California Debt Blog

Stolen Credit Card Numbers Sell for $1.50

You may be surprised to learn that your credit card information, which many of us go to great lengths to protect, is worth only about $1.50 on the black market.

A Washington Post reporter recently shopped for stolen credit and debit cards online. He found a variety of sites to choose from. He opened an account at one of the sites and found that U.S. card numbers are for sale for $1.50, and U.K. resident account information sold for $4. In addition to purchasing the card numbers, the site the reporter visited allowed extra cardholder information to be purchased, such as the cardholder’s mother’s maiden name and the cardholder’s date of birth. Most of the card information is obtained through malware that steals data from computers infected with a virus.

However, the reporter was surprised to find that if he wanted to use the website’s search tools, he was nailed for extra convenience fees. In order to buy a credit card number that was stolen from a certain city, it would cost an extra 60 cents. Apparently, the company that sells stolen information believes in nickel and diming the online would-be thieves.

You may be wondering if you can use data from a stolen credit card to purchase more stolen credit card data. No, payment on that particular website can only be made using LibertyReserve or Webmoney, which are popular in the underground.

Former Debt Collector Ran Collection Business from Prison

If you believe that most professional debt collectors are honest, hardworking, salt of the earth type people, this story may change your mind.

Lamont Cooper, age 38 and from New York, owned a business called Legal Action Recovery, which was a professional debt collection firm. In April 2009, a court found that his company used intimidation tactics to scare its victims into paying debts, some of which they didn’t even owe, were discharged in bankruptcy or had already passed the statute of limitations. The collectors threatened to send the alleged debtors to prison for failure to pay, sometimes going so far as to pose as law enforcement officers.

Many individuals sent the firm money – between May and August 2009, deposits of $1.38 million were made into accounts which were connected to the debt collection company. These deposits are believed to be from payments from victims of the company.

In 1997 Cooper, the owner of the company, pleaded guilty to drug charges. He was later paroled. In October 2009, he violated the terms of his parole and was sentenced to 14 months, to be served at the Batavia Detention Facility in New York.

While he was in prison, he allegedly continued to operate his debt collection firm. Surveillance showed that during his time in prison, Cooper was still corresponding with his employees, telling them how to manage accounts and personnel issues, and he also requested that he be kept apprised of all banking activities. The New York Attorney General’s Office has filed charges against Cooper for continuing to operate the firm. He will be arraigned on the charges once he’s released from federal custody.

Pressure to Pay Others’ Debts a Growing Problem

A new problem with debt collectors has been emerging in recent years – debt collectors who pursue the wrong people in order to collect a debt owed by someone else. Some collectors even know that they are pursuing the wrong person, but are hoping the individual will cave and pay the debt because of the fear of a bad debt appearing on his or her credit report.

 

This story highlights the problem, which is sometimes called debt tagging. Debt tagging often occurs when the debt collector pursues the wrong individual, who happens to have the same name as the debtor. Recently, Credit Bureau Collection Services paid over $1 million to the FTC in order to settle charges that it violated federal law by reporting incorrect credit information and by pressuring individuals to pay debts they did not owe. In 2010 alone, the FTC reported almost 120,000 complaints about debt collectors.

 

Many errors with debt collectors occur when the debtors have changed phone numbers or moved. Frequently, debt collectors purchase bad debts for pennies on the dollar, and the original creditors don’t always give the buyers a lot of information about the debtors. 

 

So what should you do if you are being pursued for a debt you don’t owe? First check your credit report to make sure there are no errors on the report. If there are, dispute the report with the credit reporting agency, and it should be corrected. If a debt collector is hounding you for a debt you don’t owe, write the collector a letter explaining that the collector is contacting the wrong person. If it doesn’t stop, consult an attorney.

 

Debtors Fighting Back Against Collectors in Court

Recently, I wrote about the flood of lawsuits from creditors seeking payment on debts, often with little or no proof that the debt is even owed.

