Recent Blog Posts

Filing a Time-Barred Bankruptcy Claim by LVNV Funding Not an FDCPA Violation, Holds Federal Court

Jesse Langel — Tue, 18 Jun 2013 19:50:00 GMT

During the context of a bankruptcy wherein LVNV Funding, LLC allegedly filed time-barred proof of claims (past statute of limitations) in violation of Fair Debt Collection Practices Act (FDCPA), two consumers appealed a bankruptcy order dismissing claims against LVNV Funding.

A federal district court in Alabama[1] reviewed the bankruptcy court's order under the "limited and deferential clearly erroneous standard" afforded to bankruptcy judges.

The district court distilled the appeal to one issue: Does the FDCPA prohibit a debt collector from filing proof of claims in bankruptcy court seeking payments for time-barred debts?

No, held the court, affirming the bankruptcy court's ruling.

The court found that even a time-barred proof of claim is not the type of debt collection activity addressed by the FDCPA. The court noted, "appellants were never threatened; they were never tricked; they were never lied to or deceived – they were never even spoken to. The FDCPA seeks to remedy collection efforts that are abusive, unfair or deceptive.

Filing a proof of claim is not the same thing as attempting to collect a debt; it is merely a request to participate in the distribution of the bankruptcy estate under court control, held the court. Furthermore, deeming those filings "collection activities" under the FDCPA would foreclose all collectors' rights by virtue of the automatic stay imposed by § 362 of the Bankruptcy Code.

The risks attendant with a Kimber claim (threatening to sue/suing on a time-barred claim in civil court) are not present in bankruptcy court given the "structured environment" and protection afforded to even the most unsophisticated consumers.

[1] Crawford v. LVNV Funding, LLC, et al., 2013 WL 1947616 (M.D., Alabama, Northern Division).

The 7-Year Issue: Debt Collectors, Original Delinquency Dates, and Your Credit Report

Melissa Flores, Esq. — Tue, 11 Jun 2013 15:55:00 GMT

In this business, we deal with a great deal of debt buyer cases where the original creditor is no longer involved at all. In fact, most times when debt buyers purchase old debts, the original creditor fails to provide original account statements or accurate information regarding previous payments made by the consumer. When it comes to your credit report, you want to be sure that any information a debt buyer is reporting is based on accurate information from the original creditor.

The Fair Credit Reporting Act requires that the debt collector use the date of delinquency used by the original creditor, if the creditor reported a date to a CRA. In the event that the original creditor failed to report an original delinquency date, then FCRA requires that the collector establish and follow reasonable procedures to obtain the date of delinquency from the creditor or from a reliable source of such information.

If following such procedures does not yield the collector a date of initial delinquency, then the furnisher must establish and follow reasonable procedures to ensure that the date reported precedes the date on which the account was placed for collection, charged to profit or loss, or subjected to any similar action.

Although a violation of this provision of FCRA would not entitle a consumer to private right of action, there may be a violation of the FDCPA if a collector misrepresents the legal status of the alleged debt at issue. If you believe a debt older than 7 years is appearing on your credit report and the collector has misrepresented its legal status by indicating that it is not beyond the statute of limitations, contact an attorney with The Langel Firm today.

Guarantors Unable to Escape Liability for $250,000 Capital One Loan

Jesse Langel, Esq. — Thu, 06 Jun 2013 16:45:00 GMT

Two guarantors of a $250,000 loan issued by Capital One failed to convince a Kings (Brooklyn, New York) Supreme Court judge that their signed guaranties were unenforceable.

Capital One moved by Summary Judgment in Lieu of Complaint (CPLR § 3213), a form of accelerated judgment "based upon an instrument for the payment of money only."

The Note, Modification, and Extension were introduced by affidavit sworn to by the bank's vice president.

The proof and the guaranty clause in the loan agreement seemed iron clad, but defendants adduced some interesting arguments:

The supporting affidavit lacked certification of conformity as required under CPLR § 2309;
Capital One could not prove the borrower's default;
The guaranty clause is unenforceable because it obligates them to perform non-monetary obligations relating to a mortgaged property;
Capital One failed to first make a monetary demand on the guarantors.
The extension of the maturity date in effect discharged the terms of the loan thereby cutting off their liability.

