Usury and Non-Bank Loans

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I have had my hands full lately with the National Banking Act (NBA). Specifically, the question is whether the NBA, which protects national banks from usury claims, applies to debt collectors which buy the debts. It turns out that question has several possible answers.

National Banking Act Allows Usury

Here’s the background: some states have laws limiting the amount of interest lenders can charge. Under the NBA, a bank can issue credit cards that charge high interest in states with usury laws. Yes, it’s a scam (they call it “exporting interest rates”), but they can. What happens if your debt gets sold to a debt collector? The NBA applies to national banks, not other businesses, so you might think a debt collector would be committing usury by trying to collect illegal rates. That would also violate the Fair Debt Collection Practices Act (FDCPA).

Under Madden, Debt Collectors Don’t Receive NBA License to Commit Usury, Regulation Changes That

The Second Federal Circuit of Appeals found that debt collectors collecting usurious rates was, in fact, illegal in a case called Madden v. Midland Funding, LLC 786 F.3d 246 (2015). Some other circuits, notably the 8th, have tended in the other direction. The Supreme Court denied certiorari (review) of Madden, so it remains in place as law of the 2nd Circuit. Unfortunately, the debt collectors managed to sneak a new regulation through that negates Madden. That regulation is at: 12 C.F.R. part 331, 84 Fed. Reg. 66845.

Possible Outcomes

This leaves us in an odd place. If you are in the 2nd Circuit currently being sued by a debt collector on a card with interest higher than your state allows, you have a powerful defense and a counterclaim probably under the usury law and FDCPA. I think it is still good, though you can expect some fighting on the question of retroactivity of the regulation. What about claims arising in the future, though? What about claims outside of the 2nd Circuit?

Courts are supposed to give “great deference” to regulations duly issued by agencies charged with enforcing specific laws. Without going into details, this regulation would seem to fit that bill and should probably receive that deference. It is not unheard of for the courts to reject such a regulation, but it is rare, and, in my opinion, very unlikely in this situation – even in the Second Circuit. Thus I believe that in the future this defense will not be effective. I do believe it could be raised in good faith however, at present, and that may have some advantage for a pro se defendant. It will be a long shot even in the Second Circuit, however, and longer elsewhere.

What about claims existing now but outside the 2nd Circuit? Will the regulation affect the way the 8th Circuit, for example, reads Madden? It probably should not, but it probably will. The regulation is supposedly based on the FDIC’s reading of an existing statute rather than a new legislative enactment – it will probably be considered an authoritative interpretation of the statute even though, in practical effect it is a new legislative act. But this is not certain, and again, I think the issue may have advantages for pro se litigants to raise, and winning is not out of the question in my opinion.

What if you live in a state with a usury law and a debt collector is trying to collect higher rates – but is not suing you. Can you sue them? I believe the answer is yes – all the foregoing analysis applies to the attempt to collect the debt, not necessarily limited to litigation attempting to collect the debt.

Incidentally, the NBA explicitly extends to all FDIC-insured entities. This question came up in a teleconference relating to loans issued by WebBank, which apparently IS FDIC insured. Our consideration of whether WebBank itself can charge usurious rates, then, must conclude that it can indeed do so.

One might consider that enforcing an explicitly illegal contract (usury) would be void as against public policy under state law. And so it is. However, the federal preemption doctrine that the NBA invokes overrules that – states cannot claim a federal policy is against their public policy.

If you get a loan now and at some point in the future a debt collector tries to collect usurious rates that would have allowed to the original lender, I think you’re out of luck regarding the defenses and counterclaims we’ve discussed here. The new regulation permits it, as I read it. Of course you still have all the usual defenses and attacks we always use against debt collectors, so your chance of winning remains srong.

Could this Be a Good Time to Start Something New

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This is a bad time in the world and in the economy. Could it be a good time to open a new business? Maybe – if it’s the right one. In this article I’ll take a look at a couple of ideas that occurred to me. This isn’t my normal mission here, but maybe it could help some people in what’s coming.

I do not believe the Corona Virus is finished with us. Although it looks like state authorities are about to open up businesses again, I have my doubts about the wisdom of doing that, and it also seems unlikely that things will stay open. On the contrary, I think we’re in for a longer haul. And when normal returns, it will be a new normal – I saw one study projecting that over 40% of jobs lost now will not come back. So an alternative could be a good idea.

I make one suggestion to people considering a new business. Make it pay immediately unless money isn’t an issue for you. This isn’t a good time to go out on a limb.

The two ideas I’m going to discuss are pretty different from each other. The first is something almost any adult with a car could do. The second is far more specialized but could be used as a template for anyone with such a specialized background in various things. Neither should involve an outlay of cash at all, and both are “scalable” (can be ramped up and leveraged). Both are based on current realities.

Restaurant Food Delivery

As everybody knows, most restaurants have been forced to shift from in-store dining to curbside pickup or delivery. And you may know that they are relying on certain delivery service apps. For a much fuller discussion of the way this is hurting restaurants and the way the companies involved make money and use their power, check out this link: Uber-Grubhub: How the Pandemic Is Launching the Era of Online Platform Regulation. To summarize the article very briefly, the delivery service apps are charging up to 30% of the price of the meal for delivery. Some (few) jurisdictions have mandated a maximum of 15%, and some have required that tips be given to the drivers, instead of what appears to be the prevailing custom of having them go to the apps.

The money charged restaurants is killing them. I’m told that there is also a direct charge to consumers as well sometimes, and there is another danger of which restaurant owners may, or may not, be aware. But I know.

The way most phone apps work is not by charging for their use. Do you know how they make their money? They make money by selling data the apps generate to big data processing companies (“Big Data”). Food delivery apps are creating a lot of data. Of what? Of restaurants and their customers, of addresses, food preferences, time preferences, spending habits, and net delivery income. If you owned Joe’s Pizza, would you want Sam’s Pizza, or Frank’s Italian Food, two blocks away, to know all these things about your business?

