zwirn, who runs
Arena, a hedge fund that has avoided subprime auto investments.

Some lenders are pulling back from making new loans. Subprime auto lending
reached a 10-year low in the first quarter. But for those borrowers already stuck with
debt, there is no end in sight.

Ms. Harris, the single mother from the Bronx, said that even after her wages had
been garnished and she paid an additional $2,743 on her own, her lender was still
seeking to collect about $6,500.

“It’s been a nightmare,” she said.

Copyright 2017 The New York Times Company.  All rights reserved.

What types of bankruptcy are available?

Chapter 7 and chapter 13 are the two chapters most often used by the average consumer. Chapter 7 is typically used by those with little non-exempt property and less than median income. Chapter 13 is used by consumers who desire to propose a chapter 13 plan of reorganization to provide for their various debt over a 3 to 5 year plan of reorganization.

How does a person decide which chapter is best?

Various items need to be considered in determining whether to file for bankruptcy under chapter 7 or chapter 13. One item to be reviewed is the "mean test" which was added to the bankruptcy code in 2005. If a person has substantial property in excess of that which is "exempt," filing under chapter 13 would likely be appropriate.  Also is a person is behind with their mortgage or in a foreclosure, they would consider using chapter 13 to propose a plan to reinstate their mortgage.

Can a future employer consider my bankruptcy in a hiring decision?

Goverment employers may not deny employment to those who file for bankruptcy. Private employers may not terminate an employee because of a bankruptcy filing. Although technically a private employer can refuse to hire a person on account of a bankruptcy filing, often the discharge of debt makes a person a better candidate with his financial situation resolved.

May a person file for bankruptcy for just come of his debt?

A person is required to list all of his or her debt in the bankruptcy case. Those debts that are dischargeable will be discharged. A person though is free to voluntarily repay any debts if they should so desire.

Jordan E. Bublick - Miami Bankruptcy Lawyer - North Miami & Kendall Offices - (305) 891-4055 - www.bublicklaw.com