The court rejected those arguments making the following rulings:

CPLR 3123 generally permits recovery of loan debts secured by mortgages.
The guaranty clause unconditionally guaranties payment.
The parties' explicit intention was to preserve the balance of the loan agreement while only extending the maturity date of the loan.
By signing the guaranties, defendants explicitly waived any right to require notice or demand regarding nonpayment by the debtor.
Failure to include a certificate of conformity with an extra-state affidaivit is not a fatal defect and may be corrected nunc pro tunc, which Plaintiff did here in its Reply brief.
Plaintiffs indeed established default via account statements introduced by affidavit.

The case, recently published in the New York Law Journal, is Capital One Bank, N.A. v. 4021 18 Ave., LLC, 2013 N.Y. Slip. Op. 50703(U).

District Court Strikes Midland Funding's Notice to Admit in Credit Card Lawsuit

Jesse Langel, Esq. — Sat, 25 May 2013 19:47:00 GMT

In short, District Court, Nassau County[1] ruled that Midland Funding, LLC may not use a Notice to Admit in lieu of laying a proper foundation for admission of documents necessary to establish its prime facie case.

A Notice to Admit is meant to apply as a time saving tool to avoid having to prove a fact not in dispute. For example, signatures on documents are appropriate items subject to the Notice-to-Admit device. Generally, a failure to respond to any statement contained therin amounts to an admission of that item.

Here, Midland Funding, LLC, as purported assignee of a defaulted Citibank account, served a Notice to Admit on an unrepresented consumer defendant seeking to establish:

Midland's lawful ownership of the debt;
The debt amount;
That defendant received the annexed billing statements, and that they were true and accurate copies;
Defendant's default;
Defendant received notice of the account; and
That all Midland's purported records in support represent admissible business records.

In other words, Midland apparently sought to procure Defendant's silence as a means to prove its own case that it would otherwise have to prove using proper evidentiary foundation (i.e. that records in support were reliable, admissable business records).

In Valentin, Judge Hirsh, on its own motion issued a protective order vacating Midland's Notice to Admit. It further held that Defendant's failure to respond to it shall not be construed as an admissions of any kind.

Although the court did not honor the Notice to Admit in this action, you would be ill-advised to ignore a Notice to Admit if you receive one. Maybe a different judge in a different case would feel differently and rule against you.

If you have received any litigation document – including and especially a Notice to Admit – contact us right away. We would be happy to offer you a free consultation to discuss your case.

[1] Midland Funding, LLC v. Valentin, 2013 WL 2097590. (Nassau County, New York, May 9, 2013)

Retirement Funds Are Exempt from Bank Restraints in New York

Melissa Flores, Esq. — Fri, 24 May 2013 18:40:00 GMT

Are you a New York resident who maintains a bank account that consists of retirement or pension funds? If so, you should be aware that those retirement funds are beyond the reach of creditors attempting to levy and/or restrain that bank account. This means that if a creditor restrains your bank account in an attempt to collect on or enforce a judgment, you can claim the retirement funds as exempt under the law and gain access to that bank account.

Federal law provides that civil service retirement benefits are not assignable or subject to execution, levy, attachment, garnishment or other legal process. Military retirement pay is also exempt under federal law. New York State exempts payments from public as well as private pension and retirement accounts. In New York, it does not matter whether your pension and/or retirement accounts are employer-sponsored - both types are exempt under CPLR §5222, the statute that governs exemptions.

If you have recently deposited any retirement funds into a bank account that is currently restrained, we encourage you to contact us at The Langel Firm immediately so that we may discuss your options and potentially claim the funds as exempt under the law in order to get the bank account released and ensure you have access to the funds in that account.

CACH, LLC Loses Attempts at Summary Judgment and Motion to Strike

Jesse Langel, Esq. — Thu, 16 May 2013 16:11:00 GMT

A summary judgment motion is a written request for judgment based on evidence obtained before trial. Such evidence can include documents, testimony, and affidavits by witnesses qualified to testify or introduce documents.

In CACH, LLC v. Fisher,[1] a New York Supreme Court case, Judge Bender ruled that debt buyer plaintiff, CACH, LLC failed to show standing, and further failed to offer proof of default or amount due. These defects sunk its possibility of winning summary judgment.