Not unless you’re crazy. And do you trust Big Data not to sell that information to your competitors? Again, not unless you’re crazy. But restaurant owners might not know what the delivery apps are, or could be, doing. And they may not have a choice.

You could give them that choice. You could call up Joe’s Pizza and offer to deliver for them. Make your best deal, and see if you can make it pay. It’s low risk physically if you’re careful, and if you already drive, you’re risking only your time, financially. You’d be local helping local business and local people, and you would be thwarting, to some extent, Big Data (which I think is a significant social benefit). There could be regulatory obstacles, of course, and eventually you will need to take it seriously as a business, of course, but those things wouldn’t stop you from starting. And as you learn, you can figure things out.

Dungeons & Dragons Dungeon Master

Dungeons and Dragons (D&D) is a “table-top role-playing game” (ttrpg) that several people can play. You create characters and navigate a “dungeon,” which is a made-up world inhabited by a large variety of creatures, many of them hostile, and some with missions for you to perform. Your character starts at a certain level of skill and talent and gains experience and items as you navigate the dungeon. I played the game in college and found it addictive just like that. There was a computer game based on D&D which had overall goals – a “game story” of which you were a part. Whether that’s part of a dungeon master’s trade I don’t know.

An amateur dungeon-master was facing eviction and a great need to earn money but was worried about leaving the house and possibly risking the life of at-risk members of his household. I suggested he consider being an online professional dungeon master. I know that gamers, and especially D&D gamers, are often techies who have not been as hurt by the Corona Virus or social distancing, so the customers for dungeon masters should have money. But if they’re social distancing, people who were playing the game in person might want to do it online, but how? They’d need an online dungeon master.

D&D is an intensely social game, with interaction between player-characters and the dungeon master, and between player-characters as they face various battle scenes and strategic choices. That’s what makes it such a fun game. An online dungeon master would need a video app. The person to whom I spoke also said he needed a computer program costing $300 and microphone, another $100. So that was a $400 risk – that he could not afford to take, and which I said everybody should avoid anyway.

Finding Out

And anyway, who knows whether online dungeon mastering would pay? How would you find out without spending a ton of money?

Here’s how you solve both of those issues. You advertise, for free, in Craigs List or whatever online advertising forum you can, as long as it’s free. And what do you advertise? Online dungeon mastering, of course. Figure out how much you would need to make for it to be worth it to you, and how much people are willing to pay, and if those two numbers intersect, you have a start. But you still have to get $400 to set it up, how do you do that? You sell prepaid subscriptions. If it was going to cost $50/month per person for one evening per weekend, you offer a prepay price of $25. When you have 16 customers paying that, you buy your equipment and start.

Note that I just made up all of the numbers I used (except the equipment), from what the market would pay to how many evenings per week you would do. I just wanted to illustrate the way prepaid subscriptions could get you started. That would be true of any board game or, actually, any other service you might sell, at a profit, if you needed capital to start. You can get it from the people who want your service – and looking for those people helps you learn how valuable the service is and what the demand for it is.

I believe the market is going to be very tough for wage-earners or people with jobs dependent upon physical customer contact for quite some time, and I also think that many jobs that previously existed simply won’t come back. If you can find something where you are not an employee and which does not require a lot of customer contact, I think that would be a smart thing to do.

Voidable Judgments – the Other Kind of Motion to Vacate

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Voidable Judgments – the Other Kind of Motion to Vacate

For a free copy of this article in PDF form, click here: the other kind of motion to vacate

Most of the time when people talk about motions to vacate they’re talking about motions to vacate a default that occurred as a result of failure to respond to a properly served lawsuit. There is another kind of motion to vacate, though, for people where the court did not have proper jurisdiction. If that’s your situation, this is a better way.

A Quick Review

Once a lawsuit is properly served on a defendant, the court has “jurisdiction” (the power to address the claims made in the suit) at least provisionally. If a defendant fails to respond appropriately to such a suit, the plaintiff will probably get a default order and judgment. That is what happens in a large majority of debt cases.

An “appropriate” response that will prevent a default judgment is either:

  • An Answer, or
  • a motion to dismiss the suit.

It is also possible to file a motion “for more definite statement” in some states, as well. The point is, though, that every allegation in the petition must either be moved against or answered. If that happens, a default judgment should never be issued.

If you fail to answer and the court awards a default judgment, you can ask the court to give you another chance by asking it to “vacate” the default and allow you to defend the case. I discuss what this is, what the time limits are, and how to do it in several articles, see, e.g.,  Overcoming Default Judgments.

Voidable Judgments

But what if the court does NOT have or get proper jurisdiction over you?

This can happen in two common ways: the debt collector does not manage to serve you properly; or the debt collector sues you in a court that doesn’t have power over you (because you live somewhere else). Other ways are possible, but these are by far the most common.

If you find out that you are being sued in a court that lacks jurisdiction before judgment, you can move to dismiss the case on that basis, but that can defeat the whole purpose of the rule – since in order to do so you would have to appear (“specially”) in the court to do it, and if you’re far away, that’s impractical. Another way to handle the situation is to let the court rule and then attack the judgment in the correct court. That also has significant drawbacks, so if you know about the situation before judgment, it can present a tough question.

But most people do not learn about suits where the courts lack jurisdiction before judgment.  They find out about them later. What do you do if that happens?

No Authority, No Judgment

The good news is that there is NO time limit on a voidable judgment. The court never had authority to enter the judgment, and “all” you have to do is establish that fact. You can do that at any time, and it completely undoes the judgment. It is called “void ab initio,” meaning “from the beginning” as if it never existed.

Burden of Proof

The bad news is that you can have a high burden of proving that the court did not have authority over you. Most courts require you to present “clear and convincing” evidence of the facts that you were not subject to the court’s jurisdiction. In the case of residency – you were living in California but sued in Florida, that isn’t necessarily so hard.

In the case of sewer service – where you weren’t served, but the process server swore you were, it can be much more of a challenge. Still, almost everybody I’ve known who tried it succeeded. That’s because the process servers normally describe the person to whom they theoretically gave the petition, and they usually won’t know your age or body shape, and often guess incorrectly your gender and race. If their affidavit says they served a woman 5’2” eyes of blue and you’re obviously not that, you’re good. Other things obviously aren’t as easy to prove.

