You answer the call, risk your life for your country and return to ... a parade?  A Welcome home ceremony?  A thank you?  Well ... not exactly.  No, instead you have a mortgage servicer foreclosing on your home even though your payments are current.  The servicer went out and ran the American Flag up the pole in the morning and threw your veterans' assistance vouchers in the trash in the afternoon.  Without a payment to the acccount, your home went into foreclosure.  You, your wife and kids may soon be living in the street.

Dealing with mortgage servicing problems can be a nightmare.  You didn't pick the mortgage servicer, and you have no right to fire it.  In addition to the risk of foreclosure, one improperly applied payment can effect a home loan for years to come.  A single payment is typically applied to insurance and tax escrow, pricipal and interest.  Failure to post a payment will result in an escrow deficiency and substantially increased interest payments over the life of the loan.   

Problems I have observed with mortgage servicing include failure to post payments, posting payments to the wrong account, failure to timely post payments when received, putting payments in "suspense" accounts rather than properly applying payments to principal and interest, and excessive escrow allocations causing the consumer to pay excessive interest on the loan.  One servicer had consumers send payments to one address, and then forwarded the payments to another state where they were posted.  When the payments were posted late due to the servicer's pre-caluclated delay in delivery, the servicer imposed late fees.

A federal statute, RESPA, can provide releif for some, but not all mortgage servicing "errors".  Be sure to send inquiries and complaints to your servicer IN WRITING.  A phone call does not preserve your rights and, even if it did, exactly how much time do you have to spend in phone tree hell waiting to talk to a customer service center in India?  Start a file and keep copies of all correspondence.  Keep records of payments on a mortgage for the life of the mortgage.  Do not write inquiries on a bill.  Write a separate letter and send it to the adress provided for account inquiries.  Federal law then requires a written response.

Are there any Iowa laws to protect consumers from mortgage servicing abuses?  Have I ever mentioned in my blog that Iowa is the only state in the US where consumers cannot sue for deceptive trade practices?   

  

Legitimate consumer credit counseling may be worthwhile, but it should be approached with caution.  Before counseling is started with an out-of-state debt settlement or debt reduction company, keep in mind many consumers have been further victimized by these operations. Consumers report excessive fees, misrepresentations regarding outcomes and services, in addition to incompetence or indifference resulting in consumers ending up being sued and worse off than before they signed up.  Many Iowa consumers are abused by debt collectors and need a licensed attorney in Iowa who can respond with appropriate legal action against the debt collector violating the law.  If the debt collector is calling five times a day and threatening to have you arrested or take your kids away from you—you don’t need counseling, you need a lawyer.

Some non profit credit counseling is performed by organizations funded primarily by creditors.  That’s right, your creditors.  The same people demanding 30% compound default interest rates and who are responsible for the harassing phone calls you are attempting to avoid are paying the organization counseling you.  What advice does a consumer receive where the consumer is being victimized by her creditor’s unfair debt collection violations, and that same creditor is a major financial supporter of the credit counseling agency?  Actually, a theme is starting to emerge here--the consumer's credit couselors are funded by the credit card banks; the mandatory arbitration forum who decides the consumer's case is funded by the credit card banks; the legislator who passed the laws who got the consumer into this predicament in the first place is funded by ....  You get the picture.

I recently visited the web site of the largest consumer credit counselor in Iowa.  I visited the resource page, and there were no resources listed specifically mentioning unfair debt collection.  The Federal Trade Commission was listed, but not as a resource for unfair debt collection information.  The web site indicated most collection calls could be stopped in 90 days.  No consumer should tolerate 90 days of unwanted collection calls.  An attorney can send a no contact letter immediately, and both state and federal law require calls to the consumer to then cease immediately. 

I have no doubt creditor sponsored credit counseling has helped many consumers.  I also have little doubt many consumers have paid debts during credit counseling they had legitimate defenses to or that could have been greatly reduced or eliminated with unfair debt collection cases against the perpetrators.     

You move out of your rental unit, leaving it in better condition than when you moved in.  Next, you pay a security deposit and the first months rent on your new place.  You are a little strapped for cash because your car broke down and your paying a 30% interest rate on your credit cards and there's the 300% pay day loans you obtained to make ends meet.  You anxiously await the return of your security deposit.  It comes in the mail, you deposit it, and the check bounces!!!  Not only that, your checks are now bouncing and the bank and merchants are charging you fees.  The County Attorney is threatening to prosecute you for the checks.  The law requires security deposits to be in a separate account--how on earth did the security deposit check bounce?

