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    Edelman, Combs, Latturner, & Goodwin, LLC

    20 South Clark Street
    Suite 1500
    Chicago, IL 60603
    Phone: 312-739-4200
    Fax: 312-419-0379

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    Allowable interest on debts

    Tuesday, October 28th, 2014


    In Stratton v. Portfolio Recovery Associates, 770 F.3d 443 (6th Cir. 2014), the federal Sixth Circuit Court of Appeals (covers Michigan, Ohio, Kentucky, Tennessee)  ruled against a debt buyer who it said violated the FDCPA when it sought interest charges for a credit card debt. The decision reversed a lower court ruling and included a sharp dissent from the third judge in the appellate panel.

    The plaintiff had GE Money credit card account (now Synchrony Bank) that was charged off in 2008.    Portfolio Recovery Associates (PRA) bought the debt a year later. Two years after that, PRA filed a debt collection action against Stratton in Kentucky state court. In that suit, PRA asked for statutory prejudgment interest of 8 percent, running from when the account was charged off by GE, although the contract Stratton signed allowed for 21.99 percent interest.

    The 8 percent interest rate did not appear out of thin air; it is the “default rate” under Kentucky Revised Statutes 360.010.

    Stratton then filed a proposed class action against PRA in the Eastern District of Kentucky, alleging that the company’s attempt to collect 8 percent interest for the period between the date GE charged off Stratton’s debt and the date it sold that debt to PRA violated the FDCPA. In particular, Stratton alleged that the 8% interest was not “expressly authorized by the agreement creating the debt or permitted by law,” [§ 1692f(1) of the FDCPA], that PRA had falsely represented the “character” of Stratton’s debt and the “amount” she owed [§ 1692e(2)(A)], and that PRA’s suit to recover interest it was not owed was a “threat” to take an “action that cannot legally be taken,” [§ 1692e(5)].

    The district court dismissed Stratton’s case at PRA’s request. The court held that Kentucky law gave PRA a right to “prejudgment interest” and that, consequently, PRA could not have violated section 1692f(1) of the FDCPA. Further, the court concluded that, taken together, “even an unsophisticated consumer would have understood that” the allegation in PRA’s complaint “was just a request” rather than a “false representation” prohibited by the FDCPA.

    Stratton appealed the decision to the 6th Circuit.

    A two-judge majority disagreed with the lower court decision, overturning it and remanding the case for further action.

    The majority focused on GE’s initial waiving of its right to collect interest when it charged off the account. They noted, “GE’s decision was neither irrational nor altruistic: By charging off the debt and ceasing to charge interest on it, GE could take a bad-debt tax deduction, and could avoid the cost of sending Stratton periodic statements on her account.”

    But they took that idea further and noted that when GE waived its right to collect the statutory 8 percent interest rate when it voluntarily waived its right to collect the contractual 21.99 percent interest rate. “GE cannot recover the right it bargained away simply because it later chose to waive the right for which it bargained,” the majority wrote. They found that, “PRA cannot be given a right to collect interest — contractual or statutory — that GE waived.” Since PRA was not entitled to charge interest, the judges found that its suit violated the FDCPA.

    In a dissent, the third Circuit Judge disagreed with the reasoning, writing, “The majority asks — and then answers — the wrong question. The question is not, ‘can someone collect interest if they agree not to collect interest?’ The question instead is whether someone can collect statutory interest after they agree not to collect contractual interest.”

    The decision deals with Kentucky law; consult an attorney when considering cases in other states.

    Marion County township small claims courts

    Tuesday, October 28th, 2014

    Please contact us if you were sued or had legal action taken against you  in a Marion County Township Small Claims Court and you did not either (1) live in the township at the time the action was taken or (2) sign a written contract in the township.  You may be entitled to recover up to $1,000 or more.

    Fifth Third Bank overdrafts

    Friday, October 24th, 2014

    Please contact us if you are being or have been sued in Illinois on an alleged overdraft on a Fifth Third Bank  checking account.

    Do not assume that people trying to collect debts have the right to do so

    Friday, October 24th, 2014

    Spanish speaking consumers conned out of $2 million

    The FTC has seen some truly abusive phone scams. But, in a case announced today, Centro Natural scored a hat trick. According to the FTC’s complaint, Centro Natural violated the Telemarketing Sales Rule, including the rules of the Do Not Call Registry, the FTC Act, and the Fair Debt Collection Practices Act.

    Here’s how Centro Natural conned Spanish-speaking consumers out of $2 million. The FTC’s complaint says that Centro Natural used Spanish-speaking telemarketers to call Latino consumers. Callers claimed to be court officials, government officials, or their lawyers, and told consumers they had to pay their debt of up to $9,000. But the callers offered a way to “settle” the debt: the consumer could buy a box of products costing $350-$500.