What you Have to Prove

You have to prove by good evidence that the court lacked jurisdiction over you.

What you Do Not Have to Prove

You won’t have to prove you made any mistake (you didn’t) or that the substance of the judgment (i.e., you owe $2,000) was wrong in any way. You do not need to allege or prove any “defense” to the suit, in other words. Attack the jurisdiction, and the case goes away.

What you Should Not Have to Prove

You shouldn’t have to prove you didn’t receive notice of a sewer service filing. Suppose, for example, you found it in the trash in a nearby dumpster. Most courts require proper service and not “notice” of the suit. But I’m afraid you can’t count on the courts to apply that rule consistently. You will not want to offer proof or any indication that you heard about the case in any way prior to judgment. If you became alerted to the fact that a process server was around and do some research in the court files, you will want to disguise the fact and cover your trail.

Special State Rules

The rules for this sort of motion to vacate are NOT the easily found rules in the rules of civil procedure. You must research your state’s rules for voidable judgments and follow whatever rules you find there.

Products Related to this Article

We do not have a product directly related to this article if you are moving to void a judgment. You may find our Motion to Vacate Pack helpful in showing you the form of motions and proof, but it does not contemplate the rules you would need to follow. I emphasize, again, that in filing a motion to void a judgment entered without jurisdiction, you would not want or need to include a “proposed Answer,” and you would not need to allege a defense (although claiming a defense wouldn’t hurt and might help).

You would probably find our memberships useful, particularly if the situation with the debt collector that brought you here is not the only one you’re facing.

Memberships

Members get discounts on all products as well as unlimited opportunities to join our regularly scheduled teleconferences. This gives invaluable real-time assistance, answers to questions, help with strategies, and encouragement. You also get the Litigation Manual and the Three Weaknesses Report for free with membership. Find out about memberships by clicking the “About Memberships” link in the menu at the top of the page.

 

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If Everybody Defended, What Would Happen to the Debt Collectors?

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What would Happen if Everybody Defended Debt Lawsuits?

To get a copy of this article in pdf format, click here: what would happen

Sometimes people ask me what would happen if everybody defended against the debt collectors. Would they fix things and be able to move back to business as usual without a second’s pause? Would the courts let it happen? And what would happen?

A Matter of Scale

To answer this question, consider the scale – first we’ll talk about the national scale, but then we’ll
bring it down to one member’s recent experience, an experience I had many, many times while I was representing people in this type of case.

On the national scale, it isn’t clear exactly how many of these suits are being brought. But there is over a trillion dollars of consumer debt out there, and a lot of it is “troubled.” And that doesn’t even count duplicates or old debt. We’re talking about a gigantic business here. You can see that by the fact that on any given day in St. Louis County – in the middle of Middle America – there are several thousand debt cases pending. That’s one small county in a mid-sized state.

How it actually works

You know that debt collectors buy huge amounts of debt at a time for small amounts of money. They ship them out for collection. The collectors either bug you for the money or just bring suit – they can do either one. They file – I’m guessing here – over a million suits per year, maybe many millions.

They file them in every magistrate court, small claims court, district court… all over the country.

In St. Louis County (which doesn’t include the city), there are ten courts that receive the bulk of these
cases, and it is not unusual to see 400 cases set for one hour of one day in ONE court. I’ve been there on days where there were 800 cases set for hearing. In one court, at the same hour.

One Member’s Experience

Now to discuss a member’s recent experience. He said there were 400 cases in the court his case was set in. He sat there for an hour while ALL of them “went away.”

In other words, the people being sued all either gave up to the lawyer (out in the hall, so the plaintiff related that the case had been “settled”) or the judge, or by default. Of the 400 cases set that day, ONLY ONE person chose to defend. That was our member.

What if People Defended?

Now consider that court again. It handled almost 400 cases in a little over an hour – and then it went
on to other business. What if all 400 people had said “No” and opted to defend themselves?

That would mean that the court would have to set 400 hearings and listen to the arguments one at a time. If they went to trial, it would have to set 400 cases and spend, at a minimum, two hours on each one – a hundred long days.

In ONE HOUR, the court would find itself half a year behind schedule.

Or consider the ten lawyers who handled those cases. Suppose that, instead of giving up, everybody
engaged in debt defense. They asked for discovery, haggled over objections, demanded real proof
of their supposed debts.  In one hour, those ten lawyers would be a full year behind schedule. Instead of collecting $500,000 in judgments in an hour and shuffling those off to the machine to collect, they’d have to work a year for whatever judgments they got.

And they wouldn’t get nearly as many, either. Do you think they could keep doing that?

The System Would Simply Collapse

All over the country, the debt collection business would bog down and come to a screeching halt – the courts would have a backlog of cases two and a half years long after just one week.

I don’t think anyone knows what would happen after that.

If people being sued by debt collectors could just realize it, they’d see that they own the system. It all depends on everybody giving up. Stop giving up, and the debt business collapses. Every defense increases the burden on the system.

Your Legal Leg Up

Your Legal Leg Up is a website and business dedicated to helping people defend themselves from debt lawsuits without having to hire a lawyer. As you can see below, we have a number of products as well as memberships that should help you wherever you are in the process. In addition to that, our website is a resource for all. Many of the articles and materials are reserved for members, but many are available to everyone.

Finding Resources

Our website is both a business and a public resource, and you can use it to find information on a wide variety of debt law-related topics. While many of our resources are restricted to members, of course, many more are free to the public. Please feel free to use it. Every page has a site search button in both the header and footer. It’s a little magnifying glass icon that looks like this:

Click on the magnifying glass icon, and a small window opens. Put in a key word – a word you think relates to what you’re looking for – and enter. You will get a page of results.

Why Defend Yourself from Debt Collectors

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Why you Should Defend against Debt Collectors, and Why you Can Do it Yourself

Get a copy of this article in PDF format by clicking here: why defend yourself

When you are sued by a debt collector, you are presented with two questions that often merge into one because of money.