Think that doesn't happen in Iowa?  Think again.  And what is your remedy?  Your damages plus $200 in punitive damages.  That's right, $200 measley dollars for the theft of your security deposit.  You can sure bet that deters landlords from stealing deposits.

I have seen landlords impose substantial fines simply for having a "pet", a caged hamster.  Another landlord charges $20 per butt for picking up cigarette butts.  Another $200 an hour for painting.  And one of my favorites, charging for work done by an independent contractor, except the contractor does not exist--it is simply made up and the invoice is phony. 

The Iowa Legislature has a bill raising the punitive damages to $500 or 1 1/2 times the deposit.  Still not exactly an amount that will deter much, but better than the $200 we now have from a statute enacted more than 30 years ago. 

Now who could be against that?  Surely the Iowa Legislature can pass this one meager piece of consumer legislation.   

Don't hold your breath.  Lobbyists don't want it.  Why?  Who knows.  Does it even make a difference anymore?  Money talks.  Legislators listen.

After posting on the pending legislation in the Iowa Legislature to protect consumers from contractor rip offs by requiring a bond, I have been informed the bill is already dead.  Turns out contractors didn't want it and that was enough for the Iowa Legislature.  Well, OK then.  

Lobbyists for contractors claim the bond would be too expensive and would put some smaller contractors out of business.  Iowa requires a simialr bond for auto dealers.  I am told the cost of that bond is minimal.  If a contractor is so financially insolvent it cannot afford the small price for a contractor bond or provide proof of financial responsibility, do you really want him doing your home remodeling project?  Isn't that the point?  A consumer pays a contractor for work that is never done and materials that never appear, and then the contractor claims insolvency.  And if these contractor bonds do become more expensive, it will be for a reason--because a lot of Iowa contractors are causing a whole lot of harm to Iowa consumers. 


 

Paying a contractor in advance to do work on your home is risky business.  Many Iowans learn that the hard way.  The Attorney General's Office is flooded with complaints from consumers who have been ripped off by home improvement contractors.  Consumers pay for work that is never completed, they receive shoddy work, or both. 

The problem for consumers is many of these fly-by-night contractors have no assets or cannot be found.  The usual suspects keep popping up over and over, their victims fleeced of their money and/or left with liens on their homes when the contractor fails to pay for materials or labor.  

Legislation is pending in the Iowa Legislature to require contractors to obtain a bond and to register before doing work in Iowa.  The legislation is desperately needed to protect both consumers and legitimate contractors who can't compete with a contractor who does shoddy work or no work at all.  Hopefully the Iowa Legislature will provide Iowa homeowners with this much needed protection.
 
[contractor bond legislation]

It's politics as usual in the Iowa House.  Once again, some Democratic representatives are busy killing off important consumer legislation. 

Consumer's Union did a fifty state survey on consumer laws and, as expected, Iowa received an "F" on "consumer access to justice."  Considering Iowa consumers are the only consumers in the United States who cannot seek remedies for deceptive trade practices, the grade is hardly a surprise.

I have repeatedly argued these anti-consumer votes are tied to campaign contributions.  In future posts I will be naming names concerning anti-consumer votes and reporting on the campaign contributions these representatives receive.  

It is especially frustrating to see Democrats who rightfully criticized Republicans in the last election for taking money from the title pawn industry to kill legislation prohibiting title pawns, now engage in the same or at least similar behavior.  

Voters are rejecting politics as usual.  Republicans paid a price last election for votes that appeared to be tied to special interest money.  Certain Democrats may find what goes around comes around.  Consumers expect their representatives to be responsive to their concerns.

[consumer rights legislation]

Here we go again.  For a guy who I have admired most of my life, Ralph Nader is really starting to P*** me off. 

There is no doubt Ralph is right about a lot of things.  Corporate Democrats say one thing to get elected, and then sing an entirely different tune once in office.  PAC money begins to cloud their brains.  At times, it seems like legislation is bought and sold like cattle.  One ponders whether the only difference between a Democrat and a Republican is that one has a job the other one wants.  HOWEVER, there is also little doubt that we have Ralph Nader to thank for 8 years of one of the worst Presidents in U.S. history.  Without Nader, Al Gore would have won Florida.   

