THE SALLIE MAE EMPIRE

With over $1 trillion in debt, federal student loan debt now exceeds credit card debt and over $120 billion of that student loan debt is delinquent. A January 2014 report from the National Consumer Law Center (NCLC) called “ The Sallie Mae Saga: A Government-Created, Student Debt Fueled Profit Machine,” details the extensive role Sallie Mae plays in the student loan industry. Sallie Mae was created in 1972 as a government sponsored enterprise that could use public money to purchase student loans from banks. In 2004 Sallie Mae became a private company but its connection with the U.S. government has allowed it to become very rich. In 2013 it had a net profit of $1.4 billion. But not all of that wealth came legitimately.  A Department of Education Inspector General Audit found that Sallie Mae received over $22 million in student loan subsidies between 2003 and 2006 that it should not have gotten. And Sallie Mae’s involvement in subprime private student loans with high origination and other fees also boosted its riches. According to the NCLC report, when the Obama Administration sought to switch to direct lending programs, Sallie Mae lobbied hard to keep the guaranteed student loan programs that were costing the government and students excessive amounts of money but benefiting private lenders. Although Sallie Mae lost that battle they still remain one of only four companies allowed to service the federal student loan programs.Sallie Mae also owns several of the debt management and student loan collection companies including General Revenue Corporation, Pioneer Credit Recovery and Arrow Financial Services. Photo Credit: AP Sallie Mae’s extensive role in student loan financing is coming under more scrutiny. The Department of Education says Sallie Mae has incorrectly calculated income for the income based repayment program and committed servicing errors. The NCLC report also raises concern that Sallie Mae steers student loan borrowers into forbearance programs rather than other options even though forbearances can be costly to borrowers but easy for collectors. If you have student loan problems contact us to discuss what solutions might help provide relief.

CREDIT REPORT MISTAKES

The Fair Credit Reporting Act (FCRA) prohibits credit bureaus from reporting accounts that have been placed for collection or charged off for more than seven years. The creditor (known as a "furnisher" under the FCRA) is required to tell the credit bureau the date of the first delinquency because the seven years actually begins to run 180 days following that date. After the seven years expires, the debt's "trade line" is supposed to age off the credit report. Creditors, however, sometimes improperly cause the "re-aging" of the negative trade line so that the seven year clock starts again. For example, in one recent case, Temple University failed to report a debtor's loan status to the credit bureaus until after the loan was fully repaid, nineteen years following the date of the first delinquency. Besides "re-aging" accounts, creditors may violate the FCRA if they fail to report that a consumer has disputed the information contained in a trade line. Without the notation of a dispute, the credit report is inaccurate and incomplete. Other credit report mistakes may include (a) reporting the entire balance of a mortgage as unpaid even though the loan may have been partially repaid after a sheriff's sale, (b) reporting a mortgage as delinquent even though the consumer may be current on a new modified loan, and (c) incorrectly reporting a mortgage loan modification under the federal government's Home Affordable Modification Program (HAMP). Consumers can obtain actual (and sometimes punitive) damages, costs and attorney's fees in lawsuits proving violations of the FCRA. If your credit report contains errors, contact us to discuss your options and the procedure for enforcing the FCRA.

PRO ATHLETES IMMUNE TO FINANCIAL TROUBLE? THINK AGAIN

 

Photo Credit: www.mint.com

Now that the Super Bowl is over (let's not discuss the final score), high school and college athletes everywhere are dreaming of making it big in pro sports. Contracts worth millions of dollars are possible even for athletes not selected high in any pro draft. But, just like you and me and all of our clients, money problems aren't foreign to even some of the wealthiest of pro sports players. In fact, there's some evidence to suggest these wealthy players are even more prone to financial problems then the general public. A March 2009 Sports Illustrated story reported that within two years of retirement, 78% of NFL players file bankruptcy or otherwise face severe financial problems. Within five years of retirement, nearly 60% of former NBA players are broke. There are high profile bankruptcy filings like Kenny Anderson, former NBA player who filed bankruptcy in 2005, Michael Vick, former NFL quarterback, who filed Chapter 11 bankruptcy in 2008, and Vince Young, former NFL quarterback who filed Chapter 11 bankruptcy last year (Young reportedly earned over $34 million during his career). But the problems are far more widespread. Between 1999 and 2002 at least 78 players lost more than $42 million dollars because of bad investments according to the NFL Players Association. In general, the same problems that most people who need to file bankruptcy face also strike someone making millions. The Sports Illustrated article cited divorce as one of the primary causes of pro athlete financial problems, along with trusting the wrong people. The real lesson is that the fresh start found in bankruptcy may be necessary regardless of someone's wealth and position.

