Friday, February 24, 2017

Illinois Attorney General Sues Student Loan Company for Deceptive Lending

Last month, we discussed a significant federal lawsuit against Navient, a prominent student loan company. Yet the student lender is facing more than just a federal lawsuit. According to a press release from the Office of the Attorney General of Illinois, Lisa Madigan has also sued Navient and Sallie Mae for what the office describes as “rampant student loan abuses.” Why is Madigan’s lawsuit important for consumers in Oak Park and throughout the Chicago area? In short, as the press release explains, Madigan has sought restitution for “all borrowers affected by Navient’s unlawful practices” and has requested in her lawsuit that the lender “rescind or reform all contracts or loan agreements between Navient and any Illinois consumers affected by the company’s unlawful practices.”
Madigan’s complaint emphasizes the importance of consumer protection in Illinois, and it also highlights that many Chicago-area residents are not being treated fairly when it comes to student loan repayment.
Background of Madigan’s Complaint
Madigan’s lawsuit names Navient Corporation and its subsidiaries of Navient Solutions Inc., Pioneer Credit Recovery Inc., General Revenue Corporation, and Sallie Mae Bank as defendants. The complaint highlights how Navient began as Sallie Mae, and that for years, according to Madigan’s lawsuit, the company has been engaged in deceptive lending practices that have harmed student borrowers in Illinois (and across the country).
Specifically, Madigan stated: “My investigation found Sallie Mae put student borrowers into expensive subprime loans that it knew were going to fail.” Madigan went on to explain how “Navient’s actions have led to student borrowers needlessly carrying billions of dollars in debt,” and she underscored that “the company must be held accountable.” The attorney general also noted that the lender has been in business for decades, and has played a role in every stage of the lending process. Madigan alleged that the company’s size as a lender, and its continued growth over the years, has been due in part to the harmful lending practices in which it engaged.
Problems in Loan Origination
In Madigan’s complaint, the attorney general alleges that the deceptive lending practices at Navient begin at the point where student loans begin—in loan origination. The lawsuit argues that both Navient and its predecessor, Sallie Mae, “began peddling risky and expensive ‘designed to fail’ subprime loans to student loan borrowers across the country.”

What is a subprime loan? In short, as the Consumer Financial Protection Bureau (CFPB) explains, a subprime loan—which can be anything from a student loan to a mortgage—is one that has a very high interest rate, which makes the situation such that the borrower likely will not be able to repay the loan. The Navient and Sallie Mae loans also came with high fees that added onto overall costs. Moreover, these loans often were offered to students at for-profit colleges, where the students were unlikely to obtain jobs that would allow them to repay what they owed.
The attorney general analogized the subprime lending of Sallie Mae and Navient to mortgage services who played a role in the foreclosure crisis: “Sallie Mae’s conduct was similar to what Madigan saw years ago when she investigated our country’s largest subprime mortgage lenders for their role in the mortgage crisis.” The complaint alleges that harmful lending practices went beyond origination issues, however. The deceptive lending practices, Madigan argues, extended into Sallie Mae’s and Navient’s servicing of the loans, as well as how they handled defaults.
Contact a Consumer Protection Lawyer in Oak Park
If you have questions about how Madigan’s lawsuit may impact you, or if you believe your student loan company has engaged in harmful lending practices, you should speak with an Oak Park consumer protection lawyer. Contact the Emerson Law Firm today.
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Debt Management Plans Versus Consumer Bankruptcy