OK, so Al Gore did win Florida.  But without Nader in the race, Gore would have won Florida by a large enough margin the U.S. Supreme Court would not have been asked to suddenly discover the Equal Protection Clause, and none of us would even know or care what a hanging chad is. 

It is hard to imagine Ralph Nader actually believes he can be elected, or that as a Presidential candidate he has done anything to help consumers.  One starts to wonder whether this is more about Ralph Nader's ego than any burning desire he has to improve the lives of consumers. 

[Ralph Nader consumer protection]

Debt scavengers purchase old credit card debt for pennies on the dollar and then attempt to collect it for the full balance on the card, frequently including the outrageous compound default interest rates and over-limit fees charged by credit card banks.  Many of these accounts are time barred by the statute of limitations, and for good reason.  There are lots of reasons you may not owe the account a debt scavenger is trying to collect, not the least of which is the account may not be yours (remember identity theft?), or you were only an authorized user on the account.  When the collector could not collect from the primary account holder, your name was moved to the address for the responsible person on the account with no regard at all as to whether you actually were responsible for the account.  Because of the fees, time delay and outrageous interest rates, these credit card accounts can go from a few thousand in actual charges to a collector seeking a judgment for more than $20,000 with interest on the judgement of more than 25%!!!!!  That's right, you and your family can be forced into financial ruin over this. 

So what do you do?  The debt scavenger's goal is to "re-age" the account by getting you to make a small payment on the account or by getting you to admit the account is yours.  Do not make payments on any debt at or near the statute of limitations.  In Iowa, the statute of limitations is probably five years on an open account such as a credit card, but it may be as little as three years depending on the law applicable under the card-holder agreement, which the debt scavenger probably does not have and cannot obtain.  If the judge or jury on the case requires the debt scavenger to actually prove the case like the rest of us have to do when we file a lawsuit, very few debt scavengers can do so. 

A very common trick is for the debt scavenger or a predecessor to simply re-age the debt themselves.  This is accomplished by fraudulently making a phony payment entry in your account statement or more likely simply on the computer record of the last payment on the account.

Another possible defense is that under Iowa law, a consumer has to have notice of an assignment when an account is assigned.  This is not just a technicality.  Many consumers who want to pay the debt cannot do so for years because the original creditor no longer owns the debt and will not accept payments.  In other words, interest is compounding on the debt during a time when a consumer has no clue who to make payments to.

The Iowa legislature should act to stop debt collection abuse on aged debt.  The statute of limitations for lawsuits on an open account should be reduced to three years from the time the account goes into default.  A private right of action with substantial penalties should be available against a creditor or collector who fraudulently re-ages an account.   

[debt collection abuse]

[Iowa Legislature]

It just keeps getting worse for Iowa Consumers.  We are the only state in the U.S. without the right to seek relief for deceptive trade practices.  The Iowa Legislature recently refused to index Credit Code coverage to inflation and stop the erosion of consumer rights protected by the Credit Code.  Today, the Iowa Supreme Court in Anderson v. Nextel Partners concluded cell phone contracts are not covered under the Credit Code either.  The case concerned the early termination fee charged by cellular service providers, but the ruling is equally applicable to unfair debt collection practices engaged in by cellular service companies.  After today's ruling, cellular service providers are free to call neighbors, relatives, employers, use abusive language, threats or whatever to collect debts you owe or even those you do not.  Considering celllular phone service consistently is among the leading complaint categories at the Attorney General's Office, this ruling is clearly bad news for Iowa consumers. 

The ruling is also bad news for smaller cellular service providers.  Verizon and AT&T (formerly Cingular) appear to have the lion's share of cellular service customers.  Smaller companies can waste all the money they want to on advertising, but a consumer locked into a two year contract with $800 or more in early termination fees is not going anywhere.  And Verizon or AT&T will get the majority of them to renew early with incentives.  The result will be the demise of smaller providers and further consolidation and monopolization of the cellular service industry.  We all know who ultimately pays the price for that.

Hopefully the legislature will take some action to remedy the situation and at least protect consumers, from unfair debt collection, but I wouldn't hold your breath waiting for that to happen.  I already know how Consumer Interests v. The Cellular Service Lobby turns out at the Iowa legislature--been there, done that.
 
[debt collection abuse cell phone]

Your landlord has kept your security deposit for no legitimate reason.  Now what?