  • Should you defend yourself (at all) from the lawsuit?
  • And if you do defend, do you have to have a lawyer?

A lot of people answer the second question first. They decide they need to have a lawyer in order to get anything done, and then they decide they cannot afford a lawyer, so they fail to defend themselves at all. This is a mistake.

First: Should you defend yourself?

Our answer to this question is absolutely “Yes.”

There is a tendency for people to think that lawsuits (filed against them) are only filed because the lawsuit is “good,” and that the plaintiff will or should win. That isn’t really true of any kind of lawsuit. In most kinds of law, however, the plaintiff’s lawyer will have done some research into the law and facts and will have some confidence that it’s a winner. After all, in most kinds of lawsuit, one expects a defense – the lawyer anticipates spending a considerable amount of time and money on the case before collecting anything significant.

And most plaintiffs are at least somewhat reluctant to start a lawsuit because of time and expense; often they are extremely reluctant, and with good reason.

Debt Law is Different

These things are simply not true of debt cases. In debt cases, a debt purchaser buys hundreds of thousands or millions of dollars of supposed debt and files suit without ever doing ANY research into the validity of the debt at all. When they file suit, very few debt collectors have any idea at all of whether they have a right to the money, and they have little, if any, evidence of the debt. They think they might be able to get some if they have to, but they file suit expecting not to need any evidence at all. And they’re usually right.

They Expect you to Give Up

They design their cases to cause people to give up without fighting. Since most people, in fact, do give up one way or another, the whole debt collection business is based on not spending money or time on a case.  As soon as you do anything at all to defend, you cause the company to diverge from its business model. Of course, they know some people won’t just give up – they know people hate them, after all. So even though you have stepped out of their business model by resisting, you haven’t really challenged them yet. To challenge them, you must make them spend time and money on your case alone. We’ll discuss that below.

What if you Don’t Want to Fight?

Actually, NO ONE really wants to fight. It takes time and involves various uncomfortable feelings, from insecurity to anger, to frustration. You will at some point need to weigh these lifestyle questions, but the appropriate place to start is with the legal questions. And our answer to those is that it makes sense, always, to fight the debt collector.

Regarding the more practical questions, it is also usually true that fighting the debt collector will pay off very well. For example, if they’re suing you for $5,000, it’s a fair bet that they have already damaged your credit, and they are obviously trying to get at least $5,000 from you. If you defend yourself, you can save the $5,000 and repair your credit: what hourly rate would that be if it took you 50 hours of your time? $100/hour.

And the amount at stake is often much more than $5,000, and the time required to defend often much less than 50 hours, but you will have to make your own estimates of these things.

What if you Really Think you Owe the Money?

We get this question a lot because for most people, debt lawsuits are not “lightning from a clear blue sky,” as the saying goes. They know they haven’t been paying some bill, and people have often been bugging them about it. So should you still fight?

Yes, absolutely.

And this is because although you think you owe money, you might not owe the person suing you the money, and you might not owe what they’re suing you for. On top of that, and behind our legal system, is that you only “owe” what they can prove you owe – and most debt collectors cannot prove you owe anything. So even if you think you owe, you should fight to make sure you’re dealing with the right person for the right amount – and that they can prove it.

What if you Want to Settle?

If you hope to settle, you still need to start out by fighting – people only settle lawsuits when they think doing so is the best outcome for them. In other words, they’ll settle if you persuade them that they’ll make more money by settling than by not settling. You do that by fighting – nothing makes them think the case is going to take money to win than by making them spend money. That’s just common sense, right?

Do You Need a Lawyer to Defend You?

The answer to the question of whether to fight or not is almost always “yes.” And if you doubt that, consider how many times corporations simply roll over when people sue them – it almost never, ever happens. You know that, right? But even if you decide you should fight, you have to decide HOW to fight. Do you need a lawyer? or can you do this by yourself?

Remember what we said about “most” lawsuits – the lawyers do back up work and have a pretty good idea they deserve to win. Additionally, they typically expect to, and do, spend quite a bit of time and money to make sure they do win. For these reasons, and others, you might not want to handle a typical lawsuit pro se.

Debt law is not like that at all.

Debt Law is Different

We discuss this question in great detail in a lot of places, and therefore we will only touch on it lightly here, but debt law is not like other forms of litigation. It will almost always come down to a dispute about whether certain records should be allowed as evidence. And of course you need not to admit or do things that will hurt you. You almost certainly will not need witnesses, and they probably won’t have any, either. Thus debt law is relatively simple, and people can defend themselves without a lawyer.

We can help you do that in a lot of ways.

You will find a lot of help on many topics related to debt law on this site by using our search button at the top of the page or in the footer. And you can sign up for free information by going to this link and signing up. Sign up for Free Information.

 

 

 

 

Debt Collector Dirty Tricks

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The Debt Collection Business

For a free copy of this article in pdf form, click here: Debt Collector Dirty Tricks

Debt Collectors

At its best, debt collection is a hard business. They’re trying to force people who are already making tough choices to make different choices. To make a person give up food or insurance to pay a bill for something that’s already come and gone is hard to do. And even when the choice isn’t quite that stark, there’s always the challenge of making someone give up what they want NOW for what they used to want THEN.

On the other hand, most people do want to pay their bills, and they feel guilty and embarrassed when they don’t. The debt collectors know and use those facts regularly. You might consider efforts to trigger those feelings “dirty tricks,” but we won’t discuss them other than in certain extreme ways the debt collectors play their cards.

Debtors

People who owe money also usually feel, and are, vulnerable to various bad things, and many of the dirtiest tricks use this fact against them. From a slightly different angle, one of the things that get people into debt trouble in the first place is hope or optimism – they overestimate what they can or will do or they look for an easy way out. This can make them easy suckers for scams, from get-rich-quick scams to get-out-of-debt scams. But what concerns us most for purposes of this article is that it causes them to overestimate what they can pay or for how long they can do it. Thus there’s a tendency for people to make agreements they can’t keep.

