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home | Legal Issues
Legal Issues
Legal Issues in Collections

The laws governing collections are complicated. Here at, we translate complex legal issues into plain ENGLISH.

Here's what you need to know about bankruptcies, preferences, personal and corporate guarantees, creditor's committees, security interests, reclamation letters, proofs of claims, and the effects of mass tort claims upon your customers.

Creditors' Liability for Agency Violations
This legal case study looks at a situation in which a college student's defaults on her debt. The college refers her account to a collection agency, and she sues based on violations of the Fair Debt Collection Practices Act. Does she have a case? Did the collge do anything wrong? Read on for the answers and analysis! . . . keep reading
Did This Requirment to Purchase this Vendor's "Single Interest" Insurance Constitute a Truth-in-Lending (TILA) Violation?
Randolph, an Alabama resident, bought a mobile home that was financed by Green Tree Financial. The finance agreement contained a standard arbitration clause, requiring the consumer to arbitrate any and all disputes arising out of the arrangement. Nonetheless, Randolph brought a class action against Green Tree in federal court for requiring her and other consumer/debtors to obtain "vendor's single interest" insurance (which protects a vendor or lien holder against the costs of repossession in the event of default) without setting forth this requirement in its Truth in Lending Act disclosure. . . . keep reading
Case Study: Is This Raising of Credit Card Rates a Truth in Lending ACT (TILA) Violation?
Solicitation materials for a bank's credit card promised a "fixed" 7.99% interest rate, and stated that the rate was "not an introductory rate." However, the disclosures that accompanied the solicitation, as well as the credit card agreement that the plaintiff executed after her application had been received and approved, both made it perfectly clear that the terms of the credit card, including the interest rate, could be changed "at any time." . . . keep reading
Are Both the Employer and the Employee Resonsible For This Improper Ordering of a Consumer Credit Report?
As finance manager of Hoffman of Simsbury, an auto dealership, Mark Strauss was authorized to obtain credit reports on prospective purchasers of cars. On July 3, 1995, he requested and obtained a credit report from a consumer credit agency on Debra Northrop, although she had no business dealings with Hoffman that would have provided Strauss with a legitimate reason to obtain her credit report. This legal case study looks at what happened to Northrop as a result of the pulling of her credit report, and whether Strauss and his auto dealership got themselves in a jam as a result of their actions. . . . keep reading
Unsecured Loan
This case study looks at situation in which a lender made a secured loan to an individual that contained a clear and strongly worded privacy clause. When the loan went south, the undertook aggressive collection actions, and the borrower sued based on damages and an invasion of privacy. Did he have a case? . . . keep reading
Legal Case Study: The Case of the Collection Letter That Might Have Missrepresented the Agency. Or Did It?
Lori Pettit received a collection letter from Retrieval Masters Creditors Bureau, Incorporated ("RMCB") dunning her for an outstanding debt. The letterhead prominently displayed at the top the entire . . . keep reading
Is This a Violation of Regulation Z of the Truth in Lending Act?
This legal case study looks at a situation where a fan purchased at a store did not work, so the purchaser did not pay for it. The store promised to fix it, but never did. A year later, the store demanded payment, including late fees, and notified credit bureaus of the account's status. The customer sued based on a violation of Regulation Z of the Truth in Lending Act (TILA). This looks at what happened and why. . . . keep reading
Small Claims Court--A Do-It-Yourself Guide
You've heard all the promises. You've offered workable solutions. You've given all the proper warnings and issued all the proper Fair Debt Collection Practices information. Still, you haven't been paid and your patience is at its end. What's your next step? If the amount owed falls within your state's guidelines, you could take the debtor to small claims court. Here's a complete run-down of what goes on in small claims court and how you can do it yourself without hiring a lawyer... . . . keep reading
Case Study: Do These Gambling Losses and Resultant Bad Debt Add up to Fraud?
This legal case study explores a situation in which a consumer declares bankruptcy in part because of gambling losses. Her losses included $12,000 in advances for gambling on her credit card, so the credit card company charged fraud. What do you think happened and why? . . . keep reading
Credit Reporting and Bankruptcy: Is Your Post-Discharge Credit Reporting Inviting Trouble?
November 15, 2010, By Diane P. Furr & Lisa Sumner
Credit Reporting and Bankruptcy: Is Your Post-Discharge Credit Reporting Inviting Trouble? In difficult economic times, debtors' attorneys closely review credit reports looking for potential legal claims against creditors. Long after a debtor has been discharged from bankruptcy, creditors can find themselves defending claims of improper credit reporting. A recent case from the Eastern District of North Carolina illustrates the trouble facing creditors who furnish incorrect reports of discharged debt. See In re Adams (Bankr. E.D.N.C. 2010). . . . keep reading
Legal Case Study: Debtor Sues Based on Deceptive Letter from In-house Collection Arm. Is that A FDCPA Violation?
This legal case study explores a situation in which a retail credit card holder fell behind on her payments. This retailer's accounts were operated by Citicorp, which sent the debtor various dunning notices. When she failed to pay, she received a letter from "Debtor Assistance," which stated that "your account has recently [been] charged off" and which offered her a manageable repayment schedule. At the time of this case, Debtor Assistance was actually a unit of Citicorp that handles accounts that have been written off but not yet assigned to collection agencies. The debtor never paid and ended up filing for bankruptcy protection. She eventually sued Citicorp for violation of the Fair Debt Collection Practices Act (FDCPA), based on the letter from Debtor Assistance.

Think she had a case? Read on for the answer and our analysis! . . .
keep reading
Legal Case Study: Does Co-Mingling Two Purchases Negate This PMSI?
This legal case study explores a situation in which a creditor plans to use its purchase money security interest on two purchases made by a creditor. But the creditor believes the PMSI is invalid because he made two purchases and they were mingled together. What's the answer and why? Read on to find out! . . . keep reading
Case Study: Is This Law Firm in Violation of the Fair Debt Collection Practices Act Because of the Way it is Mass Producing Collection Letters?
This case study examines a situation in which a debtor complains that letters he's received from a collection law firm are in violation of the FDCPA because the signature of the partner at the bottom were generated automatically, and not signed personally. He also took issue with some of the language in the letters. Read on to see if he has a case! . . . keep reading
Does This Action By An Agency Fall Under The FDCPA?
Betty Clark was "flabbergasted," as she put it, when the store called to tell her that her check had bounced. Why, she'd never had such a thing happen before. Would she come right down with the cash to cover the check? they wanted to know. Well, of course she would. She certainly didn't want a reputation for that. This case study examines a situation in which a debtor bounces a check, breaks a promise to make it good, then ignores collection efforts by both the store she wrote it to; and then an agency hired to follow up. she claimed their letter-writing was too aggressive and they were violating her rights under the Fair Debt Collection Practices Act, treating her like a criminal. So she sued them. Can she collect? . . . keep reading
Is This Suit - Filed in the Wrong County - a FDCPA Violation?
This legal case study examines a situation in which a creditor sued a debtor in the wrong county for a bad check. The debtor claimed he was protected from such a suit because it violated the Fair Debt Collection Practices Act. The creditor countered that he was prosecuting a fraud because of the bad check, rather than collecting the money. And further, because he did not intentionally file in the wrong county, and had procedures designed to protect against such mistakes, a suit against the creditor would be fruitless. Who's right? . . . keep reading
Force Majeure Clauses
This case study looks at the effect of a force majeure clause in a purchase order. Does a sudden war allow the customer to simply cancel a custom-made order after it's already been ordered and finished? What do force majeure clauses mean and how do they work? . . . keep reading
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