InsideARM reports that, according to WebRecon LLC, as of April 30 Sergei Lemberg is the “most active consumer attorney” of 2012. We welcome this designation, and hope to continue to help consumers throughout the rest of the year, and for years to come.
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Lemberg & Associates Mentioned in Sacramento Bee Debt Collection Article
Lemberg & Associates Of-Counsel Tammy Hussin was quoted in the Sacramento Bee over the weekend. The article, written by Marjie Lundstromand, discussed the uptick in lawsuits against debt collection agencies by California consumers. Hussin noted that the poor economy means people have less money with which to pay their debts, which results in more aggressive debt collection tactics.
The article reported the increase in debt collection-related complaints to the Federal Trade Commission, as well as enforcement actions taken against rogue California-based debt collection agencies. Unsurprisingly, representatives of the debt collection industry portrayed themselves as victims of consumer attorneys, unclear laws, and consumers who file multiple lawsuits. But the article also sheds light on California’s debt collection statute, the Rosenthal Act, as well as the downright nasty practices engaged in by some debt collectors.
Consumer Attorney Sergei Lemberg Applauds Education Department Mandate for Student Loan Debt Collection
Excerpted from last week’s press release:
Consumer Attorney Sergei Lemberg (www.stopcollector.com) applauded the U.S. Department of Education’s recent actions regarding student loan debt collection. Late last week, the Education Department said that it would mandate that debt collectors use an income-based formula in collecting payments on defaulted student loans, rather than a minimum payment based on the loan amount. The agency also indicated it would review debt collection scripts and the commission structure it uses with private debt collection agencies.
Lemberg said that these actions, which will likely take effect in mid-2013, will help offset economic conflicts of interest that cause debt collectors to violate the Fair Debt Collection Practices Act by threatening to garnish the wages of those with defaulted student loans. Lemberg said, “While the law says that a court judgment isn’t needed to garnish wages to repay federal student loans in default, the debt collection agency is required to provide the consumer with a notice of intent to garnish. We’re seeing a disturbing trend whereby debt collection agencies threaten consumers with garnishment if an immediate minimum payment isn’t made.”
In addition to sending the consumer a notice of intent to garnish, the law mandates that the person in default has a right to an impartial administrative hearing. “Several of our clients have been threatened with garnishment, without having been served a notice of intent nor having been informed of their right to an administrative hearing,” Lemberg said. “This is a clear violation of provisions of the Fair Debt Collection Practices Act that prohibit debt collectors from threatening actions that they neither have the ability nor intent to carry out.”
Indeed, some of Lemberg’s clients report that debt collectors have deceived them into supplying their financial information, ostensibly to be considered for a “hardship program,” and instead use the information to press for immediate payment. One client began receiving verbal garnishment threats from a debt collector in December 2011, and to date hasn’t received the legally required notice of intent to garnish.
According to Lemberg, the Department of Education’s current financial arrangements with private debt collection agencies create a situation ripe for abuse. “Debt collection agencies get a sizeable commission from each dollar they collect, while getting only an flat administrative fee for accounts on which they don’t collect,” he said. “Moreover, the Education Department gives each debt collection agency a quarterly ranking, and awards new accounts based on that ranking. Seventy percent of the ranking is based on dollars collected. There is zero incentive for debt collection agencies to help consumers enter a loan rehabilitation program that lowers their monthly payments.”
Lemberg goes so far as to propose that the Department of Education do a bit of borrowing of its own. “The Education Department should take a page from the IRS playbook,” he said, noting that – like back taxes – defaulted student loans aren’t dischargeable in bankruptcy. “The IRS had a disastrous experience with private debt collection agencies, and brought collections back in-house. Consumers with student loans shouldn’t be treated more poorly than those who owe back taxes.”
Lemberg Client Profiled in Article
Lemberg & Associates client Bradley Kimbell was profiled in an article outlining the increasing prominence of the Consumer Financial Protection Bureau’s role in regulating the debt collection industry. The article, written by Andrew Tangel and printed in The Record, outlined Kimbell’s experience with debt collection robocalls, and the runaround he received when trying to communicate with Palisades Collection, a subsidiary of Asta Funding. It also quotes attorney Sergei Lemberg.
Tangel’s article position’s Kimbell’s story as one reason why the CFPB is trying to fill the enforcement gap in reining in the debt collection industry. CFPB Director Richard Cordray has been vocal about putting a stop to the most egregious tactics used by the bad players in the industry, and the CFPB has proposed a rule that would enable the agency to more closely regulate the largest debt collection agencies and credit reporting agencies.