NATIONAL COLLEGIATE STUDENT LOAN TRUST DISMISSES LAWSUITS

Four lawsuits against two of my clients were dismissed last month after the National Collegiate Student Loan Trust (NCSLT) was unable to prove it was entitled to collect the private student loans my clients allegedly owed. After filing motions to dismiss in each of the lawsuits I argued NCSLT had failed to prove how it was the "real party in interest" when the original loans had been with JPMorgan Chase. The judges gave NCSLT three weeks to file documents showing how it had acquired the right to sue but it wasn't able to do so. NCSLT also failed to show how the debt it was alleging was due had been calculated. If you're facing collection from NCSLT or any other private student loan collector contact us immediately to discuss your defenses.

CHAPTER 13 MORE LIKELY TO SAVE HOMES

A recent study confirms what many of us have known for some time-- filing Chapter 13 bankruptcy is one of, if not the best way to keep people in their homes. Researchers from North Carolina looked at the cases of nearly 4,300 homeowners across the country, all of whom were more than 90 days late on their 30 year fixed rate mortgages. The study said that when homeowners filed bankruptcy, sales of their home were 70% less likely to occur than for borrowers who didn't file bankruptcy. Although this was true whether or not the homeowner filed Chapter 7 or 13 bankruptcy, homeowners who filed Chapter 13 were five times more likely to avoid foreclosure sales.  The researchers found that the unique features of Chapter 13 were good tools for preserving home ownership. These features include the ability to cure defaults at 0% interest, strip liens and pay an attorney over time. Another finding from the study showed that even for borrowers who aren't successful at keeping their house, filing Chapter 13 provides benefits. According to the study, nationally the median length of time from the start of foreclosure to a sale of the house was 8 months for borrowers who didn't file bankruptcy but 16 months for those filing Chapter 7 and 26 months for those filing Chapter 13. This additional time to stay in their home provides borrowers a significant boost. If you're struggling with mortgage issues and want to consider Chapter 13 contact us to talk about what options are available.

CREDIT REPORTING REQUIREMENTS

The Fair Credit Reporting Act (FCRA) requires that when a consumer sends a dispute to a credit bureau it is supposed to forward that dispute to the creditor reporting the inaccurate or incomplete information. The credit bureau must give the creditor all relevant information related to the dispute. The creditor must then review the information and conduct an investigation into whether the report is accurate. If the creditor determines the disputed information is inaccurate it must correct the description of the account (called a "tradeline").

The Consumer Financial Protection Bureau (CFPB), the governmental watchdog over credit reporting, recently issued reminders to creditors about their obligations under the FCRA. The CFPB said it expects creditors to (1) maintain a system capable of receiving information about disputes, (2) conduct investigations using all information forwarded to them by the credit bureaus and their own information, (3) report the results of the investigation back to the credit bureau, (4) provide corrected information to all of the credit bureaus, and (5) modify, delete or permanently block incomplete or inaccurate information that a creditor might have provided to the credit bureaus. The CFPB said it is monitoring complaints from consumers and will bring enforcement actions when necessary. If your credit reports are showing inaccurate information about your debts contact us to talk about what response to take. Pursuing violations of the FCRA requires that specific steps be followed before relief can be sought in court. We can help walk you through what to do and advise whether legal action is warranted.

MODIFYING A CHAPTER 13 PLAN

Clients considering a Chapter 13 bankruptcy are often afraid they'll be stuck in a payment plan they can't afford if something changes during the plan period. As I often tell clients, life doesn't stop just because someone files Chapter 13 bankruptcy so the chances of some unforeseen circumstance disrupting their income are good. Although some clients go the entire 3-5 years without needing a plan modification, more often then not, something will happen that requires a change in the plan payment. Job loss, car repairs, home repairs, medical bills, tax debt. All of these and more might require that a plan be modified to address a borrower's new budget. To modify a plan a motion must be filed with the court explaining why the modification is needed and what the new payment plan is to be. The process for obtaining approval of a modified Chapter 13 plan generally takes at least 45 days so plan modifications can't be done quickly to reflect month-to-month changes in a borrower's budget. But if change in the plan payment is necessary, borrowers can be confident they won't have to continue making a payment they can't afford. If you're in a Chapter 13 plan currently and are anticipating some change that will make you unable to make your plan payment contact us as soon as possible so we can propose the necessary modification.