As part of our law practice, we represent consumers against creditors for illegal or abusive conduct. The West Virginia Consumer Credit and Protection Act along with the Fair Debt Collection Practices Act prohibit abusive debt collection by creditors. The term “creditor” is a broad term that basically includes any person or entity to which you owe a debt. The debt can be secured or unsecured, store credit, credit cards, bank loans, car loans, liens, or nearly any other type of debt. However, the debt must be for personal and or household goods or services. So the debt can’t arise from your commercial business debt/activities!
A large part of our practice includes educating consumers about their rights. Just because you may legally owe a debt, it does not mean that the creditor/debt collector can use illegal, draconian, oppressive, abusive, harassing, misrepresentations, extortion or downright gangster-style threatening tactics in order to squeeze money out of you. When times were normal, you may have been able to afford a credit card balance or that new toy (jewelry, ATV, boat, expensive SUV). But life happens. You may have been injured and unable to work, or like many of our friends in the coal industry, you may have been laid off due to the ridiculously imposed war on coal by the current administration. Whatever the reason, you got behind and up popped the vampires (unscrupulous debt collectors).
Let me preface this next portion by stating that many debt collectors are legitimate and adhere to the law and ethical collection of debt. However, it is undeniable that MANY do not. In fact, the entire premise that “a debt collector is available to help you” is a farce. The vampire debt collector is a unique breed. Their sole purpose is to extract payment from you by any means necessary. Their ulterior motive is to “assess” your financial condition (assets, accounts, savings, overall financial picture) to determine if they want to sue you to obtain a judgment. They ask tons of veiled questions to obtain as much information about you, your spouse, your family, and your financial situation and make notes only to use against you later, because the law requires they obtain a judgment against you in court BEFORE they can levy your accounts or put a lien on your house, land, or other property. That’s it. That is their goal. Let me say that again, the law requires a collector to first obtain a judgment in court, BEFORE, they can garnish your wages, levy your bank account, or put a lien against your house, land, or other property.
So now that you know a little bit more about the game, let’s look at a few common abuses and what your consumer rights are. Consumers have some tools to protect them from abuses if they know where to look and how to enforce them. Some frequently asked questions:
1) I lost my job a few months ago, and I can’t afford my payments now. What can I do?
(Let's start with secured loans, i.e. loans that are backed by collateral, such as cars, houses, mobile homes, ATV’s, boats, and other movable personal property with significant value.)
The most common thing we see people do before they consult with an attorney who practices consumer protection law is they take the vehicle back to the seller/dealership thinking that they can just give the property back and all will be right in the world. THIS IS A MISTAKE!
Sellers/dealers have no legal obligation to take the property back in exchange for forgiving the outstanding debt. Nowadays vehicle payments are structured with installment payments ranging from 60-72 monthly payments. Unless you put a hefty sum of money/trade-in (with equity) down at the time of purchase, the consumer will almost always be upside down on their loan agreement. Vehicles depreciate faster than you can pay them off. It varies, but by around installment payment 48, the asset should begin having more value than the remaining loan obligation, thus giving the consumer “equity.” Otherwise, you’re likely upside down.
So think twice about taking it back to the dealership. 1) they don’t have any obligation to waive the balance you owe on the loan; 2) you put yourself at the mercy of what they sell it for at “auction” and then you are responsible for the remaining balance or “deficiency” from the sell.
SO WHAT DO I DO?
Try to sell the vehicle yourself and get enough out of it to pay off the note. Otherwise, sell it for the payoff amount or slightly less and you kick in the last few thousand to the finance/lienholder in order to eliminate the obligation. If you do this, it should reflect positively on your credit report as showing the obligation was fulfilled, because it was. If you aren’t in default, try to refinance the vehicle with another creditor to lower the monthly payments to an amount you can afford. You will probably have to “downgrade” and trade-in your vehicle for a model/type that retails for less. You may be able to go “trade-in” the vehicle for a lesser vehicle that you can afford over a longer period of time. (Don’t trade for a similar high valued vehicle and just compound the balance owed on the trade-in back ON TOP into the new loan. If you do, you’re just setting yourself up for failure later with more and more debt you can’t afford. Be responsible and downgrade. If you couldn’t afford the first vehicle, you can’t afford the new one)
We think you should call us. Lots of times we are able to negotiate with the lienholder before you get too far behind and they begin repossession procedures. At any rate, before the finance company lienholder repossesses the vehicle or sues you for the balance, they are required to deliver to you (or the address they have on file that you gave them in the loan agreement) a Notice of Right To Cure letter pursuant to W.Va. Code 46A-2-106. If they haven’t provided the papers, and they repossess the collateral, then give us a call (304-245-9097) because they have acted illegally. If you move or change your address, it is always your responsibility to notify the creditor/lienholder and update your address. They are only required to deliver the Notice of Right To Cure to the address they have on file being the address you provided, so always update with a good mailing address.
2) Five (5) or more years ago I couldn’t make the payments on a vehicle so I took my vehicle back to the dealer as the loan company told me to. Now, debt collectors are calling me saying I still owe thousands of dollars. What do I do now?
A contract is a contract. You took out a loan to pay a specific amount of money, and whether or not you still have the vehicle in your possession, they want their money. (BEWARE: a creditor must take legal action against you within the statute of limitations prescribed by law or they can never sue you for the debt and collect it. So if it has been 3-4-5 years since you’ve defaulted and not made a payment, and a creditor has popped up from your past and now trying to collect, then call us immediately to discuss. P: 304-245-9097)
When you take an “upside-down” vehicle back to a dealer because you can’t afford the payments any longer, you are at the mercy of the Finance Company / Dealership applying the value they receive at the “auction” from other car wholesalers to your outstanding debt obligation. They will get about 60% of what the car is actually worth at “auction” versus if you tried to sell the vehicle yourself on the open market. The balance you still owe on the loan after they apply for the money from the sale of the vehicle at auction is called the deficiency balance. YOU STILL OWE THE DEFICIENCY BALANCE and someone will try to collect it.