In this article, we’ll discuss a few of the tricks the debt collectors play to use the weaknesses of people in debt against them so that you can recognize and prepare for them. We also have a report that you can get for free that has many more of the worst of the tricks.

I have found that a lot of people come to us after doing some things that hurt their rights. Part of our mission is to protect some of those rights before they get lost or damaged. We want to catch people earlier in the debt cycle, in other words. If you give the wrong person money, it’s almost impossible to get it back.

A Few Preliminary Words

There are a few things I will say before getting into the scams and tricks. First, the Fair Debt Collection Practices Act (FDCPA) makes almost all of the tricks we discuss here illegal. But some of them are not, as we will discuss.

The FDCPA generally requires fair-dealing and honesty of the debt collectors, and it makes deception and “misleading” behaviors illegal. It also gives them certain affirmative requirements. But it applies only to “debt collectors” as that term is defined, and there is currently a lot of uncertainty about exactly what the term means and just who is a debt collector even among legitimate operators, and there are a lot of crooks out there, too.

What there is really no doubt about at all is that debt collectors, whether they are within the definition of the FDCPA or not, will do almost anything to get your money. You know that. We can only list and describe a relatively few of their tricks, but you need to develop the habit of extreme caution and skepticism towards anybody who’s trying to get you to give them some money. You need PROOF of every aspect of what they’re saying, because, as we all know, paying the wrong person a bill we really owe doesn’t do any good at all – it just means we’re going to double-pay.

No legitimate debt collector will require you to act immediately the first time you hear from them. Don’t let them hurry you into lowering your standards of proof – that’s the key to all of their other tricks.

A Few of Their Tricks

The tricks here are only a few of what they have come up with, and they will constantly be coming up with more. These are merely examples. The tricks don’t all have formal names, but I have given them names to make them easier to remember.

Asking for Post-dated Checks

Sometimes a debt collector will urge you to send a post-dated check. That is, a check with a date on it that’s different than the actual date. You think the money will be there in a week, so you write the check for next week.

Debt collectors love to get you to do this. Why?

There are some legitimate reasons, and this isn’t always a scam or dirty trick. It is a fact that people get busy, have second thoughts, or simply change their minds – especially when it comes to paying money for something that doesn’t bring them pleasure. A debt collector has a legitimate interest, assuming the debt is valid and the collector is honest (which you should almost never do), in getting your money before any of that happens. He or she has talked you into doing something, and he doesn’t want it to come undone as soon as you hang up. A post-dated check is a good way to make your intention stick.

The problem is that you cannot trust the debt collector, yourself, or the world around you with this.

You can’t trust the debt collector because most debt collectors will say anything that comes to mind to get you to do what they want. They are under intense pressure to perform, and to perform quickly. Therefore, chances are good that the debt collector will not remember – and not even try to remember – that your check is post-dated check. That will be forgotten before you hang up.

So even if by chance your check goes to the debt collector who called you, she will put the check in the pile to go to the bank immediately. And it isn’t likely the person who called you will see the check – it will automatically go out for payment when it arrives in the office.

And you can’t even trust yourself on this. If you were just trying to get the debt collector to go away, or if you made a slight miscalculation, or if something unforeseen happens – as so often happens – you will be in trouble.

Attempt to Collect from Relatives of the Dead

With few exceptions, a parent or spouse’s debts do NOT transfer to anyone else. A deceased’s debts are claims against the decedent’s estate. That means, if there’s a will, that any claimants will have to make a claim against the estate in probate. If for some reason that doesn’t happen, then in some situations the “residuary” beneficiary of the will might be liable.

If the will says, “I leave $100 to Mary and the rest to John,” John is the residuary beneficiary, and John might under some circumstances be liable for a debt. But of course it almost never happens because the creditor would have to prove a variety of things that aren’t easy to prove. Most debt collectors want nothing to do with that. They’d rather try to get you to pay.

All you need to know is that if a debt collector is asking you to pay someone else’s bills it’s probably a scam.

Debt collectors know most people do not know the law and have never thought they might owe someone else’s bills.  People who are grieving are less likely to question or oppose someone who asserts that they owe something. In other words, this scam requires catching you at a vulnerable time and taking advantage of it.

The FBI’s After You

In this scam, someone calls you up “from Washington” (or wherever) to let you know you’ve been implicated in some vague crime or misdeed. They’ve tried this one on me a couple of times, as a matter of fact, only the person was supposedly calling from the Social Security Administration to tell me my account had been “frozen” because someone was using the number to launder money.

The agent spoke fast and had a number to call for verification, but things were close to a boiling point. I was supposed to act quickly or expect the FBI to show up within the next day, or possibly hours. Of course the first thing I had to do was verify a few numbers for them…

This is obviously a criminal scam, with only the barest pretense at being debt collection when there is one – sometimes the threat is that agents are on the way to pick you up for non-payment of some debt, or whatever. The critical features are the urgency, the authority, and the threat.

The people doing this one are clearly not legitimate debt collectors, they’re criminals, but it may show up as a debt collection, and chances are good you’ve been targeted because of some perceived vulnerability. Tell these guys to take a hike.

There’s more in the report

You will find many more examples of debt collector dirty tricks in our free Bestiary of Debt Collector Dirty Tricks. You can find that by clicking here: https://yourlegallegup.com/blog/debt-collector-dirty-tricks/.

 






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Econ 101 or What Happens when the Bills Come Due

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I believe it is a fundamental, unchanging law: there are no free lunches in life or nature. What gets bought must be paid for, eventually, by someone.Members at Your Legal Leg Up know very well that that law applies to daily personal purchasing decisions, and many have paid very steep prices indeed. But it also applies at the national and international level, and politicians who have long ignored the fact are soon going to be reminded of it.

As one economist puts it, in order for one person to get something for nothing, someone else must get nothing for something. So what happens to our current government debt of 21 trillion dollars (more or less, and growing rapidly) in a world of debt jubilee? Eventually it must be paid, right?

This is part of a series of articles on Occupy Wall Street, Debt Jubilee, and our future. Click on the links for the previous articles, but this article should stand on its own, also.

