A Florida woman has sued an auto loan financing company for reportedly using Facebook to launch a debt collection campaign designed to embarrass and intimidate her into paying her debt.

When Melanie Beacham alerted her auto finance company, Mark One Financial, that a pay cut at work, coupled with a medical leave of absence, would likely make her fall behind on her monthly $362 car payments, the company offered to defer her payments temporarily as a stop-gap debt relief plan.

Initially, “I was able to make the car payment.,” Beacham told WKMG TV in Orlando. “My dad was helping me with the car payment, but I couldn’t keep putting that stress and pressure on him” (“Company Sued for Collecting Debt on Facebook,” WKMG TV, Sept. 20, 2010).

Two months later, after Beacham fell behind on her payments, Mark One representatives began calling her as often as 20 times a day and used Facebook to contact her, her cousin, and her sister, according to Beacham’s court filings.

Mark One allegedly used the pseudonym “Jeff Happenstance” to send messages to Beacham’s cousin, as well as her sister, who lives in Georgia. The messages disclosed Beacham’s financial situation and asked the recipients to have Beacham call a number, which led back to a debt collection agent at Mark One’s offices (“Woman Sues Debt Collectors Over Alleged Facebook Harassment,” The Huffington Post, Nov. 17, 2010).

“I don’t know why they would go on Facebook and contact my family,” Beacham told WKMG.

Debt Collection Campaign ‘Psychological Warfare’

Beacham said her sister was “hysterical, asking me did I need money, were they going to take my car. She knew my car company was trying to contact her, and I said, ‘No way.’ ”

Beacham’s attorney, Billy Howard, a Tampa representative of the regional law firm Morgan & Morgan, has filed a motion to prohibit Mark One from using Facebook to contact Beacham’s family and friends, calling the practice “psychological torture.”

“The tactics we’ve seen in this case are an example of psychological warfare,” Howard said.

According to Howard, if Mark One is barred from using social networking sites to harass debtors, it will be the first injunction of its kind in U.S. history.

“The law says you can’t do anything that is considered harassing or abusive,” Howard said. “What they did clearly falls into that category.”

Bruce Newmark, Mark One’s managing director, told WKMG, “I don’t know a Jeff Happenstance,” though he did confirm that his company uses Facebook to contact clients who can’t be reached another way, which is likely not the case with Beacham, since the company was reportedly calling her up to 20 times a day.

When WKMG presented Newmark with documents suggesting Happenstance, the Facebook pseudonym, was a Mark One employee using the social networking site to track Beacham, Newmark disputed the findings, saying, “I don’t know if that’s the case. I think you’re bringing up something we didn’t have any knowledge of.”

But just in case Mark One did use Facebook to track Beacham, Newmark asserted that his company didn’t do anything illegal.

“I’m not a lawyer, but we’re convinced it’s legal,” Newmark said.

However, Howard, who has successfully sued Mark One in the past, said he is confident that a jury will find in favor of Beacham.

“Debt collectors usually have two arguments — ‘It wasn’t me’ and ‘We didn’t do anything wrong,’ ” Howard said. “The first one is not available to them, so now they are saying they didn’t do anything wrong. But we think a jury will find to the contrary.”

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A day after announcing he had resolved a complaint with a debt relief company over violations of state law regulating the amount of fees that consumers can be charged, West Virginia Attorney General Darrell McGraw announced that his office had reached settlement agreements with three debt collection agencies for operating in the state without licenses.

The three collection agencies — Trailhead Capital LLC, a debt buyer based in Chicago; Hollis Cobb Associates Inc., Trailhead’s affiliated debt collection agency in Norcross, GA; and Troy Capital LLC, a debt buyer based in Las Vegas — were investigated after complaints filed with the Attorney General’s Consumer Protection Division revealed that the companies were violating state law by collecting debts in West Virginia without licenses or surety bonds.

The companies were primarily attempting to collect charged-off credit card debt originally owed to Chase, Wells Fargo Bank, and GE Capital.

According to terms of the settlement agreement, 161 West Virginia consumers will receive $1,277,648.33 in cancelled debts and $15,337.50 in cash refunds (“Attorney General McGraw Recovers $1.25 Million From Three Unlicensed Collection Agencies,” West Virginia Attorney General’s Office press release, Nov. 9, 2010).

“Our nation suffers from an explosion of credit card debt resulting largely from companies that extended credit without due regard to consumers’ ability to repay and without clearly disclosing the terms of financing,” McGraw said in a statement.