    If the consumers said no, the callers often threatened them with arrest and immigration investigations. If the consumer hung up, the caller might call back and use profane language. When consumers told the callers to stop calling, the calls kept coming. And when consumers got the boxes of unspecified stuff anyway, some consumers paid out of fear. Pushing products people didn’t want, and collecting debts they didn’t owe: that’s how Centro Natural took an estimated $2 million from Latino consumers.

    Today, the FTC announced that it temporarily shut down this scheme, and is asking a federal court to shut down the company and their abusive practices permanently.

    Guaranty Bank overdrafts

    Monday, October 20th, 2014

    Please contact us if you are being or have been sued in Illinois on an alleged overdraft on a Guaranty Bank checking account.

    Informed consent in Internet marketing transactions — FTC action

    Monday, October 20th, 2014

    At the Federal Trade Commission’s request, a U.S. district court has temporarily stopped a group of marketers in Nevada and California from conducting business using “free” trial offers and health claims that the agency charges are deceptive and illegal to pitch green coffee bean extract and another dietary supplements. The FTC is seeking to permanently stop their allegedly deceptive conduct.

    This is the first FTC action alleging violations of the Restore Online Shoppers’ Confidence Act (ROSCA), which prohibits marketers from charging consumers in an Internet transaction, unless the marketer has clearly disclosed all material terms of the transaction and obtained the consumers’ express informed consent.

    “The defendants behind Simple Pure used nearly every trick in the book to deceive consumers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “They not only deceived consumers about the effectiveness of their products, but also repeatedly debited consumers’ accounts without their approval.”

    According to the FTC’s complaint, Health Formulas, LLC, its related entities, and principals (Simple Pure) use telemarketing, the Internet, print, radio, and television advertisements to pitch a variety of dietary supplements and other weight-loss, virility, muscle-building, or skin cream products. Examples of Simple Pure’s advertising claims include: 1) “Burn fat without diet or exercise”; 2) “Shed pounds fast!” and 3) “Extreme weight loss!”  The FTC alleges that the defendants have no basis for the weight-loss claims they make about their products.

    In addition, the defendants allegedly trick consumers into disclosing their credit and debit card information, and then enroll them without authorization in a negative option program in which defendants continually charge consumers’ accounts. The charge for Simple Pure’s weight-loss supplements, with names like Pure Green Coffee Bean Plus and RKG Extreme, typically ranges from $60 to $210 per month. Some consumers were sold additional products that cost between $7.95 and $60.

    The FTC charges that the defendants failed to provide the disclosures required for a negative-option program, failed to provide a way for consumers to stop the automatic charges, and also failed to disclose material facts about their refund and cancellation policy.

    The complaint charges the defendants with violating the FTC Act, the ROSCA, and the Commission’s Telemarketing Sales Rule (TSR). It also charges the defendants with violating the TSR’s Do Not Call provisions by calling consumers who had asked them to stop calling. Finally, the complaint charges the defendants with violating the Electronic Funds Transfer Act by debiting consumers’ accounts on a recurring basis without their prior written authorization.

    Defendants in the case include: 1) Health Formulas, LLC, also doing business as (d/b/a) Simple Pure Nutrition; 2) Pure Vitamins, LLC; 3) Longhorn Marketing, LLC also d/b/a Men’s Health Formulas, LLC, Life Vitamins, and Unleash the Thunder; 4) Method Direct, LLC, also d/b/a Extamax, LLC, Vitaman Labs, Inc., Vitafit, and Playboy Offer/DVD Entertainment; 5) Weight Loss Dojo, LLC, also d/b/a Fitness DVDs; 6) VIP Savings, LLC, also d/b/a VIP Saving Center; 7) DJD Distribution, LLC; 8) MDCC, LLC, also d/b/a Method Direct Calling Center; 9) Chapnick, Smukler & Chapnick, Inc.; and 10) Brandon Chapnick, Keith Smukler, Danelle Miller (also known as Danelle Folta and Danelle Kenealy), and Jason Miller, individually and as members of the corporate defendants.

    CGR Services

    Sunday, October 19th, 2014

    Please contact us if you are being sued by CGR Services.

    Attorney’s fees on Chicago eviction / rent cases

    Tuesday, October 14th, 2014

    Please contact us if you have been asked to pay attorney’s fees in connection with the settlement of an eviction/ rent case based on residential property within the City of Chicago.

    Fraudulent collection calls

    Monday, October 6th, 2014

      • Madigan’s office warns of phone scam

    • By The Associated Press 
      Posted Oct. 5, 2014 @ 2:21 pm 

      CHICAGO — The Illinois attorney general’s office is asking residents to be on the lookout for a phone scam in which callers posing as government officials attempt to get people to send money by claiming they are under criminal investigation or owe unpaid taxes to the Internal Revenue Service.

      Attorney General Lisa Madigan’s office issued a news release on the scam in late August, but now the office says it has seen an uptick in the number of calls in the last few weeks. The callers sometimes tell the people who answer the phone they should act quickly to avoid being arrested or have their bank accounts frozen.

      Often the scam artists “spoof” caller ID devices into showing they’re calling from government agencies or from the Washington, D.C., area code of 202.

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