Wednesday, February 22, 2017

Phantom Debt Collection Scams on the Rise in Illinois

Have you been contacted by a person claiming to be a debt collector who is seeking to recover a debt you allegedly owe? If so, you are not alone. According to a recent report from CBS Chicago, such parties claiming to be debt collectors are on the rise, and they are scamming Chicago-area residents. These alleged debt collectors are part of schemes known as “phantom debt collection scams,” since they involve the attempt to collect on a debt that the consumer does not actually owe.
How can you avoid becoming a victim in a debt-collection scam? What should you do if you have been targeted by a fake debt collector?
How Do Phantom Debt Collection Scams Work?
Now, you might be thinking to yourself: I would never agree to make payment on a debt that I did not owe. But the scam is not always that simple. Parties at the center of debt-collection scams often target consumers who do actually owe debts (to someone or to some entity), and they prey on the fact that these consumers are anxious about those debts. In some cases, the scam artists are successful in getting debtors to make payments to them. In many cases, the debt-collection scammers have backgrounds in actual debt-collection services, so they are familiar with the practices and language used by real debt collection companies.
As one Illinois consumer told CBS Chicago, she never thought that she would become the target of a debt-collection scam. However, she had been married previously, and she knew that her ex-husband had incurred substantial debts. As such, when she received calls telling her that she owed a debt, she assumed it was a real debt that her ex-husband had incurred. Given that she believed the debt was real, she paid it off, only to learn later on that the payment went toward a phantom debt.
Such scams often are run by more than one scammer, and they can even ask for the same payment amount (suggesting to the Chicago consumer that the debt is indeed real). In the case mentioned above, the Illinois resident received constant calls from three allegedly different debt collection companies who were all seeking to recover on a supposed debt of between $7,000 and $9,000.
Learning More About Debt Collection Scams in Chicagoland
How are these scammers able to swindle Illinois debtors? According to the report, some of these phony debt collectors used to work in the debt collection industry. As such, they have background knowledge about debt-collection practices. For instance, one of the scammers who has targeted debtors in the Chicago area is Nelson Macwan, an individual who claims to run the debt-collection company “New Britain Financial.” As it turns out, Macwan actually used to work in debt collection, but in 2015 he “was permanently enjoined from working in debt collection in or from the state of Illinois.” That language appeared in a consent decree following a lawsuit against Macwan filed by the Illinois Attorney General for unfair debt collection practices.
Specifically, Attorney General Lisa Madigan alleged that Macwan employed “really abusive debt collection practices, trying to collect on phantom debts, calling people threatening to file lawsuits against them.” It is important for debtors in Oak Park and throughout the Chicago area to know that they have rights under the Fair Debt Collection Practices Act (FDCPA).
If you have questions about your rights, or if you have been treated unfairly by a debt collector, an Oak Park consumer protection attorney can help. You may be eligible to file a claim depending on your circumstances. Contact the Emerson Law Firm to learn more about how we can be of assistance.
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Wednesday, February 15, 2017

Debt Management Plans Versus Consumer Bankruptcy


If you are struggling to repay debts in Oak Park and are looking at different options, you may be considering debt management plans. In many cases, debt management plans are pitched as an alternative to consumer bankruptcy. However, according to an article in the Chicago Tribune, sometimes debt management plans might not be as workable or as affordable as they initially sound. When you are dealing with seemingly insurmountable debt, it is possible that a debt management plan is not the best option for you. Although these plans can be helpful to some people, in other situations, personal bankruptcy could be the better choice for helping you to get back on track.
How can you know whether a debt management plan or consumer bankruptcy is the right decision in your specific case?
Debt Management Plans Do Not Work for Everyone
How do debt management plans work? Typically, debtors will work with a credit counseling agency, and the agency will work out an agreement with credit card companies and other creditors. Then, the debtors will make payments directly to the credit counseling agency, which will then make payments to those creditors. Usually these types of debt consolidation, or debt management, plans allow debtors to have lower interest rates and lower fees. In addition, the total amount of the payment made each month to the credit counseling agency is often less than the total of all the other payments together (if the debtor had not gone to credit counseling). Over the course of four or five years, on average, the debtor will pay off what she or he owes.
When debtors in credit counseling make all of the required payments under their debt management plan and pay off their creditors over time, their credit scores are impacted less than they would be through, for example, bankruptcy. This might sound preferable to bankruptcy, but there are other factors to consider.
For instance, the article cites one older married couple that opted for credit counseling instead of bankruptcy at a time with the husband was terminally ill and the wife had to work overtime hours in order to make the debt management plan payments. As a result, she spent less time with her husband, who passed away shortly after she had repaid their debt (of about $120,000). Some consumer advocates contend that bankruptcy may have been a better solution in terms of affording that couple a higher quality of life.
Cons of Debt Management Plans
While debt management plans may be better for your credit score in the short term, there are drawbacks beyond the quality of life the debtors may have while they are working to repay loans. The article cites some of the following cons when it comes to debt consolidation, or debt management, plans:
  • Debt management agencies do not discuss the benefits of bankruptcy with debtors who are thinking about a debt management plan;
  • Most debt management plans cannot help with mortgages, auto loans, student loans, or medical debt;
  • Debtors will have access to very little, or no, credit during the repayment period of a debt management plan (which prevents the debtor from purchasing a new vehicle or refinancing a mortgage);
  • Even a single missed payment can result in a cancellation of the debt management plan; and
  • Payments on debt management plans can still be high, making it difficult and sometimes impossible for debtors to make the payments.
It is important to discuss your case with an Oak Park bankruptcy lawyer to learn more about your options. Contact the Emerson Law Firm today for more information.
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Tuesday, February 7, 2017