“Rather than working with consumers to develop plans that might enable them to pay their debt over time, banks increasingly sell defaulted credit card debt for pennies on the dollar to collection agencies called debt buyers … [who] often take overly aggressive collection actions that include the filing of lawsuits — even when they have little proof of the debts they seek to collect from consumers,” McGraw explained.

McGraw pledged to continue his office’s “vigilance in ensuring that all debt buyers are licensed and bonded, as well as follow the letter of our state’s consumer protection laws.”

Residents of West Virginia who would like to file a consumer complaint or otherwise inform the Attorney General’s office about unfair or deceptive practices can call the state’s Consumer Protection Hotline at (800) 368-8808 or fill out a complaint form from the Attorney General’s website at www.wvago.gov/takeaction.cfm.

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As struggling U.S. consumers continue to deal with the aftershocks of persistent unemployment, missed bill payments, and shrinking credit, parents hit hard by the recession are asking their adult children to co-sign on loans in increasing numbers.

Although the rate of parents co-signing on loans for their adult children has ticked upwards over the past two years, from 9 percent to 11 percent, evidence points to a dramatic growth in adult children co-signing on loans for their parents.

Online car-leasing website LeaseTrader.com, for example, reported that over the past two years, the rate of adult children co-signing on loans for their parents has shot up more than 30 percent (“ ‘Son, Can You Spare a Signature?’ Kids Co-Sign for Credit-Strapped Parents,”ABC News, Nov. 12, 2010).

In its data, the company looked at parents between the ages of 40 and 55 and the children between the ages of 20 and 29 who co-signed on their parents’ loans.

According to John Sternal, vice president of marketing communications at LeaseTrader.com, credit card debt, foreclosures, and unemployment may be “forcing adults to make this decision and take this alternative approach.”

A growth in the rate of personal bankruptcies and an increase in the average age of filers may also have something to do with the trend.

Last year, 56 percent of personal bankruptcies were filed by people between the ages of 35 and 54, according to the Institute for Financial Literacy. The institute also noted that while the number of consumers between the ages of 18 and 44 declaring bankruptcy declined overall, the number of personal bankruptcies filed by those 45 and older increased slightly from 2008.

Family + Finances = Co-Signing Complications

Of course, being a co-signer comes with pitfalls, regardless of age:

• Co-signers will be held liable for the full loan amount if a borrower fails to pay.
• Debt collection agencies will go after co-signers with the same aggression they use to pursue borrowers.
• Unlike the lender, co-signers can’t repossess an automobile or house as collateral if the borrower falls behind on loan payments.
• A borrower’s failure to make timely payments will also hurt a co-signer’s credit, which can raise a co-signer’s credit card interest rates and affect the co-signer’s ability to get approved for his or her own credit card accounts, car loans, or mortgage.

One of the principal problems with co-signing is that “you usually don’t know there’s a problem until the loan is in default,” said Rick Kahler, a financial planner at Kahler Financial Group in Rapid City, S.D.“If a payment is missed, you’re one of the last to find out.”

And late payments are no small thing. A late payment “can blow someone’s credit score by 100 points,” says Sergei Lemberg, an attorney at consumer law firm Lemberg & Associates LLC in Stamford, Conn. “A single missed payment can cost you thousands of dollars.”

But perhaps the biggest issue facing family members who co-sign for a relative is that the loan can ultimately turn a familial relationship into a business relationship, which can be problematic for everyone involved.

“If you think [co-signing for a parent is] a wise thing to do, then, of course, go for it but you still must say, ‘I’m going to be just fine if I have to step in and make this good because that’s the bottom line,’ ”Kahler said.

“The bottom line is you’ve got to be ready to pay off that note.”

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The West Virginia Attorney General’s office has resolved its complaint against a debt relief company over violations of state law regulating the amount of fees that consumers can be charged in exchange for debt settlement services.

Attorney General Darrell McGraw reached a settlement agreement with Preferred Financial Solutions Inc., an Indiana-based debt relief company also known as CCR Now and Credit Card Relief Now.

West Virginia state law prohibits for-profit debt settlement companies from charging more than 2 percent of the amount of money deposited by consumers for payment to creditors.

McGraw filed a complaint against CCR Now alleging that the company charged West Virginia consumers more than the allowable 2 percent for debt settlement services. CCR Now was also charged for not being registered to do business in West Virginia.

According to the settlement agreement, CCR Now paid $175,000 to the state to compensate West Virginia consumers and agreed to finish settling debts for its current West Virginia customers at no further charge.

“My office will continue to scrutinize the debt relief industry in an effort to protect consumers who are already facing dire financial circumstances from paying excessive fees for services that may leave them in worse shape than before,” said McGraw (“Attorney General McGraw Settles With Debt Management Company for $175,000,” West Virginia Attorney General’s Office press release, Nov. 8, 2010).

