Category Archives: Fair Debt Collections Practices Act

Here is the Real Problem With Payday Loans and Why They Should Be Illegal

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I keep reading articles about cities trying to regulate payday loan companies with land use restrictions and other measures. While that is great news I cannot help but think payday loan companies should just be illegal altogether. States like California should just revoke payday loan companies’ corporate status and cities should revoke their business licenses. Why is it so hard to regulate what clearly is a horrible business model for those who are the consumers facing financial difficulties?

What Happened to the Time Honored Ways to Get Short-Term Money?

There have been time honored ways to obtain short-term loans when things go sideways. The first is primarily friends and family members that do not charge immoral interest rates and work with their relative or friend to get paid back. The second way is pawn shops that also do not charge immoral interest rates and are highly regulated. A third option is getting an advance from your employer. These are the time honored ways to get short-term money to get by. Today, payday loans are charging people immoral interest rates and making matters worse for people who obtain the loans. I have witnessed an interest rate of 1,000% in writing from a payday loan company. How can this be legal?

The Real Problem: People/Customers Who Get Payday Loans Have No Voice

What do I mean when I say they “have no voice?” It means justice is not free and you have to have money to get justice in this world. Sorry if this is the first time you have been told this, but it is the cold hard truth. Bankruptcy attorneys and attorneys in general can less and less go out on a limb and take cases on for a contingency fee. Even in contingency fee agreements the expenses for the litigation of the case are paid for by the client normally. Do you know how much it costs to sue for your rights being trampled? In San Mateo County the filing fee for a limited civil lawsuit ($10,000 or less in damages alleged) is $240.00 plus serving the lawsuit on the party you are suing. There are ways to serve the summons and complaint for free. Did I hear someone say small claims court? A small claims court complaint costs $181.00 to file in San Mateo County. Yeah, well, that is an option, but I have not witnessed people actually following through with doing it themselves and then enforcing the judgment to get paid if successful. Remember you do not just get a check when you get a judgment. You have to then spend time and money to satisfy the judgment. If someone is getting a payday loan they do not have the money for any of this and probably do not have the time either. How does someone take a day off from work or more for small claims court to just reduce their income further causing more hardship?

What happens when the person does not pay on time? The payday loan company violates the law when attempting to collect the debt. They harass people at work, tell them they are going to be arrested and they will go to jail, call their family members and harass them. What do people do when their rights are violated and crimes are committed against them by these payday loan companies? Not a damn thing. They have no money so they have no voice. They are just trying to keep food on the table and a roof over their head. It just keeps going on and on like this until they get sick of it and come to someone like me. I file bankruptcy for them and now there is an enforceable order of discharge to hopefully make it all go away. No more 500% interest rate. No more phone calls. No more harassment of their relatives. No more phone calls to their work.

Payday Loan Companies are the Worst When Trying to Collect

But wait, it actually does not stop there sometimes. I can tell you as a bankruptcy lawyer that the most likely creditors that mercilessly harass our clients long after an order of discharge is entered are payday loan companies and their collection agencies. Just like clockwork while I am writing this article I received a phone call from a client that we filed chapter 7 bankruptcy for about two years ago. She received a harassing phone call from a collection agency. When I say harassing I mean the person was yelling at her and being very rude. She received multiple calls at work and on her cell phone. She was told that she has two felonies against her and she would be put into jail if she did not pay them $1,900.00 immediately. I have read there are people impersonating the Internal Revenue Service doing this same thing. In this case though the collection agency was collecting a debt for guess who? It was a payday loan company. So the payday loan company fully knowing the debt was discharged in the chapter 7 bankruptcy case sold/assigned collection of the discharged debt to this ruthless law breaking collection agency. It happen all the time and more often than not the original debt was from a payday loan company.

Do You Need Actual Damages to File a Lawsuit for a Violation under the Fair Debt Collections Practices Act (FDCPA)

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On November 28, 2011, the United States Supreme Court will hear arguments regarding this very issue.  The FDCPA allows for recovery of any actual damages, statutory damages sustained and reasonable attorneys’ fees and costs by an individual resulting from a debt collectors violations and in a case involving an individual, any additional damages as the court may allow, not exceeding $1,000.

The issue being heard by the Supreme Court involves whether an individual has the right or standing to file a lawsuit if actual damages are not pleaded or proved.   The FDCPA is a federal law and to sue someone for a violation of the FDCPA they must have standing.  To prove you have standing you must show that there is a connection between what an alleged wrongdoer did and yourself, and you were harmed as a result.  If there is no standing then the complaint will be dismissed.  The argument being advocated to the United States Supreme Court is that many plaintiffs do not have standing to lawsuits under the FDCPA because they do not and cannot prove there was an actual injury to them for the violation of the FDCPA.

The Fair Debt Collections Practices Act outlines many different types of violations.  For example, if the debt collector calls you 50 times a day over and over again harassing you and causing you unwarranted stress and aggravation, this is a violation of the FDCPA.  What are the actual damages though?  Did you get fired from your job because of it and therefore are seeking lost wages?  Or what if the debt collector called your mother and told her they were going to throw you in jail if you did not pay the debt back to them?  This is a violation also, but again, what are the actual damages?  Most courts allow the recovery of statutory damages without having to prove there were actual damages.

It will be interesting to see how the United States Supreme Court chooses to rule on this issue.  The whole point in passing the FDCPA is to protect consumers from the unfair and deceptive tactics used by collection agencies to obtain payment for debts.  A violation of the law is a violation and therefore that should be damage enough.  If consumers are not allowed to file lawsuits for the mere violation of the FDCPA no matter how insignificant, then why have the law at all?  The FDCPA would become a meaningless set of guidelines to be followed while debt collectors know they can do whatever they want without consequence.  For the Fair Debt Collection Practices Act to protect consumers and operate as it was intended, any technical violation of the law has to be an injury to that person giving them the right to file a lawsuit.

If you are struggling with debt or have been abused by a debt collection agency, please contact us to meet with our experienced bankruptcy lawyers and Bay Area bankruptcy attorneys to schedule a free consultation.