K&S Files Class Action Against Transworld Systems, Inc. Regarding Unfair Student Loan Collection Practices
Continuing our work on behalf of consumers facing collection on time barred debt, Kakalec & Schlanger, LLP recently filed an FDCPA class action class action along in U.S. District Court, Northern District of New York, against Transworld Systems, Inc. The lawsuit, Jurs v. Transworld Systems, Inc. (17-cv-1030), is brought with co-counsel Anthony J. Pietrafesa of Syracuse, NY, and alleges that Transworld attempts to collect alleged student loan debt that is time barred (i.e. outside the statute of limitations) without providing the detailed notice required by New York’s Department of Financial Services in such scenarios, and that these collection attempts violate both the Fair Debt Collection Practices Act (FDCPA) and section 349 of New York’s General Business Law. The statutorily required notice includes, inter alia, a warning that by making a partial payment the consumer risks re-tolling the statute of limitations.
This case is the second class action our firm has filed in the past two years involving collection attempts on student loan accounts alleged to be owned by the National Collegiate Student Loan Trust. The first, Winslow v. Forster & Garbus, LLP et al (2:15-cv-02996-AYS) is pending in U.S. District Court in the Eastern District of New York.
Court Grants Preliminary Approval For Class Action Settlement in Klippel v. Portfolio Recovery Associates, LLC, et al.
We are pleased to announce that the Court has granted final approval for the class action settlement in Klippel v. Portfolio Recovery Associates, LLC, et al., an FDCPA case filed by Kakalec & Schlanger, LLP along with co-counsel Anthony Pietrafesa in U.S. District Court, Northern District of New York.
The case, which we filed in 2015, involved a claim for statutory damages based on allegedly false information relating to state court venue that was provided by P.R.A. in state court summonses filed in certain collection actions.
As we previously reported, the settlement class numbers just over 200 New York consumers, each of whom will receive $250 under the Court-approved settlement. The named plaintiff will receive a total of $3,500 ($1000 in FDCPA damages and $2500 as a service payment for his efforts on behalf of the class). The settlement also provides for attorney’s fees and costs.
For more information regarding the settlement, go to www.klippelfdcpasettlement.com
Kakalec & Schlanger represents plaintiffs in re Midland Funding, LLC Interest Rate Litigation, a case that addresses attempts by one of the nation’s largest debt collectors to collect interest in excess of New York’s criminal usury limit of 25% from approximately 50,000 New Yorkers. The case originally made news in 2015, when the Second Circuit found that the National Bank Act’s preemption of New York’s usury statutes did not apply. Click here to read the Second Circuit’s decision.
More recently, on February 27, 2017, the District Court issued a detailed Opinion & Order, holding that (1) New York’s criminal usury limit applied to defaulted debts and (2) choice of law clauses that select the law of a state without any usury limit violate New York’s fundamental public policy and are therefore unenforceable under New York law. The Court granted class certification and permitted Plaintiff’s claims under the Fair Debt Collection Practices Act and New York General Business Law 349 to proceed. Click here to read the District Court’s Opinion and Order regarding summary judgment and class certification.
For understandable reasons, many consumer and business debtors that come to us with collection issues are focused overwhelmingly on the monetary terms of any potential settlement with the creditor or debt collector. Particularly for those pressed for cash, there are hard-to-ignore bottom line issues such as: Will they have to pay? How much? Lump sum or over time?
Without detracting from the obvious importance of these questions, it is important to note that the non-money terms can often be critical and failure to adequately address non-money terms can leave the debtor at a severe disadvantage.
Here are just a few examples:
Example #1: Where a judgment has been taken against the client, the creditor typically does not care whether payment results in vacatur and dismissal vs. satisfaction of judgment. But the difference can be hugely important to the consumer in terms of credit reporting. Vacatur and dismissal cleans up the person’s credit, removing the judgment from the public record that is reflected in the credit report. Satisfaction of judgment, in contrast, memorializes the lawsuit as one in which the consumer was sued for non-payment, lost the suit and then paid the judgment. There is typically no reason not to condition settlement with the creditor on the parties entering into a stipulation of vacatur and dismissal.
Example #2: Where appropriate, does the settlement agreement characterize the debt as disputed and/or specifically address the fact that this is not a case of “forgiveness of debt”? Creditors are big on boilerplate and that boilerplate is rarely if ever favorable to the consumer. Where the debt is legitimately disputed, there is no reason (in fact, every reason not to) agree to boilerplate language that has the defendant acknowledging indebtedness and/or that characterizes a reduction or elimination of the purported balance as “forgiveness of debt”. By leaving this language in, the defendant/alleged debtor is virtually assuring that he or she will be issued a 1099-MISC characterizing the reduction in principle as income on which taxes are to be paid while simultaneously limiting his or her ability to effectively challenge that characterization. It is an avoidable and common mistake. (The appropriate alternative language will, of course, depend on the facts of the case.)
Example #3: Does the settlement provide for a reasonable “right to cure” procedure? It seems basic, but many standard creditor agreements contain no or only very limited right to cure language. The result is that the debtor can find themselves arguably in breach and owing the full amount originally sought based upon a purported one-day delay in payment. One common trap is to provide for a very short cure window plus notification by USPS regular mail. By the time the notice arrives, the window to fix any alleged deficiency may have closed! Our practice is to insist on at least 7 days, with notice by multiple, fast communication channels (e.g. fax plus email) and notice to both the debtor and his or her attorney. That way, we and our clients have a meaningfully window to address any purported delay in payment without adverse consequence.
I could keep going (and don’t even get me started with regard to overly broad confidentiality provisions), but you get the idea: to paraphrase the old Smokey The Bear public service announcements: Only You Can Stop Anti-Debtor Boilerplate.