Debts Used to be Paid in Gold

Up until the 1930s, debts all the world round were settled, ultimately, in gold. A “dollar” was a fixed amount of gold, and for over a hundred years there had been essentially NO inflation. There had been occasional “runs” on banks that got overextended, and banks (and people with savings in them) got wiped out from time to time, and there had been occasional booms and busts. The Federal Reserve was put in to deal with those problems, and so it did. Thirteen years after its founding in 1914 the Great Depression began, and we’ve been on a boom and bust cycle ever since then.

But I digress.

Private Debts were Paid in Gold until the 1930s

The point is that Gold was first removed from actual circulation within the United State by Franklin Roosevelt and made illegal for persons to own. At the same time, the dollar was devalued (against gold on an international basis) by about thirty percent. International debts were still settled in gold until 1971.

So what does “settled in gold” even mean? When a businessperson in the U.S. buys a Japanese widget, he pays either dollars or yen. That is, either he sells dollars to buy yen, or the Japanese business ultimately does so. In any event, some dollars are transferred to Japan. Of course this happens in a gazillion ways and times throughout any given year, but in the final analysis one side is holding more of the other side’s currency. Mostly, that is allowed to persist, but at some point the side holding more of the other side’s currency may want to settle up in something else. Until 1971 foreigners could trade dollars for gold.

Dollar Window is Closed

Then there was the Vietnam war along with various U.S. policies that cost more than the government was taking in. That caused the dollar’s actual value to go down, but the official dollar value in gold stayed the same. That meant that gold was too “cheap,” and the French (in particular) decided to trade large amounts of dollars for gold. In 1971, the U.S. dollar was cut free of any specific relationship to gold and the government stopped giving foreigners gold for dollars.

At that point, the U.S. deficit was a few billion dollars and causing a lot of anxiety. Since then it has grown to 21 trillion (and adding, at current rates, another trillion or more per year) and causing very little anxiety. People on Social Security are hoping to get paid, and yet there are fewer and fewer workers to support them, so they are being paid out of taxes (or, realistically, government debt). The deficit is going to grow, inevitably.

Still No Free Lunches

What happens when the law against free lunches kicks in, finally? What happens when those trillions have to be paid? And what happens if, along the way, a lot of student loan and other debts are also wiped out by legislative act?

Right now, the dollar’s value is established by the free market (which isn’t to say it isn’t extremely manipulated). It’s worth what people all over the world say it’s worth without reference to any fixed point (gold, historically). When the law against free lunches kicks in, people will decide they would rather have things than dollars. They’ll say the dollar is worth less as they try to recuperate some of the resources they’ve been sending over in exchange for U.S. debt, in other words. This process has happened many times to various other countries. It is happening right now to Venezuela, whose inflation rate was, unofficially, approximately 1 million percent in 2018. It’s happening in Turkey right now. It happened in Germany, where one U.S. dollar was ultimately worth 4 trillion German marks in 1921.

Current Deficit is 21 Trillion Dollars and Growing

You can buy a lot of stuff for $21,000,000,000,000.00. If people try to buy stuff with that much money it’s going to cause prices to zoom higher. Many factors have held that result in check for the time being, but it will not last. If history is any guide, the change will be sudden and happen with incredible, bewildering speed. When adding straws to camel backs, one never knows which one will be the one that is too much. All that is certain is that currently over a trillion straws are being added every year. I think the one too much will happen within the next decade or two.

The havoc caused by currency destruction is almost unbelievable. Historically, it has meant the destruction of the middle class and all economic security. It has devastated the poor and led to widespread starvation and disease, and it has led to oppressive government and foreign wars. Without going into further details, I hope that the millennials will try to prevent it from happening. That’s going to mean some very tough choices.

As an aside to the reader, although I think the value of the dollar may, at the point foreseen, be among the least of your problems, it would probably be smart to try to keep it from being a problem at all. You should consider buying things of actual value no with whatever money you can afford. Talking about gold, silver, land, food… I’m not saying hoard cans of food like a survivalist. I’m saying it makes sense to recognize what seems to be coming our way and take rational steps to prepare where possible. There seems to be no telling when things will hit the fan, but that they will hit the fan is guaranteed by the law against free lunches.

Jubilee for Student Debt

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There is a movement – in its very early stages – for a debt jubilee. You may not have heard of it, but it has some people very worried. And I think there’s a good chance it will come to pass. Soon.

This is the second of a series of articles on a continuing political phenomenon important to people with debt. The first article is “Occupy Wall Street.”  The second article is Econ 101 or What Happens when the Bills Come Due.

What is a “Jubilee”?

A jubilee is the mass forgiveness of debt – a governmentally imposed wiping of the slate clean from all debt of any specific, or all, types of debt. You might think it could never happen here in the United States, but it has, historically, happened several times in various places. Never was it more appropriate than for student debt, in my opinion. Of course, other kinds of debt could also get thrown into the pot when things get going. Is it good? Is it likely? And if it happens, what will be the probable consequences?

Any talk of student loan jubilee should begin with what has happened in the past forty years. During that time, student loans have become not just popular, but essential for almost all students entering college or other formal, advanced education in the United States. In some countries in Europe, for example, schooling is free, but here it is expensive – very expensive. And it has been getting more so at a rate far exceeding the rate of inflation for the past forty years. This is because student loans, which had a noble publicly discussed purpose (making education available to all) had the unintended consequence of making education unaffordable to all. By relieving the price competition, it has allowed schools to increase tuition at a tremendous rate.

The schools and the banks have become filthy rich from the system. Student graduation rates have fallen, and average length of college has increased. And a whole generation of students have entered adult life with a crushing burden of debt.

Because of “special government protections,” bankruptcy is almost never any help to people with student debt. They declare bankruptcy and still end up paying everything they have for student loans that, all too often, were completely useless to them. Whatever you think of Trump’s tax cuts for the super-rich in 2017, the amount would have been enough to rid people of their student debt burdens, so it can be done. It’s just a question of who gets the money: the super rich 1%? Or the poverty stricken 99%?