After losing its summary judgment motion, CACH, LLC twice moved to strike the consumer defendant's answer for her alleged failure to serve answers to interrogatories (written questions to be answered and signed under oath). The court dismissed its first attempt to strike because CACH failed to actually provide a copy of the interrogatories. CACH moved to re-argue the motion, this time annexing a copy of the interrogatories.

The court criticized CACH's styling of the interrogatories as "nothing more than a request for admissions" as "an attempt to have the Defendant prove the Plaintiff's case"[2] as it is evident that "the Plaintiff lacks proof to procure a judgment." The court stated, "Responsible practice would suggest Plaitniff's counsel should have such documentation [billing statements, credit card agreement] before commencing suit."

CACH, LLC was represented by Daniels, Norelli, Scully & Cecere, P.C.

[1] 2013 N.Y. Slip Op. 50170 (U).

[2] The interrogatories asked the defendant to state for example, whether or not the plaintiff opened an account with the plaintiff's predecessor, received statements from the plaintiff's predecessor, and made payments to the plaintiff's predecessor.

FDCPA Class Action Against Erin Capital Management for Lack of Licensure

Jesse Langel, Esq. — Fri, 10 May 2013 21:26:00 GMT

The proposed class-plaintiffs in Collins v. Erin Capital Management, LLC[1] allege that Erin Capital violated the Fair Debt Collection Practices Act ("FDCPA") for suing Florida consumers – and enforcing judgments – without registering with the Florida Office of Financial Regulation as required by the Florida Consumer Collection Practices Act.

This action was commenced on August 4, 2012. Erin Capital registered for licensure on August 27, 2012.

Erin Capital opposed the plaintiff's motion for class certification.

The court conducted its Rule 23(a) certification analysis:

Numerosity: At least 48 affected consumers lived in Miami Dade County alone.
Commonality: The crux of this dispute is whether Erin Capital's failure to register as a consumer collection agency qualifies as a violation of the FDCPA. All issues associated therewith are capable of class-wide resolution, held the court.
Typicality: All plaintiffs were each allegedly subject to Erin Capital's unlicensed and unlawful collection activity.
Adequacy: Plaintiff collins suffered same/similar injury and his claim is not time- barred since unlicensed garnishment argued as independent violation.

As required under Rule 23(b)(3), the court found that common questions predominate over individualized ones, and it also found that the class action device is plausibly superior to individual actions.

Worth noting in my mind is Erin Capital's failure to successfully allege the Rooker-Feldman doctrine (prohibits challenging state-court judgments in federal court) as to those putative class members with pending state-court judgments. The court viewed the enforcement of those judgments as potentially independent violations.

For insight into New York's position on non-licensure in New York, see our prior blog: "In New York City, does a debt collector violate the FDCPA for not acquiring its debt collector license before suing you?" In New York, Erin Capital Management is usually represented by Eltman, Eltman & Cooper, P.C.

[1] 2013 WL 1164026, U.S. District Court, S.D. Florida

"Sewer Service" May Violate FDCPA, Holds New York Federal Court

Jesse Langel, Esq. — Thu, 09 May 2013 22:35:00 GMT

The defendants in this case[1]: Mel S. Harris & Associates and NCO Portfolio Management, Inc. The plaintiff sued these collection entities under the Fair Debt Collection Practices Act ("FDCPA") for 1) obtaining a default judgment based on a falsified affidavit of service; and 2) failing to return garnished money pursuant to a court order.

Denying NCO Portfolio's dismissal motion in its entirety, Judge Batts of the Southern District of New York handed good arsenal to consumers victimized by "sewer service" (intentionally failing to serve a consumer then falsifying an affidavit of service to reflect proper service). Judge Batts honored plaintiff's pro se claim that NCO fraudulently obtained a default judgment that resulted in a garnishment, ruling that "such sewer service practice, followed by obtaining a default judgment, squarely falls within the prohibited acts under the FDCPA."

The second basis of the consumer-plaintiff's complaint was NCO's failure to return – for 10 months – garnished money that was ordered to be returned by a judge. Using strained logic, NCO Portfolio argued that since a court order was not a debt, the plaintiff failed to state a claim under the FDCPA. The court quickly rejected that argument finding that the underlying debt obligation[2] is the determinative factor – not the court order. The court order was not an independent obligation. "What is dispositive in determining the applicability of the FDCPA is not the form of the obligation but whether the debt, regardless of its form, arises from a consumer transaction," the court stated.