“I am heartened that CCR Now has agreed to help its remaining customers in West Virginia for free. If CCR Now can settle credit card debts for less than what is owing at no further cost to the consumer, that is true relief,” he added.

Current and past customers of CCR Now are required to file a claim by Nov. 30, 2010, in order to receive a partial reimbursement of any fees they paid to the company.

Residents of West Virginia who would like to file a consumer complaint or otherwise inform the Attorney General’s office about unfair or deceptive practices can call the state’s Consumer Protection Hotline at (800) 368-8808 or fill out a complaint form from the Attorney General’s website at www.wvago.gov/takeaction.cfm.

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A week after Pennsylvania’s attorney general sued a debt collector for setting up a fake courtroom used to intimidate consumers into paying their debts, the attorney general in Texas has sued a debt collector for intimidating consumers by illegally misrepresenting itself as an official government agency.

Attorney general Greg Abbott has charged CASHMAX, an Oklahoma-based payday lending company, with fraudulent and misleading practices for sending deceptive debt collection letters to Texans while posing as the Dallas County Clerk (“Attorney General Abbott Charges Debt Collector,” Texas Attorney General’s Office press release, Nov. 5, 2010).

The letters were delivered in envelopes bearing the Dallas County Clerk’s forged signature and the official seals of both the State of Texas and Dallas County, according to the lawsuit. Inside the envelopes were official-looking letters serving as debt collection notices.

The letters referenced phony case numbers and illegally threatened criminal prosecution, including fictitious penalties of up to five years in prison and heavy fines, if recipients failed to pay.

Inserts placed in the envelopes reportedly instructed recipients to call a telephone number to resolve outstanding debts. The number belonged to CASHMAX.

Abbot’s office obtained a temporary restraining order from Dallas County District Judge Martin Lowey that prohibits owner Patrick D. “Dylan” White and his businesses — which are incorporated under the name Federal Cash Advance of Oklahoma LLC and include CASHMAX, Fed Cash, TOPCASH, and Cash Service Center — from continuing to distribute fraudulent mailings.

White told The Associated Press on Friday that he had yet to be served with the lawsuit. White also said that he believes the deceptive debt collection letters were sent by an employee who no longer works for CASHMAX (“Texas Sues Payday Lending Firm Over Deceptive Collection Letters,” KWTX-TV, Nov. 5, 2010).

Abbott is seeking fines of up to $20,000 for each violation of the Texas Deceptive Trade Practices Act and the state Finance Code.

Read the Texas attorney general’s lawsuit against CASHMAX and Federal Cash Advance:
Petition for civil penalties, injunctive relief, and temporary restraining order; State of Texas v. Federal Cash Advance of Oklahoma. Filed November 5, 2010.

Sample debt collection letter from Federal Cash Advance.

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Although the Federal Trade Commission made sweeping changes earlier this year to the federal telemarketing sales rule in order to rein in deceptive marketing and fraudulent practices by shady debt help companies that had been taking advantage of struggling consumers, the FTC last week granted an exclusive reprieve that has some debt relief firms breathing a little easier.

A prohibition in the revised telemarketing sales rule preventing companies that sell debt management, debt settlement, debt negotiation, or other debt relief services over the phone from charging consumers upfront fees has been suspended for firms that specifically provide tax debt help.

The suspension of the upfront-fee ban, which went into effect for all other debt relief companies on Oct. 27, comes after several tax debt relief companies hired a lobbying firm, the National Policy Group, to question the meaning of the prohibition and ask whether the law specifically applied to tax debt, according to a statement released by the FTC.

“During the FTC’s education and outreach efforts earlier this month, some tax debt relief companies expressed uncertainty about whether the Rule applied to them. Specifically, they questioned whether tax debts are ‘unsecured,’ which would make them subject to the Rule,” the FTC said (“FTC Issues Enforcement Policy Statement on New Debt Relief Rule,” FTC press release, Oct. 27, 2010).

Unsecured debts are debts that aren’t backed by assets or collateral — debts such as credit card accounts and student loans. Secured debts, on the other hand, such as car loans and home mortgages, are typically tied to some type of collateral that a creditor could seize or repossess if a consumer fails to pay the debt.

Tax debt relief companies are proposing that tax debts may actually be considered secured debts.

“The FTC currently is considering these concerns, and until further notice, will defer enforcing the Rule with respect to … tax debt relief services,” the FTC said.