Commercial Recovery Systems: How Low Can You Go?
A Texas woman says she has suffered immeasurably at the hands of Commercial Recovery Systems, a third-party debt collection agency. In Flynn v. Commercial Recovery Systems (U.S. District Court, Northern District of Texas, Dallas Division), it is alleged that the debt collection agency went beyond the pale in attempting to collect a debt. The complaint alleges that the debt collector called Flynn’s cell phone up to six times a day, and called her octogenarian parents at 7:00 a.m. and told them that there was a warrant for Flynn’s arrest. Moreover, the debt collector allegedly threatened to come to Flynn’s house, and to arrive with a law enforcement agent. Added to the mix are allegations that Commercial Recovery Systems allegedly failed to send Flynn the mandated 5-day notification letter, nor informed her of her right to dispute the debt. The suit, filed by Lemberg & Associates on behalf of Ms. Flynn, cites numerous violations of the federal Fair Debt Collection Practices Act, as well as the Texas Debt Collection Act.
Amended Complaint Filed in Class Action Against Whirlpool and Service Net
We released the following press release on Monday, January 9:
Lemberg & Associates LLC has filed an amended class action complaint on behalf of a client that alleges that Whirlpool Corporation, which has merged with Maytag Corporation, and Service Net Warranty engaged in deceptive and unfair trade practices regarding the companies’ service contracts. According to attorney Sergei Lemberg, “Thousands of consumers – or perhaps hundreds of thousands – were ripped off by Whirlpool and Service Net when those companies did not repair or replace faulty appliances per the terms of the service contracts.”
According to the amended class action complaint, when he purchased his Maytag clothes dryer, the plaintiff also bought a three-year service contract that promised to repair or replace the appliance if it failed. The complaint states that it also gave the warrantor the option of “buying out” the contract by either refunding the original purchase price less the amount of claims paid, or replacing the dryer with a comparable product. Instead of refunding the original purchase price or replacing the dryer, the complaint alleges that the defendants told the plaintiff that he was only entitled to a refund for the present value of the dryer, minus the cost of the repairman’s visit. According to Lemberg, “That is absurd, since the point of buying a service contract is to avoid the cost of repair.”
The plaintiff alleges that Maytag, which was subsequently purchased by Whirlpool, and Service Net Warranty, which administers the service contracts, failed to fulfill the terms of the service contract by improperly administering buy-outs. As such, the suit alleges that the his dryer’s buy-out, and buy-outs given to similarly situated consumers, constituted breach of contract, unjust enrichment, and a violation of the federal Magnuson-Moss Warranty Act.
Lemberg concludes, “Consumers purchase service contracts to ensure that they will be protected should an appliance need repair or replacement. Corporations and service contract providers need to be held accountable to the terms of the service contracts. On behalf of our client, we are determined to do whatever it takes to give consumers who have been victimized an avenue of redress.”
This release references Sherman v. Maytag Corporation, Whirlpool Corporation, and Service Net Warranty, LLC (U.S. District Court, District of Connecticut, 3:11-cv-01010-JBA).
Newsweek Runs Excellent Story on Debt Collectors
Newsweek Magazine started the New Year right – with a great story on the seedy underbelly of the debt collection industry. A former debt collector relates that she was ordered to keep calling consumers to the point of harassment, and tells tales of threats made by debt collectors to consumers. Gary Rivlin, who wrote the piece, also delves into the world of debt buying, explaining that “zombie” debt may be pursued by three or four debt collection agencies over time, subjecting the consumer to repeated inquiries about debts that have never been validated. He even explains that many debt buyers have no qualms about collecting past a debt’s statute of limitations. He notes that one debt buyer he interviewed “doesn’t bother buying the paperwork that would substantiate the data contained in the spreadsheets he buys from other debt buyers because, he explains, that bumps up the cost of the purchase and therefore eats into the bottom line.
Sergei Lemerg is also quoted in the article, commenting on the Federal Trade Commission report that shows a huge uptick in consumer complaints about debt collectors. Lemberg says that the FTC numbers are “just the tip of the iceberg.”