"Defendant's ten-month refusal to comply with two Court Orders that vacated a fraudulently received judgment falls within FDCPA's broad purpose," the court held. A court could also find Defendant's conduct abusive and unfair in violation of other sections of the FDCPA.

This decision helps remediate the widespread problem of sewer service. But it still takes a lot of work for the aggrieved consumer to 1) vacate the default judgment; and 2) bring a federal case to obtain the remedy.

Also, please observe that other courts have refused to impose liability on creditors and law firms for the alleged misconduct of process servers. Many times, it is successfully argued that process servers are independent contractors over which the collectors/lawyers are not responsible.

[1] Polanco v. NCO Portfolio Management, Inc. 2013 WL 1104170

[2] As long as the debt arose out of a transaction in which the money, property, insurance, or services were for personal, family, or household purposes. FDCPA § 1692a(5).

Facing Medical Debt in New York? 11 Good Medical Debt Protection Laws

Jesse Langel, Esq. — Wed, 08 May 2013 16:44:00 GMT

Hospitals may not charge uninsured patients with income under 300% of the federal poverty level more than what the hospitals receive from Medicare, Medicaid, or the highest volume payer for that hospital.
New York requires hospitals to use a written financial assistance policy that sets forth a sliding scale and discount rates.
Patients with income under the federal poverty threshold may only be liable for a nominal amount, while those patients with 100% to 150% of the poverty level may only be required to pay up to 20% of the amount paid by insurers.
Hospitals must provide for payment plans with payments not to exceed 10% of the patient's gross monthly income and for which interest is limited to the rate on a 90-day Treasury bill plus 0.5%.
New York hospitals may not send collection letters directly to patients who are in the process of applying for Medicaid or other financial assistance.
New York hospitals must provide a 30-day notice to patients before referring the bill to a debt collector.
A hospital may not foreclose on a patient's home but may place a lien on it.
Debt collectors must obtain the hospital's consent before commencing a lawsuit to collect the medical debt.
Collectors must follow the hospital's financial assistance policies and provide information on such policies.
Hospitals must provide notices of their financial assistance policies.
New York hospitals that receive state charities are prohibited from engaging in discriminatory pricing practices.

This bulleted list was derived from N.Y. Pub. Health Law § 2807 and National Consumer Law Center, Collection Actions (2d ed. 2011).

State or Local Tax Liens Appearing on Your Credit Report? We Can Help

Melissa Flores, Esq. — Fri, 26 Apr 2013 14:47:00 GMT

If you have recently discovered that there is a state tax warrant or a tax lien against you, you are most certainly not alone. Similarly, if you have recently received a tax bill or notice, you are in good company.

As we typically suggest for everybody, you should be checking your credit report at least once a year. If you find a tax judgment or lien appearing on your credit report, you should investigate it immediately. Often times a tax lien or judgment will appear on your credit report under the section entitled Public Records, and the creditor will appear to be the state.

It can be difficult to navigate your state's department of taxation and finance, but luckily, The Langel Firm is here to help. New York State's Department of Taxation and Finance is not the same as many of the other private creditors we deal with; the standards under which the state can hold you liable for debts are different. You should understand that fighting the state is a tougher battle than fighting, for example, a debt buyer.

The procedures for disputing a tax lien or judgment are different and more complicated than the typical disputes against private creditors. Settlement options are not as readily available and payment plans that extend over time are even less likely.

But all is not lost. If you are having issues with tax liens, judgments, notices, or warrants, contact The Langel Firm today for a free consultation.

Please note: If you encounter a tax judgment or tax lien resulting from the federal Internal Revenue Service, you should consult a tax professional right away.

Fired because of a Wage Garnishment? New York Law Compared to Federal Law

Jesse Langel, Esq. — Thu, 25 Apr 2013 22:37:00 GMT

In our prior blog ("Has your Employer Fired You because of a Wage Garnishment/Income Execution..."), we discussed your statutory right to damages should your employer retaliate against you for its receipt of an income execution. Under this New York State statute (CPLR § 5252), you may sue your employer for up to 6 weeks of lost pay and potential reinstatement of your job.