This question is soon going to be coming to the fore.

Social Security is a Huge Issue

There’s another factor at play. The baby boomers – people born from roughly 1950 – 1965 – have plundered the resources of the past and future. They’ve given themselves tax cuts and embarked upon expensive wars while decimating the interest rates that allowed old people to live on their savings. And while guzzling the resources that could have given the young a start in life. Now they’re beginning to retire, assuming that Social Security will keep them in the comfort to which they are accustomed, for the rest of their long lives. When boomers started paying into Social Security, there were many workers per retiree, now there are less than half as many workers per retiree. Social Security is paid out of current tax revenues, so what that means is that the “surplus” people like to talk about for Social Security is an illusion – that surplus is made up of government bonds which are paid (or rolled forward to be paid later) out of current taxes. The millennials will be paying for the boomers’ retirement, if they choose to do so.

By election time in 2020, the baby boomers will no longer be the largest voting group in the country. Millennials will become the largest voting block, and they will be gaining electoral power for many years after that. It is going to occur to them that the boomers have pillaged their futures. It will occur to someone that the time is ripe for a jubilee to set thing straight. That person will find a passionate following of people who have never felt called-upon to vote. Politicians have pandered to the boomers for many years. They’ve ignored the millennials, and the millennials have ignored them.

That could change very suddenly. I think it will. Some people are in fact already talking about it.

What it Means

The change in electoral power and the likely shift in governmental focus could be huge. One could hope that the millennials will strive to set some priorities that the boomers never managed. In that scenario, student loans would be eliminated and free education installed (perhaps). Social Security would be managed in some way take care of the old without overburdening the young, and peace and harmony could descend forever and ever amen. Something has to change for that to happen, though. Either the super-rich will have to pay much more or the military, for example, will have to take much less. It could happen, but these are both deeply entrenched special interests with a lot of money and power.

An alternative scenario is less attractive but more likely. In that scenario, student debt is eliminated and there’s a lot of talk about cutting back on money to retirees and the military and of taxing the super-rich. What actually happens is more of what has been happening, though – the deficit balloons. The money is paid in depreciated dollars, and the debt is pushed down the line for the future to pay.

Eventually, that isn’t going to keep working.

Is There a Moral Duty to Pay Debt Collectors

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Debt and Moral Duty

Debt collectors and bankers, and their minions, like to talk about the “moral” duty to pay your debts. Is there one? And if so, does it extend to paying bankers and debt collectors? You’ll have to decide for yourself, of course, but I don’t think it’s the clear issue the debt collectors want you to think it is. Regarding paying a debt owned by a debt collector, I think there is no moral duty at all.

 

Debts and Morality

First let’s consider the broader question: is there a moral duty to pay your debts? Creditors like to say so, of course, but are they really impartial? Of course not. Their invoking a moral duty is highly self-serving.

Commercial Loans and Interest Rates

First let’s look at what a loan is, as it has come to be meant in modern times with credit cards. Credit cards in essence involve a loan – at an extremely high rate of interest: the issuing bank “lends” you the money to pay a merchant for some service. Interest payments on loans are supposed to cover two things: risk of nonpayment and the loss of the present use of the money. In other words, interest payments are designed to cover the fact that you’re giving the money back later (called “discounting” for time) and the risk that you won’t pay it back at all.

The way you discount for time is easy. You look at the inflation rate, taking a guess as to whether it will continue or not. The present inflation rate is somewhere between one and four percent, and the banks are, in any event, borrowing the money from the Federal Reserve for much less than one percent. That means that almost the entire interest rate either provides the banks an obscene rate of profit or pays for a risk of loss of approximately 30%. It also means that loans are business propositions which contemplate a very significant risk of loss (much higher than the actual loss would justify) – a risk that is paid for by the borrower on every loan that is repaid.

Any loss on a loan is more than adequately repaid by this premium on other loans to people with the same credit standing. I don’t see a moral duty to repay there, do you?

Non-Commercial Loans are Different

Notice that I am not addressing loans made for personal friendship, for example, where the risk is not compensated and offset by the interest rate. I see these as completely different and believe there is a moral duty to pay back someone who actually takes a risk on your integrity. But that is certainly not credit cards or other arrangements where you pay an interest rate higher than the rate of inflation.

Does the Law Imply a Moral Duty to Repay?

Is there a “moral” duty to repay a loan implied in the law? Really, not very much.

There are things that are considered legally “bad,” and these things are called “torts.” Assault, theft, and a variety of other things are torts, and the main thing they have in common (besides many of them actually being criminal offenses as well as “civil” torts) is that if you prove them, you are entitled to “punitive” damages or some sort of statutory “penalty.” That is, if someone commits a tort against you, the law lets you actually try to punish them (which is the point of punitive damages or statutory penalties).

For plain breach of contract cases (like not paying a bill), there are no punitive damages or penalties – only the money actually lost. In formulating this policy over the centuries, the courts have actually pointed to the beneficial effects of allowing breaches of contract. Not punishing breach of contract encourages people to act in more efficient ways, although to be fair avoiding payment may not be completely within this concept. There are some indications that the law recognizes a moral obligation to pay, although it has very little actual legal force.

Usury – Is THAT Immoral?

In ancient days throughout the Christian world, and even now in some Islamic law, charging interest on any loan was considered immoral. Most states – even now – have laws against “usury,” which is charging more than a certain amount of interest. It might interest you to know that the prevailing interest rates charged by credit card companies would violate those laws in most states. Ever wonder why credit cards always have their financial centers in just a few states? It is the way that they evade the usury laws. Because while states can control the interest rates local concerns charge, the courts have held that credit cards are “interstate commerce” and cannot be controled by the individual states. Only the laws of the state in which the credit card issuer is located can set that rate. Thus the interest rates charged by most credit cards, most of the time, could be considered immoral or illegal from some points of view.

That doesn’t seem to bother the banks or debt collectors one bit.

How about Business Bankruptcies?