Consumers Feel Threatened By Debt Collectors, CFPB Says

When consumers who owe debt receive calls from debt collectors, do they tend to feel threatened by these contacts? According to a recent news release from the Consumer Financial Protection Bureau (CFPB), a report from the government agency determined that “over one-in-four consumers contacted by debt collectors felt threatened.” The report was based on a large-scale national survey—the first of its kind—to address consumers’ relationships with debt collectors and consumer feelings concerning the debt collection process. The report drew startling conclusions about how debt collectors treat consumers, and the findings are important for any consumer to consider, as well as for anyone concerned about fair debt collection practices.
CFPB Survey Highlights Problems in Debt Collection Practices
The CFPB survey helped to show that even debt collection practices that may not be in violation of the law still make consumers feel unprotected and, as the report noted, threatened. Yet the survey uncovered more information about consumers’ reactions to debt collection practices than simply how they respond psychologically to phone calls from collectors.
In addition to more than 25% of consumers in the survey feeling threatened by debt collectors, more than 40% surveyed indicated that “they were approached about a debt in collection” and “requested that a creditor or collector stop contacting them.” How many of those debt collectors complied? In the cases of those consumers surveyed, “three-in-four report that debt collectors did not honor their request to cease contact.” To put that number another way, among the consumers surveyed who asked a debt collector to stop making contact, 75% of those consumers continued to receive unwanted contact from debt collection companies.
What else did consumers report in the study? More than half of those surveyed (53%) indicated that they had been contacted by debt collectors for a debt they did not owe, for the wrong amount of the debt, or for a debt owed by another member of the person’s family. In addition, more than one-third of consumers surveyed made clear that debt collectors had contacted them at inconvenient times, including between 9:00 p.m. and 8:00 a.m.  
CFPB Looks Ahead Toward Additional Consumer Protection Goals
Moreover, the survey helped the CFPB to think about other potential harms in the debt collection universe, including the “potential risks in the online debt marketplace, where consumer debts and personal information are for sale for fractions of pennies on the dollar.” In releasing the report, Rich Cordray, the CFPB Director, explained the implications of the agency’s study:
“The Bureau today casts light on troubling problems in the debt collection industry . . . .  More than one-in-four consumers report feeling threatened by a debt collector, and a majority of those contacted about debt say the calls persist even after the requests stop. The Bureau is working to clean up abuses in this industry, and to see that all consumers are treated with fairness, decency, and respect.”
Contact a Consumer Protection Attorney in Oak Park
If you have questions about your rights as a consumer under the Fair Debt Collection Practices Act (FDCPA), it is extremely important to speak with an experienced Oak Park consumer protection lawyer. An advocate at our firm can discuss your options with you. Contact the Emerson Law Firm today.
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Allegations of Deceptive Lending Practices at Student Loan Company

