Being Harassed by Student Loan Collectors? How to Fight Back!

By Laura Whitley

Falling behind on any bill can cause concern, however defaulting on student loans can be especially frustrating.  Aside from damaging credit scores,  defaulting on student loans can carry long term and  painful financial consequences like wage garnishments.  Filing for bankruptcy can provide consumers temporary relief from student loan debt collections.  However, student loan debt can not be discharged in a bankruptcy and consumers should seek the advice of a licensed attorney.

Certain collection agencies specialize in collections for government student loans.  Private lenders often hire them as well, for a list click here.  At times, some agencies my engage in unethical or abusive tactics.  Those abuses can violate state and federal fair debt collection laws.  Federal and state laws offer protections to consumers from abusive and fraudulent collection practices.  In Texas collection agencies must follow the Texas Debt Collection Act.

Consumers who think a collection agency is violating their rights should contact the loan holder, guaranty agency or Department of Education and complain in writing. Those complaints are taken seriously.

There are a few ways student loan borrowers with government backed loans can complain to the Department of Education.

How to Complain:

A. Document every contact with collection agency noting, date, time, actions
B. Keep copies of all complaints filed
C. File complaints with 3 different agencies

1. the collection agency
2. the Office of Inspector General - Online Complaint Form
3. the Department of Education

-Send a letter and any evidence to
U.S. Department of Education
61 Forsyth St., SW 19T89
Atlanta, GA 30303

4. Contact the Department of Education's Default Resolution Group to be connected with the Special Assistance Unit
1-800-621-3115

In May 2012 the National Consumer Law Center, released a comprehensive report detailing problems with complaint systems in the student loan collection agency industry.

Bankruptcy Filings Take a Tumble

Fewer South Texas consumers and businesses are filing for bankruptcy this year, with dramatic drops recorded in September according to the U.S. Bankruptcy Court Western District of Texas.

Much of the decline can be traced to a sharp drop in Chapter 13 filings. Just 146 consumers filed for Chapter 13 bankruptcy protection last month. Chapter 13 geneally allows consumers to restructure their debt into a payment plan over 3 to 5 years.

The other type of bankruptcy most often used by consumer Chapter 7, otherwise known as liquidation bankruptcy, is down as well for 2012. You can read more in the San Antonio Express News. 

For more information the types of bankruptcy and protection availiable from creditors visit www.bankruptcyattorneytx.com

States May Loose Control Over Pay Day Lenders

By Laura Whitley 

Regulation of pay day lenders vary from state to state. However a federal backdoor, may give the short term lenders a way to escape state regulations by obtaining federal charters.  The proposal is know as H.R. 6139: Consumer Credit Access, Innovation, and Modernization Act.   The legislation, sponsored by Rep. Blaine Luetkemeyer (R-Mo), would allow pay day lenders to be chartered by Comptroller of the Currency to operate.   This means even states laws that strictly limit loan amounts, their length and fees short term lenders can charge, consumers could loose their power. 

Attorney Generals in 40 states, including Illinois believe the proposal would undermine consumer safeguards.  In a joint letter to congressional leaders, they warned of the harm the federal law could cause.

“The legislation is nothing more than a shameless attempt by the payday lending industry to do an end run around states’ decades’ long battle to protect low-income families from becoming trapped in a downward spiral of debt,” Illinois Attorney General Lisa Madigan said.

Texas Attorney General Greg Abbott did not sign on to the letter. Which likely comes as little surprise to consumer advocates who have criticized Texas law makers for years for failing to enact meaningful short-term loan consumer protections.  The Texas Fair Lending Alliance, a coalition of organization and individuals, recently formed to end abusive payday and auto title loan outfits in Texas. Currently the organization is promoting it's 500% Interest Is Wrong Campaign.

Still advocates of H.R. 6139 call it a “solution” to a patchwork of laws across the country.

“The demand for affordable credit is significant and growing while available credit alternatives are shrinking,” testified Mary Jackson, before a senate committee hearing in July.  Jackson is a tenured employee of Cash America International, 

What pay day lenders and consumers consider “affordable credit” may be very different things.

“Once I took out the first loan, it felt like I was forced to take another to pay off the first and then another and then another,” said one former short term loan borrower.

Annual percentage rates topping 1000%, lengthy loan terms, and high renewal fees hallmark some of industry tactics some state laws are designed to stop.  According to the Texas Fair Lending Alliance, in Texas the average payday borrower pays $840 for a $300 loan.

“The bill threatens to turn back these protections by giving these non-bank lenders the ability to obtain a federal charter that would allow them to sidestep more stringent state laws,” the letter from attorneys general said.

The backers of the federal proposal say consumers need more options.  The legislation does include usury limits and civil penalties. 

If you or someone you know is facing difficulty paying off payday, short term loans, or other debt call The Law Office of Gerald C. Moton today 210-841-5728 or www.bankruptcyattorneytx.com

500% APR Not In Our Town: Say Some Local Texas Government Leaders

By Laura Whitley

               The cycle of debt served up by payday and auto title lenders to thousands of Texans is getting the attention of some local Texas government leaders.  A coalition of consumer advocates, hope their efforts rope in some of wild rates in the state known as the “wild west” of short term lending.

“These loans are defective products that unfairly target working families, military families, and seniors,” said Rebecca Lightsey, Executive Director of Texas Appleseed.

Texas Appleseed is one of a wide collation of consumer advocates crisscrossing the big state, looking to reel in the big fish… loan sharks that prey on the state’s working poor. Known as the Texas Fair Lending Alliance, members of the group are visiting with local government leaders in Texas cities pushing for reform.  An effort that appears to be paying off, in San Antonio the city council gave the city attorney the green light to draft an ordinance to limit lenders.  Houston’s city comptroller, Ronald Green was quoted by the Houston Chronicle as saying an ordinance is, “..clearly on the table.” Meanwhile reforms in Dallas and Houston have already been approved.

Reforms would include:

1.        Payday loans limited to 20% of a borrower's gross monthly income

2.        Auto title loans limited to either 3 percent of the borrower's gross annual income or 70% of the vehicle's value

3.        Each loan would have only 4 installments and each rollover would reduce principal by 25%

These efforts are characterized as long overdue by the majority of respondents to a recent poll released by Texas Appleseed.  Texas lawmakers yet again caved to the loan shark-esque industry’s $3.9 million dollar lobby and failed to protect consumers during the last legislative session.

A new poll commissioned by Texas Fair Lending Alliance found 75% of respondents support changing Texas law to cap the interest rates and fees that payday and title loan businesses can charge customers.

If you know someone who is struggling with pay day loans and other debt, there is help. Visit www.bankruptcyattorneytx.com