You can read the full article at the Daily Beast: http://www.thedailybeast.com/newsweek/2012/01/01/america-s-abusive-debt-collectors.html
Complaint Filed in Class Action for Alleged Violations of the Servicemembers Civil Relief Act
We filed a class action complaint on behalf of Sgt. Charles Beard and other servicemembers, and issued this press release last week:
Attorneys for plaintiff Sergeant Charles Beard have filed a class action complaint that alleges that Satander Consumer USA and Triad Financial Corporation illegally and routinely repossess automobiles belonging to active duty U.S. military personnel without first obtaining a court order, in violation of the Servicemembers Civil Relief Act (SCRA). The complaint, filed in U.S. District Court, Eastern District of California, also alleges that the defendants fail to reduce the applicable interest rate to six percent for any servicemember who provides them with notification under Section 527 of the SCRA. According to Sgt. Beard’s attorney, Sergei Lemberg, “While our sailors, airmen, and Marines are exhibiting unparalleled patriotism and sacrificing so much, unscrupulous companies are stealing their cars. Violating the SCRA is simply unpatriotic.”
Sgt. Beard, who is in the Army National Guard, purchased a Kia Sportage in September 2007 and began making payments to Triad Financial. In August 2008, Sgt. Beard was ordered to active duty and was deployed abroad. The suit alleges that the defendants repossessed Sgt. Beard’s Sportage in February 2009, despite his wife telling them that her husband was on active duty and that a court order was required to repossess the car. A representative of the defendants allegedly told Mrs. Beard that she would go to jail for a stolen car if she did not return the vehicle. Although an Army legal assistance attorney advised the defendants that Sgt. Beard was protected under the SCRA, the suit alleges that they nonetheless sold his Sportage at auction, and kept both the auction proceeds and Sgt. Beard’s payments.
According to the court filing, the defendants’ repossession of Sgt. Beard’s vehicle in violation of the SCRA is typical, and therefore qualifies for class action status. It notes that, after reviewing many jurisdictions heavily populated by military personnel, it was found that the defendants routinely fail to determine whether a delinquent borrower is in the military or on active duty. It says, “Defendants routinely ignore servicemembers’ rights under the SCRA and wrongfully repossess their cars without obtaining the required court orders.” Moreover, the court filing notes that the defendants routinely charge more than the six percent interest rate allowed by the SCRA.
Since September 11, 2001, more than one million courageous men and women have stepped forward to defend the U.S. and its founding principles through their military service. Our nation has witnessed the focus and determination of our brave men and women in uniform – a commitment that has cost many their limbs and others their lives. Serving in approximately 150 countries around the globe, U.S. servicemembers make sacrifices on a daily basis. Says Lemberg, “The very lives of our men and women in uniform depend upon their ability to focus on the job at hand. The SCRA is meant to ensure that they aren’t distracted by matters back home.”
Lemberg notes that those in the military sacrifice tremendously for our country in the name of freedom. The case filing says, “It is against equity and good conscience to permit [the] defendants to retain the ill-gotten proceeds of the vehicle’s repossession and sale and from charging illegal rates of interest.” Lemberg concludes, “We will fight on Sgt. Beard’s behalf – and servicemembers like him – to see that the defendants are brought to justice.”
This release references Beard v. Santander Consumer USA, Inc. and Triad Financial Corporation (U.S. District Court, Eastern District of California, Fresno Division, 1:11-cv-01815-LJO-BAM).
Holly Petraeus Stands Up for Military Families at the CFPB
Holly Petraeus, who served as the Better Business Bureau’s military liaison, is now the head of the Consumer Financial Protection Bureau’s Office of Servicemember Affairs. As such, she’s redoubled her commitment to ensuring that servicemembers and their families are protected from predatory lending. If you’re part of a military family, or have friends or neighbors who serve, you should read her article on DoD Live.
Petraeus, who happens to be the wife of (Ret.) General David Petraeus, discusses the burdens that military families shoulder when they receive orders to move to a new duty station and are denied short sales and home modifications. She notes that the Treasury Department has taken steps to help, but it sounds as though there’s a long way to go. She also discusses predatory marketing by for-profit colleges regarding military education benefits, as well as scams by used car dealers involving yo-yo financing.
Petraeus also voices concern about debt collectors calling servicemembers and threatening them with the Uniform Code of Military Justice or telling them that their security clearances will be compromised if they don’t pay. She recounts, “We even heard of a debt collector telling a widow that she had to use the money from her husband’s combat death gratuity to pay the debt immediately.” That’s simply beyond the pale.
Media Coverage for Lemberg & Associates
We received some nice media coverage from the Leader-Herald. You can read the story here:
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