Thursday, February 2, 2017

Seventh Circuit Ruling Against Debtor in Recent Bankruptcy Case


In a recent decision from the Seventh Circuit Court of Appeals—which includes residents of Oak Park, Illinois—the court ruled in favor of a bank as opposed to the debtor who had filed for consumer bankruptcy protection. More specifically, the case concerns the co-debtor stay and whether a spouse (who has not filed for bankruptcy protection) can benefit from the co-debtor stay in certain situations involving the other spouse’s application for bankruptcy protection. To better understand the implications of the case, we would like to take a closer look at the facts and to discuss the Seventh Circuit’s holding.
Facts of the Case in Smith v. Capital One Bank
The case at issue here is Smith v. Capital One Bank (2016). The facts of the case, according to the court, are as follows:
A debtor, Karen Smith, filed for Chapter 13 bankruptcy back in 2011. Before she filed for bankruptcy, her husband applied for and obtained a Capital One credit card, which he “used for consumer debts for the Smith family.” When Karen Smith filed for personal bankruptcy, her husband did not join in the bankruptcy petition, and she did not list him as a co-debtor in her application for Chapter 13 bankruptcy. In bankruptcy court, Karen Smith’s Chapter 13 plan was confirmed.
However, in July 2014—during Karen Smith’s repayment period as part of her Chapter 13 plan—Capital One filed a lawsuit against Smith’s husband in relation to debts owed on his Capital One credit card. The bank won the lawsuit in state court. In response, Karen Smith argued in bankruptcy court that, under the co-debtor stay of 11 U.S.C. Section 1301(a), as well as other relevant laws including the Fair Debt Collection Practices Act (FDCPA), her husband should be consider a co-debtor in connection with her Chapter 13 bankruptcy, and as such Capital One should not be permitted to attempt collections on the credit card debt.
The bankruptcy court in Karen Smith’s claim agreed with her, and held that the Capital One credit card debt initiated by Smith’s husband was subject to the co-debtor stay. However, the district court disagreed.
Analysis of the Case
As the Seventh Circuit explains, the bank “sought and obtained leave for an interlocutory appeal to the district court.” In its decision, the district court determined that “the husband’s credit card debt was not Smith’s consumer debt, [and] reversed the bankruptcy court.” Specifically, it explained that “consumer debt of the debtor . . . does not include a debt for which a debtor is not personally liable but that may be satisfied from the debtor’s interest in marital property.”
The “stay of action against codebtor” under 11 U.S.C. Section 1301 states that, after a debtor’s Chapter 13 bankruptcy plan has been confirmed, “a creditor may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor.”
As such, the primary issue for the Seventh Circuit was whether the husband’s debts on the credit card should be considered the debts of Karen Smith (inasmuch as they were debts of the Smith family), or whether they should be considered debts only of Smith’s husband. The Seventh Circuit ultimately ruled that, because Karen Smith did “not demonstrate that her husband’s credit card debt is her own, the co-debtor stay does not apply.”
Contact an Oak Park Bankruptcy Lawyer
The case could impact future bankruptcy proceedings, particularly in cases involving married couples. In the meantime, if you have questions about filing for personal bankruptcy, an experienced bankruptcy attorney in Oak Park can speak with you today. Contact the Emerson Law Firm for more information.
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Friday, January 27, 2017

Allegations of Deceptive Lending Practices at Student Loan Company

If you have student loan debt and your servicer is Navient, it is important to be aware of recent allegations of deceptive and unfair lending practices against this entity. According to a recent article in The New York Times, the Consumer Financial Protection Bureau (CFPB) has filed a complaint against what the newspaper calls “the nation’s student loan serving behemoth,” alleging that the lender took unnecessary shortcuts in addition to deceiving and cheating borrowers. According to the CFPB’s complaint, Navient “failed customers at every stage of repayment.”
What else should you know about the CFPB’s complaint against Navient? If your student loans are serviced through Navient, how might the complaint impact you?
Specific Deceptive and Unfair Lending Practice Allegations Against Navient
As the article clarifies, the allegations against Navient, a accompany that “oversees $300 billion in student loans for 12.5 million borrowers,” are numerous. The complaint alleges some of the following:
  • Failure to accurately apply borrower payments;
  • Failure to make clear steps that customers can take in order to keep their student loan repayment at a manageable rate; and
  • Reported that veterans, who may be eligible for federal loan forgiveness, defaulted on their loans when they had not actually done so.
The complaint sounds a lot like those aimed at mortgage servicers during the foreclosure crisis, The New York Times suggests. The article draws a comparison between Navient’s practices and the “mortgage foreclosure machine [that] chewed up and spit out troubled borrowers, adding junk fees and costs of unnecessary services to the amounts they owed,” and “even foreclosed on borrowers when they had no right to.”
While Navient Denies Allegations, Consumers Protection Advocates Question Current Regulatory Practices
Navient has denied the allegations against it, describing them as “false allegations.” The student loan servicer contends that it “leads the industry in income-driven repayment plans and has the lowest level of severely delinquent borrowers and the lowest default rates.” Navient is a contractor for the U.S. Department of Education, and it is currently the “largest company in education loan portfolio management, servicing, and collection” in the country.
Will the complaint lead the Department of Education to reconsider the current contract is has with Navient? The Department has yet to issue a formal answer to such a question, emphasizing only that it will continue taking steps “to ensure the interests of the government and of student borrowers are protected.” Yet in response to the allegations against Navient, consumer protection advocates have begun questioning whether there are “sufficient protections” in place to protect debtors from unfair and deceptive lending practices, particularly when it comes to student loans. The company previously settled an investigation conducted by the U.S. Department of Justice and the Federal Deposit Insurance Corporation (FDIC) for $60 million, following allegations that Navient “had been illegally overcharging military families as far back as 2005.”
Contact an Oak Park Consumer Protection Lawyer
Do you have student loans that are currently being service by Navient? Do you have questions about whether you may have been the victim of deceptive or unfair lending practices? You may be able to file a claim for compensation. You should discuss your case with a consumer protection attorney in Oak Park as soon as possible. Contact the Emerson Law Firm today to discuss your case.
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