This blog introduces the federal corollary of CPLR § 5252 contained within the Consumer Credit Protection Act ("CCPA" - 15 U.S.C. §§ 1671-1677), enacted in 1970 as a means to prevent widespread bankruptcy and hardship.

Although the "preservation of an employee's job is one of the dominant purposes of the CCPA garnishment protections," the protections apply only to garnishment of one debt.[1] In other words, the CCPA permits an employee firing due to multiple garnishment orders for different debts. New York CPLR § 5252 prohibits any adverse action against an employee because of one or more wage garnishments so it affords more protection.

Although the Secretary of Labor has the authority to enforce the CCPA, this federal Act is devoid of a private cause of action – meaning you can't sue on your own behalf for reinstatement or damages. As stated, New York does have a private cause of action allowing you to sue for up six weeks of lost wages and/or reinstatement.

Under the CCPA, what an aggrieved employee may consider, however, is bringing a Title VII Civil Rights action, which prohibits employment discrimination based on race or other certain characteristics. Employees in some cases have shown that firings relating to wage garnishments had a "disparate impact" on minorities forming the basis for a Title VII claim. If you wish to go this route, make sure you consult an employment discrimination attorney immediately to ascertain the short statute of limitations period in which to file such a claim.

The CCPA protections generally do not apply to actions to collect state or federal taxes,[2] but the "job protection" provision of the CCPA does apply to an Internal Revenue Service levy on wages.[3] Also, the CCPA garnishment protections do apply to debts incurred for business purposes – not just consumer purposes. Some courts further extend the protections of the CCPA to independent contractors, not just wage earning employees. Independent contractors would be wise to first seek protection under state garnishment protection statutes.

[1] Cheatham v. Va. Alcoholic Beverage Control Bd., 501 F.2d 1346 (4^th Cir. 1974).

[2] 15 U.S.C. § 1673(b).

[3] Martin v. Hawkeye Int'l Trucks, Inc., 782 F. Supp. 1320 (S.D. Iowa 1991).

Sued Twice for the Same Debt? Assert Your Rights Immediately!

Melissa Flores, Esq. — Tue, 16 Apr 2013 17:37:00 GMT

The Langel Firm has recently been retained on several cases where consumers had been sued for the same debt twice. In one particular circumstance, our client had been sued without ever having been properly served, thus the creditor obtained a default judgment against him. Later, the creditor began collecting on the judgment by garnishing the consumer's wages. Because the consumer was aware of the existence of the debt, he did not fight the garnishment, as he believed it was his duty to pay it. (A quick note on this: don't let a wage garnishment/income execution go unchallenged! If your wages are being garnished, contact us today).

Fast-forward three years … that same consumer received yet another Notice of Garnishment from the same creditor, but represented by a different law firm. The consumer was baffled to receive yet another Notice of Garnishment from the very same creditor, for an amount that was $200 within the first debt amount. Wisely, he called us at The Langel Firm right away. We worked to unravel this second case, and are working towards having the judgment vacated on the basis that this judgment is premised upon the first debt, which the consumer was already paying off through the existing wage garnishment.

Not only is this grounds for dismissal of the second case, but the second collection law firm is in violation of local, state, and federal consumer protection laws relating to suing on the same debt twice. If you find yourself in a similar situation, call The Langel Firm today and let us assert your rights under the laws!

A final note about double lawsuits:

You should understand that there is a difference between a creditor seeking to collect on a judgment that resulted from a lawsuit, and a new lawsuit being filed against you.

If the first case against you was dismissed without prejudice, or was resolved pursuant to a settlement agreement that you failed to honor, the creditor may have a right to bring that same suit against you again. However, if the first case was filed and you either paid in full according to a settlement agreement, or a judgment was entered against you and you're still paying that judgment (whether by wage garnishment, or voluntarily), you cannot be sued again on that same debt.

Credit Card Liability: Distinguishing Authorized Users from Joint Account Holders

Jesse Langel, Esq. — Mon, 15 Apr 2013 19:53:00 GMT

Users of credit cards fall into one of two categories – account holders or authorized users. Account holders apply for and agree to be obligated on the account. The account holder can authorize others, called "authorized users," to use the account.