 

The other side of the coin, highlighted by this article, shows that debtors are increasingly fighting back against collectors under the Fair Debt Collection Practices Act. The FDCPA prohibits collectors from making threats against, harassing, and using obscenities against debtors, among other things. The FDCPA provides fines of up to $1,000 per lawsuit and requires collectors to pay debtors’ attorneys’ fees.

 

Although collectors usually win lawsuits when they sue debtors for the debt, debtors are now winning multitudes of cases when they fight back against the collectors’ tactics. In the past 10 years, federal lawsuits by debtors against collectors have increased 700 percent. About 30 percent of debtors who sue a collector will sue again at some point, and at least 80 debtors have sued collectors more than 10 times. Collectors often settle quickly when debtors sue.

 

In fact, lawsuits against collectors have increased so much that one Minnesota attorney has begun holding boot camps at which he trains other attorneys on how to sue debt collectors on behalf of debtors. This recent flood of lawsuits has prompted collectors to complain that the suits debtors are filing against them are very light on details of the FDCPA violations, which is very similar to the complaints debtors have about creditors filing suits against them with little or no substantiation of the debt.

Courts Overwhelmed by Number of Automated Debt Collection Lawsuits

Since the recession began, increasing numbers of Americans are becoming unable to pay their debts. As a result, debt collection lawsuits are now overwhelming the court system.

 

As the New York Times reported, many debt collection law firms are now using software programs to help prepare the cases with little or no oversight by an attorney. One law firm in New York has been filing around 80,000 lawsuits a year, although it has only 14 attorneys on staff.

 

The way the debt collection process typically begins in this situation is debt buyers purchase overdue debts from credit card companies, often for pennies on the dollar. In past years, the debt buyers would then try to collect the debt with phone calls or letters. However, now many of them are choosing to sue. Debt buyers will send a debt collection law firm a database that contains information about delinquent borrowers. The law firm will run the database through a software program, which will generate collection letters and lawsuits automatically. Many of the consumers who are sued do not show up in court or have an attorney and a default judgment is entered against the consumer.

 

Critics of the system claim that the lawsuits are sometimes based solely on a debtor’s name, address and balance of money owed. Sometimes the lawsuits are filed against the wrong people, or the debt collector has no proof of the debt that is owed. In fact, some judges are beginning to challenge debt collection attorneys who do not have documentation proving that the debt is owed.

Hotels are Frequent Targets of Credit Card Hackers

A recently released study found that a whopping 38 percent of all credit card hacking cases in 2009 involved the hotel industry.

 

Hackers are believed to steal credit card information from hotels because many of them lack sufficient data security. Many hotels have systems which vary in sophistication level from one hotel to the next, even if the hotels are part of the same chain. Most of the security problems start with the credit card swiping systems. The industry has been struggling during the economic recession, and many hotel owners cut spending, including on security upgrades, which includes software, hardware, firewalls and ecryption programs.

 

Recently, both Destination Hotels and resorts, a luxury U.S. hotel chain, had 700 of its customers’ credit card numbers hacked. Wyndham Hotels also had hackers steal credit card information from as many as 31 of its hotels in a three month period.

 

Credit card companies have been urging hotels to adopt uniform security standards to guard against hacking. Credit card companies are typically the ones ultimately stuck with the charges.

 

In order to keep their information safe, travelers should check charges frequently after business trips. Frequent travelers who may not see printed statements monthly should check their charges online.

Debt Collectors’ Claims Beginning to Cause Doubt Among New York Judges

According to this New York Times article, during the current recession, debt collectors in New York have begun to file suits against debtors in record numbers – and often, this occurs without sufficient evidence that the collectors have the right person or the debtor owes the debt. Finally, judges in New York are beginning to strike back at abusive practices by collectors.

 

Some of the recent egregious collection cases New York courts have dealt with include:

 

• A debt collection company sued the wrong person, but pursued the case anyway. A Manhattan judge threw the case out.

 

• In a case against a Long Island woman, she discovered that she had been sued, and a process server claimed it served her in 2004 at an address she hadn’t lived at since 1998. A Nassau County judge said a debt collection firm that obtained the judgment did not provide “a scintilla of evidence” she even owed the debt.