What about when large businesses go “bankrupt?” For them it mostly means that they get to trash their commitments to workers and their pensions. Ever hear anybody howl about “moral” duties? No. The talking heads all line up to discuss how tough business is, or whatever, but there is never any real moral pressure brought to bear on these companies. Of course that would be pointless: it’s just business, right?

And of course in this day of bailouts, the banks don’t even have to go through the farce of bankruptcy. They get their money basically free from the federal reserve and use it to speculate or lend it to individuals at rates as high as 30% or more – and when that isn’t good enough to fund their bonuses, they get huge amounts of money in other ways from the government. You know who pays for that, right?

Is There a Moral Duty to Pay Debt Collectors?

As I have pointed out elsewhere, you might consider that you have a moral obligation to pay a business that extends you credit, although I do not believe that is a powerful obligation. What about to debt collectors? In their case, I do not believe there is any duty at all. Where does the duty towards a merchant that extends you credit arise? surely it is from the faith in you that the action of lending you money implies. The merchant extends credit to you as part of an overall relationship which in some cases is quite personal, but in every case is based on a mutual expectation that you will pay the money back. None of that is going on when debt collectors own the debt.

By the time the debt collector owns the debt, the original creditor has lost all the money it is going to lose – and you can believe that the debt collector bargained hard against it to pay as little as possible for it. If you pay the debt collector you do not improve the merchant’s situation at all – you simply give the debt collector a windfall profit. And the debt collector purchased the debt knowing you were struggling financially – their intention was never to help you at all or do you any good at all. Instead, a debt collector exists to squeeze, punish and ultimately sue you in an attempt to force you to pay. I see no moral duty to pay at all, although I emphasize that there is still a legal duty if they can prove it in court. My point is that nothing should hold you back from giving it your best not to pay.

Conclusion

I won’t say that morality is for suckers (although the bankers would), but what I do say is pay attention to your own needs and interests – and look carefully at anybody who criticizes you for taking care of yourself. The moral talk by debt collectors and their servants is simply a gimmick to get  you to pay.

Letter to People being Sued for Debt

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Could Anything Actually Make You Glad to Get Sued by Debt Collectors?!

Dear Harassed Consumer,

It’s hard to believe that could happen, isn’t it – that you could actually end up glad you got sued by a debt collector? And yet it could true.

If you’re being sued by a debt collector, chances are it’s coming at the end of a long process that started with missed bills, phone calls, letters, messed up credit reports, worry, and missed sleep at night. I don’t need to tell you how awful it is. And the lawsuit itself may seem like a nightmare. After all, if you lose, you could face new problems: garnishment of wages, seizure of bank accounts, and possibly even worse.

And you can forget about your credit report if they get a judgment, right?

That all sounds bad, and it IS what happens to most people being sued. But it doesn’t have to happen to you.

So How Could Getting Sued Possibly Be Good News?

Simple. You could win. And you should win most of the time.

It seems hard to believe, but the lawsuit could actually be the end of your trouble. That’s because the debt collectors almost always start their lawsuit without what they need to win, and without being able or willing to get what they need to win. If you fight back intelligently, that may give you a chance to erase your debt for good. In the process, you can take control of your life again.

What if you could make the debt that’s hung over you go away? Imagine how you’ll feel when you drive the debt collector away and erase the debt. You can start repairing your credit report and get back to your life. You can answer your phone without worrying about debt collectors

Finally.

It’s even better than that, though. Here’s what one user of our litigation services said about his experience:

Today I received in the mail an offer “Stipulation For Dismissal With Prejudice”,which basically states the Plaintiff will dismiss their Complaint if I dismiss my counterclaim.  All the examples,logic and powerful arguments presented in your materials helped me beyond belief! I am eternally grateful,and right now quite ecstatic!

Thanks Ken,
Frank from Arizona 

 

And another:

Just a quick email to say THANK YOU for your well written manual! I was scared to death when I got a Summons and Complaint served on me by a debt collection attorne. I did exactly what you said though, and basically let them know I wasn’t going away.… So I filed a Motion to Dismiss, and that was pretty much it. The Attorney folded like a cheap suit, and I have to say it almost felt better than sex!

Thanks again! 
Gary

 

These people, and many more, could tell you the same thing: you can beat the debt collectors. And when you do, it will feel even better than you would ever guess. It will change your life. They’ll never push you around again. You’ll never be scared of debt collectors and their lawyers again.

And it won’t cost you a fortune, either.

You can do it all with our litigation products. Memberships with us give you the help you need to take control and win against most debt collectors.

Now, I should point out that we’re not talking about magic here, no “secret” tricks, no voodoo. We’re talking about using the rules to slip through the gaping holes in the debt collectors’ nets. See, if you could win 90 percent of the time without spending anything, and 91 percent of the time if you spent a bunch on all your lawsuits, would it make sense to spend anything? It doesn’t, and they don’t. Almost always. If you get the rare case where they have what they need and are willing to spend the money to pursue the case right, they will probably win. Or force you to settle the case, although if you settle it will be for much less than most people, even then.

But they almost never have what they need or the willingness to fight if you do it right. And that’s what we show you how to do.

I Don’t Want to Tell You You Can Just Get Away with It (But You Probably Can)

I don’t want to tell you you can rack up debt and get away without paying, because we should all pay our debts. But these are tough times, and sometimes things happen that make it impossible to pay.

And sometimes those things are the fault of the banks.

If you’re having trouble with credit cards, not having to pay would be poetic justice.

Not only have they siphoned away huge amounts of public money through the infamous “bailouts,” ensuring that you and your children will be taxed for decades to keep the banking fat-cats in their fancy cars and expensive mansions. But these same people have set you up for failure, offering you way more credit than you could ever pay off. Sure you should have known, maybe, but they’re paid to know, and they did know. They deliberately set you up to borrow more money than you could pay back…so that you’d be stuck with ridiculous interest rates and ruinous fees. They wanted it to happen, and they made it happen. Now they’re trying to drive you into the ground.

If they’re after you, the only way you can get them to stop is make them stop. Our materials give you what you need to do that.