Account holders are liable for the debt while authorized users generally are not. The account holder must provide consent to add authorized users and joint account holders. Similarly, a consumer must also provide consent to be held liable as a joint account holder. The collector has the burden of proof showing that the consumer provided such consent.[1]

There are situations where card issuers erroneously code authorized users as joint account holders resulting in debt buyers suing non-liable authorized users as if they were joint account holders. Therefore, as a consumer you'd be wise to demand evidence – other than the card issuer's designation – that you requested to be jointly liable as a joint account holder.

When tested on this issue, however, even the originating creditor may lack proof supporting its designation of an individual as an account holder versus an authorized user. For example, in Johnson v. MBNA Am. Bank,[2] the card issuer was unable to pin liability on a wife as a joint account holder because it destroyed the original account agreement pursuant to its document retention policy. The court in Johnson rejected the argument that the mailing of account statements to both husband and wife at the same address supported their joint-account holder status.

Federal law (15 U.S.C. § 1642) permits the issuance of a credit card only in response to a request or application for a card. The issue turns on whether the existing account holder requested that the additional party be added as an account holder or an authorized user.

Any evidence from the real account holder, like the credit card application for example, showing its lack of intent to create an additional account holder will defeat a collector's lack of proof to the contrary. Debt buyers, who often receive only a computer print-out of the basic facts of an account, will find it that much more difficult to prove joint account holder liability.

[1] "In any action by a card issuer to enforce liability for the use of a credit card, the burden of proof is on the card issuer to show the use was authorized." 15 U.S.C. § 1642.

[2] 357 F.3d 426 (4^th Cir. 2004).

Is your Employer Required to Investigate the Validity of an Income Execution?

Jesse Langel, Esq. — Sun, 07 Apr 2013 23:51:00 GMT

No, according New York CPLR § 5209, entitled, "Discharge of garnishee's obligation."

Assuming the Income Execution itself contains the basic information required in CPLR § 5231, the injured employee-debtor may not seek damages against its employer. An applicable scenario would be when somebody is accidentally targeted for someone else's debt, and the employer honors the income execution without investigating the merits of the case or its procedural appropriateness (jurisdiction, for example).

An income execution is used interchangeably with wage garnishment. It's the process whereby a marshal or sheriff seizes part of your wages to satisfy a judgment. A garnishee refers to any party who holds money or property belonging to the judgment debtor (employee). Employers paying out wages are garnishees.

This statute was affirmed in Chin Sung Yu v Riggs Nat. Bank of Washington, D.C.[1] The 1998 appeals court held that "garnishee's compliance with CPLR 5209 is a safe harbor that preempts the judgment debtor's common-law claim that the garnishee should have investigated the validity of the execution." Turn to the creditor, not the employer, suggested the court.

The statutorily prescribed "Notice to Judgment Debtor or Obligor" and the 20-day Marshal/Sheriff notice required under CPLR § 5231e are supposed to afford the debtor notice protection to satisfy due process. But if the judgment creditor prosecutes the entire action using an outdated address, these notices are rendered meaningless.

Unfortunately, you have the burden to formally intervene to protect your interests. Conveniently, that's what we do well. Contact us for an immediate, free consultation.

[1] 248 AD2d 235 (1st Dept 1998).

Has Your Employer Fired You because of a Wage Garnishment/Income Execution? Learn Your Rights Under New York Law.

Jesse Langel, Esq. — Sun, 31 Mar 2013 21:08:00 GMT

Aptly titled, "Discrimination against employees and prospective employees based upon wage assignment or income execution," New York CPLR § 5252 sets forth in relevant part:

"No employer shall discharge, lay off, refuse to promote, or discipline an employee, or refuse to hire a prospective employee, because one or more wage assignments or income executions have been served upon such employer or a former employer against the employee's or prospective employee's wages or because of the pendency of any action or judgment against such employee or prospective employee for nonpayment of any alleged contractual obligation."

This statute further provides a civil, private right of action for damages not to exceed 6 weeks of lost wages with potential reinstatement of your job. Or, if you were not hired because of the garnishment(s), the court could apparently force your employer to hire you.

You only have 90 days from the violation to bring such a case, so contact us immediately to discuss your matter!