Under Iowa law you can file a lawsuit to get the deposit back.  Not much comfort for a student moving from her apartment and leaving the area.  A real pain for others who need the deposit for their next rental or other expenses.  Using vacation time to go to court rather than laying on a beach or spending time with the family also has little appeal. 

The best way to stop this abuse is to put teeth in the law so the theft of a security deposit does not happen in the first place.  Iowa law provides for a measley $200 for the "bad faith" retention of a security deposit.  Like the Credit Code (see prior blog), this statute was enacted nearly 30 years ago and the legislature has not indexed the remedy for inflation. 

Legislation is now pending that would raise the penalty for the bad faith retention of a security deposit to $500 or one and 1/2 times the amount of the illegally retained deposit, whichever is greater.  Now who could be against a small penalty for the theft of a security deposit? 

You can bet landlords who keep security deposits in bad faith have a lobby and they have money to contribute to legislators all to willing to help them out at your expense.  It will be interesting to see if this common sense legislation will pass and which legislators will be leading the charge for landlords to oppose it.

Stay tuned.

[rental deposit Iowa landlord tenant]

We hear a lot about lawsuit abuse.  Those greedy consumers who supposedly exploit big corporations and their lawyers by filing frivolous lawsuits. 

Let's look at the facts.  Most lawsuits are not filed by consumers.  The overwhelming majority of lawsuits are filed against consumers.  These lawsuits include an alarmingly large number of debt collection lawsuits seeking recovery on disputed debts, debts resulting from identity theft, or debts where the statute of limitations expired long ago.  Debt collectors frequently purchase these debts for pennies on the dollar and then sue for the full amount plus compunded default interest rates.  Consumers, unable to afford an attorney, end up defaulting because they lack the knowledge or skill to defend themselves in district court.  The consumers then face wage and bank account garnishments on debts they did not owe.

Even where the consumer owes a debt, the amounts demanded are frequently inflated.  Credit card lawsuits include outrageous compound default interest rate, overlimit fees and late fees.  For example a late fee for a payment paid on line on the due date, but after the "gotcha" deadline imposed by the credit card company of 2:00.  Lenders seek recovery of deficiency balances on defaulted car loans caused in large part because the lenders and dealers collude to exclude the public from auctions of the repossessed vehicle--selling only at private "dealer only" auctions where a fair price for the vehicle is unlikely.  The consumer is required to make up the difference.  The list of abuses is endless.   

The fact is that frivolous lawsuits by consumers account for an extremely small number of lawsuits filed.  The number of frivolous lawsuits is a drop in the bucket compared to the number of legitimate lawsuits exploited consumers could bring but do not.  Consumers and their lawyers have little incentive or interest in spending time and money on a lawsuit that will ultimately be unsuccessful.
     
[lawsuit abuse credit card collection lawsuit]

I just saw a television commercial apparently funded by pay day lending interests.  Clearly stung by justifiable criticism of their lending practices, the commercial urged consumers to "use pay day loans responsibly." 

A responsible use of pay day loans would be to avoid them completely.  These loans frequently have absurdly high interest rates.  The loans are often utilized by those who can least afford to add high interest charges to their weekly or monthly budgets.  Unfortunately, fairlure to timely repay can lead to being victimized by abusive debt collection practices.  

Remember, if you need a pay day loan, you can't afford one.  If you can afford a pay day loan, you don't need one.

[pay day loan unfair debt collection]

An Iowa House subcommittee killed off very important legislation to preserve consumer rights under the Credit Code.  As a result, more consumers will lose protections they currently have in the purchase and financing of automobiles, or to be free from unfair and abusive debt collection practices.  For example, if you financed a vehicle for more than $25,000, pay for it for four years, and then make a payment a few days late, your lender could repossess the vehicle without sending you a writtne notice to cure the default or without a ten day grace period before your payment is in default.  A debt collector could then threaten to beat you to a pulp if you do not pay up, or could call your employer, relatives or others and discuss the alleged debt.  The Credit Code prohibits this conduct, but the statute was passed thirty years ago and the legislature has not indexed it for inflation.  As a result, many vehicle purchases once covered under the Credit Code are no longer covered.  In fact, all of the protections of the Credit Code are inapplicable to such loans, including limits on interest rates or late fees, Truth in Lending requirements, or disclosure requirements.   

Iowa's consumer protection laws are now among the worst in the U.S. 

[Credit Code Iowa Legislature]