The FTC clarified that tax debt relief companies are still subject to all other regulations of the telemarketing sale rule, as well as the FTC Act, which bans unfair and deceptive marketing practices.

Read the full amended Telemarketing Sales Rule:
Federal Trade Commission. Telemarketing Sales Rule: Final Rule. Federal Register, 16 CFR Part 310. August 10, 2010.

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The Pennsylvania attorney general’s office has filed a consumer protection lawsuit against an Erie debt collection company for deceptive practices meant to confuse, mislead, and coerce consumers, including intimidating debtors into showing up for sham “hearings” held in a fake courtroom at the company’s offices.

Attorney General Tom Corbett said that Unicredit America Inc., also identified as the “Unicredit Debt Resolution Center,” used employees dressed resembling sheriff deputies to hand-deliver phony “hearing notices” that threatened consumers with imprisonment if they failed to show up for bogus court “hearings” or “depositions” (“Erie Debt Collection Company Sued,” Pennsylvania Attorney General’s Office press release, Oct. 29, 2010).

Civil subpoenas ordered consumers to show up at the company’s “Debt Resolution Center” with vehicle registrations, bank statements, deeds, bonds, stocks, tax returns, and records of personal property, according to the lawsuit.

Debtors Deceived by Sham ‘Hearings’ Held in Fake Courtroom

Consumers who showed up at the company’s offices in response to one of the subpoenas were reportedly led into a room that had been made to look like a courtroom, complete with a raised “bench” where a fake judge dressed in black would sometimes sit; two tables and chairs arranged in front of the “bench” for attorneys and defendants; a “witness” stand; seating for spectators; and bookshelves stocked with legal books.

Consumers intimidated by Unicredit’s fake courtroom proceedings were coerced into making immediate payments, providing the company with access to bank accounts, or surrendering vehicle titles and other assets, the suit charges.

When consumers appeared at the “hearings” accompanied by a lawyer, the “proceedings” were called off and Unicredit agreed to halt collection efforts, investigators said. When consumers failed to appear, they were sent letters with additional threats of arrest.

One such letter, included in the lawsuit filing, read, “I shall have no alternative but to request from the Court of Common Pleas of Erie County to have the Sheriff attach you personally (physically take you away) for your appearance before the Judge to answer to the Court for your disobeying the Subpoena issued by the Prothonotary and lawfully served upon you. You have attempted to flout the law; therefore, you must face the consequences. See me immediately.”

The letter was apparently written by a lawyer located near Unicredit’s offices, Lawrence D’Ambrosio.

“This is an unconscionable attempt to use fake court proceedings to deceive, mislead, or frighten consumers into making payments or surrendering valuables to Unicredit without following lawful procedures for debt collection,” Corbett said.

D’Ambrosio allegedly prepared the subpoenas and other legal letters to help orchestrate the fake hearings. A second lawyer, “Attorney Logue,” referenced in court records as “Unicredit counsel,” may be involved in the scam as well.

Scope of Lawsuit Could Grow as Investigation Unfolds

It was not immediately clear how many debtors were deceived by the scam or what criminal charges might be filed. Investigators are “still working to determine the full size and scope of this scheme,” said Nils Hagen-Frederiksen, a spokesman for the attorney general’s office. (“Suit: Erie Debt Collectors Held Fake Court Hearings,” Pittsburgh Tribune-Review, Oct. 30, 2010).

“The exact role and potential liability for any individuals is something that will be determined as the case moves forward,” said Hagen-Frederiksen.

The investigation, aided by complaints from victims, was spearheaded by lawyers from a Pennsylvania nonprofit legal services group and an investigator from the state Attorney General’s Office who attended a Unicredit court “hearing” while working undercover.

So far, 370 affected consumers have been identified, but investigators want to know how far Unicredit’s deception actually reached. “We do not want to leave any potential victims out,” Hagen-Frederiksen told the Erie Times-News (“Attorney General Goes to Court to Shut Down Erie Debt Collector,” Oct. 30, 2010).

The victims, according to the Erie Times-News, typically had modest judgments entered against them by local businesses and hospitals, with the overdue accounts having been turned over to Unicredit for collection.

The attorney general’s lawsuit seeks restitution for victims and civil penalties of up to $1,000 for each violation, or up to $3,000 if the victim is age 60 or older. The lawsuit also seeks to prohibit Unicredit from conducting further debt collection or asset recovery services in Pennsylvania until complete consumer restitution and penalties have been paid.

The attorney general’s office has asked consumers with complaints or questions related to Unicredit to call the Attorney General’s Consumer Protection Hotline at (800) 441-2555 or file a complaint online.

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