The collectors start with letters and phone calls. It will seem like they generally want to help you and ask you friendly questions about your financial picture to assess how they’re going to collect against you. They typically end up giving you two options: 1) they ask you to pay off the full amount of the deficiency in one lump sum; or 2) they ask you to make payments to avoid them from taking action [initiating a lawsuit to obtain a judgment, wage garnishment, sending Sheriff to your house, filing criminal charges, etc.] against you or your family. Some of which is legal for them to do, some of it is not. Generally speaking, in order for a creditor to garnish wages, seize property they don’t have a security interest in, levy bank accounts, or involuntarily collect the debt, THE CREDITOR MUST FIRST OBTAIN A JUDGMENT FROM A LAWSUIT. I can’t restate the importance of that statement so I’ll repeat it: The Creditor Must First Obtain A Judgment From A Lawsuit Before They Can Involuntarily Garnish Wages, Levy Bank Accounts, or Seize Property.
That requires them to sue you and the judge or jury to rule in their favor and enter judgment Order against you. That process takes time and money on their part, that they can’t add on to the debt, and you should be aware of it because they certainly are. It may not make financial sense for them to spend hundreds or thousands of dollars on court fees, their own attorney fees, and months of time, just to get a judgment against you. So they will insinuate it is in your best interest to 1) pay off the lump sum, or 2) set up a payment plan.
If you can afford to set up a payment plan that is responsible and gets you out of debt in under 24 months, then we suggest you do that. Negotiate with them first though (and always in writing) to secure some benefit from the new arrangement, such as 0% interest as long as you make timely payments. There are some really great apps you can download for free that will show you exactly what interest percentages cost you on a loan. My favorite is EZ Calculators. Plugin the amount, % interest, term length, and it will show you what you’ll be paying in interest. So if you are going to try to voluntarily make payments to the debt collector prior to them filing a lawsuit, then try to get something out of it.
3) I have been sued for a debt from my past. My debt is 7 years old and the balance is 3 times as much as it was back then because interest has been added. What should I do?
This is what we call zombie debt. Give us a call at 304-245-9097. As we mentioned above, the law requires that a creditor sue you for the debt within a certain period of time, called a statute of limitations. The statute of limitations varies depending on the agreement creating the consumer debt, i.e. secured vs unsecured, the choice of law governing the credit agreement, etc. If you have been sued for a debt that is years old, you should call us to set up a FREE CONSULTATION. The law protects consumers from old, stale, zombie debt collection. If the creditor slept on their right to collect the debt, you may be able to ask the court to dismiss their case. Further, you may have a counterclaim against the creditor for engaging in abusive and illegal collection conduct. We have handled many cases involving zombie debt, and have been successful in making the creditor PAY OUR FEES instead of the debtor. Furthermore, the court may make the creditor pay statutory penalties to YOU for their bad behavior.
If you have been sued, it is extremely important that you not wait around or ignore the Plaintiff's creditor/debt collector. We have seen instances where the defendant debtor/consumer waited or ignored the court and the creditor obtained a default judgment that they would not have otherwise been entitled to. You should contact our office immediately for a free consultation. Call 304-245-9097 and let’s discuss your case.
4) I have a debt collector that keeps calling my house and they have even told me that they were going to send the police to my house to arrest me. What can I do?
Call us. This is something that we hear from time to time. You cannot be arrested for failing to pay a civil debt like a credit card, car loan, or some other loan. In fact, it is illegal for a debt collector to even imply that you can be arrested or that they are sending the police to talk to you about the debt. The debt collector is simply lying in an attempt to squeeze payment out of you, AND IT IS ILLEGAL for them to do so.
It is this kind of appalling conduct that is prohibited by federal laws like the Fair Debt Collection Practices Act and also by various state laws such as the West Virginia Consumer Credit and Protection Act. Specifically W.Va. Code 46A-2-125 states that no debt collectors shall unreasonably oppress or abuse any person in connection with the collection of or attempt to collect any claim by using profane or obscene language or language that is intended to unreasonably abuse the hearer or reader. Some other unlawful conduct:
i. calling any person more than thirty times per week; ii. engaging any person in telephone conversation more than ten times per week; iii. calling at unusual times or at times known to be inconvenient, with intent to annoy, abuse, oppress or threaten any person at the called number; iv. calling before 8 AM in the morning or after 9 PM at night;
These are just a few basic examples, but it is important to know that the debt collector cannot abuse you by calling relentlessly or by threatening to send the police to arrest you.
5) A debt collector told me that I should just pay the debt to avoid more penalties and fees, like attorney fees, collection fees, and more late fees. Can they do that?
The short answer is NO. A debt collector cannot increase the debt through incidental collection costs or attorney fees. The West Virginia Consumer Credit and Protection Act prevent a debt collector from increasing the debt by adding interest or other charges, fee or expense incidental to the principal obligation unless such interest or incidental fee, charge or expense is expressly authorized by the agreement creating or modifying the obligation AND by statute or regulation. See W.Va. Code 46A-2-128(d) This means that the contract AND the law must permit the debt collector to add the fee. The law does not permit the creditor to shift their attorney fees to the debtor increasing the amount you owe. It is illegal, and if they assert that they can, then call us at 304-245-9097.
Steven S. Wolfe, Esq.