 

• A Brooklyn judge reprimanded an attorney who claimed she remembered mailing a document to a credit card holder, despite the fact the document had been mailed three and a half years earlier. The document formed the basis of the collection lawsuit.

 

• A Staten Island judge noted that a credit card company was claiming 28 percent on a balance due, which is illegal under New York law. The company argued that the card was issued by a bank in Utah, which has no usury law. The judge ruled the agreement was not enforceable in New York.

 

Part of the problem in New York stems from businesses that purchase debts, with lists of names of debtors and amounts due, for pennies on the dollar from credit card companies. They often have no evidence about the debtors. The businesses then filed thousands of lawsuits without evidence to back up their claims.

FAQ: What is a debt collector forbidden from doing?

Question: I think my debt collector is harassing me. What is the debt collector legally forbidden from doing to collect the debt?

 

Answer:  The Federal Trade Commission publishes a guide for consumers that details exactly what debt collectors can and cannot do under the Fair Debt Collection Practices Act (FDCPA) when they are attempting to collect the debt. The FDCPA applies to most consumer debts except those incurred in running a business.

 

Collectors may not:

• contact you at inconvenient times or places (such as early in the morning or late at night);
• harass you with threats of harm or obscene language;
• lie to you, such as about the amount you owe;
• tell you you’ll go to jail if you don’t pay;
• tack on extra interest that is not allowed under law;
• contact you at work if you’ve told them not to;debt co
• discuss your debt with anyone other than you, your spouse, or your attorney;

 

If a debt collector has violated the law, you can sue the collector in state or federal court within one year of the alleged violation. You can be compensated for any damages the debt collector’s actions caused, and you can also be awarded court costs, attorney’s fees, and $1,000.

And remember that California's Rosenthal Act applies many of these same rules to the original creditor.

Supreme Court Ruling Helps Protect Consumers from Debt Collectors

On April 21 the U.S. Supreme Court issued a ruling in favor of debtors who are subject to abuses at the hands of debt collectors.

 

In Jerman v. Carlisle, the Court ruled that if a debt collector makes an incorrect statement of law during communications with a debtor, in violation of the Fair Debt Collection Practices Act (FDCPA), the debt collector cannot claim they merely misinterpreted the FDCPA in order to shield themselves from a lawsuit. The Court reasoned that ignorance of the law is no excuse when it comes to unfair debt collection tactics.

 

The case arose when Carlisle, a Cleveland law firm, filed a foreclosure action on behalf of Countrywide against Karen Jerman. However, Jerman had already paid off the mortgage on her home. When Jerman protested, an attorney for Carlisle told her that she must dispute the debt in writing, which is not true. Carlisle admitted the mistake but claimed it should not be liable for legal mistakes. The Court disagreed.

 

This ruling is a win for debtors who have been subject to abuses by the debt collection industry. The case should result in fewer debt collector misstatements of the law, since they can’t claim those incorrect statements were merely a mistake.

FAQ: Credit Checks by Prospective Employers

Can a Potential Employer Run a Credit Check on Me? In California, yes.

 

A bill went through the California Legislature last year that would have prohibited employers from running credit checks on perspective employees, but it was vetoed by Governor Schwarzenegger.

 

However, a potential employer must have the written authorization of the potential employee before running a credit check. In addition, if the employer decides not to hire the applicant after running the credit check, the employer must give the applicant the name and contact information of the company that prepared the report, as well as a copy of the report. The applicant can then dispute the completeness or accuracy of the report.

 

Lawmakers in 16 states have proposed banning most credit checks on potential employees, claiming the practice traps people in debt because it gives those with past financial problems a tough time in finding work. Hawaii and Washington currently have laws in place that prevent employers from running credit checks when hiring for most positions, unless the information is relevant to the job.

 

Employers who use credit checks as a hiring tool claim they help make better hiring decisions. A 2008 survey by the Association of Certified Fraud Examiners found that the two most common red flags for employees who commit workplace fraud are living beyond their means and having trouble meeting financial obligations.