Nursing home debt collection abuse

 

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Illegal nursing home debt collection abuse

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FDCPA Affirmative Defenses and Motions to Strike

 The US Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007)  and Ashcroft v. lqbal, 556 U.S. 662 (2009) to tighten the relaxed standards of “notice pleading” in federal civil action resolved a pre-existing split in the lower courts. But, the split continued after Towmby over whether to apply a “plausibility standard” to the pleading of affirmative defenses. Many district courts extended Twombly to defense pleadings, but the courts that have declined to extend the plausibility standard have gained ground and the split remains.

Federal Rules of Civil Procedure (FRCP), Rule 8(c)(1) requires a party to “affirmatively state any avoidance or affirmative defense” when responding to a pleading. The party asserting an affirmative defense generally has the burden of proof. If not appropriately and timely presented, the defense might be waived.

It is not unusual for lawyers to plead every potential affirmative defense to prevent a waiver. However, the Federal Rules of Civil Procedure do not allow this tactic or the assertion of boilerplate affirmative defenses. 

Specifically, Rule 11 of the FRCP states that a lawyer who presents to the court a “pleading, written motion, and other paper” confirms “to the best of the person’s knowledge, information, and belief, formed after an inquiry reasonable under the circumstances” that the “claims defenses and other legal contentions are warranted by existing law” and that the “factual contentions have evidentiary support after a reasonable opportunity for further investigation or discovery.”

FRCP Rule 11(b) Representations to the Court. 

By presenting to the court a pleading, written motion, or other paper—whether by signing, filing, submitting, or later advocating it—an attorney or unrepresented party certifies that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances:

(1) it is not being presented for any improper purpose, such as to harass, cause unnecessary delay, or needlessly increase the cost of litigation;

(2) the claims, defenses, and other legal contentions are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law;

(3) the factual contentions have evidentiary support or, if specifically so identified, will likely have evidentiary support after a reasonable opportunity for further investigation or discovery; and

(4) the denials of factual contentions are warranted on the evidence or, if specifically so identified, are reasonably based on belief or a lack of information.

If Rule 11 is violated, the court may sanction a lawyer. See Fed. R. Civ. P. 11(c)(1), (3).

Rule 12(f) motions to strike have been used to eliminate non-complying affirmative defenses.

FRCP Rule 12(f) provides:

“The court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter. The court may act:

(1) on its own; or

(2) on motion made by a party either before responding to the pleading or, if a response is not allowed, within 21 days after being served with the pleading.”

When a court strikes an affirmative defense, leave to amend should be freely given so long as there is no prejudice to the moving party. Wyshak v. City Nat’l Bank, 607 F.2d 824, 826 (9th Cir. 1979); see also Fed. R. Civ. P. 15(a)(2) (“The court should freely give leave [to amend] when justice so requires.”).

“The Ninth Circuit has long held that “[t]he key to determining the sufficiency of pleading an affirmative defense is whether it gives plaintiff fair notice of the defense. Wyshak, 607 F.2d at 827.

“Following the Supreme Court’s decisions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, (2007), and Ashcroft v. Iqbal, 556 U.S. 662 (2009), which announced a heightened pleading standard for complaints, the courts in this district have generally applied the Twombly/Iqbal pleading standard to affirmative defenses.”

Goobich v. Excelligence Learning Corp., 482 F. Supp. 3d 986 (N.D. Cal. 2020)

Using this standard, affirmative defenses must contain sufficient facts to state a

defense “that is plausible on its face.”

“This standard serves to weed out the boilerplate listing of affirmative defenses which is commonplace in most defendants’ pleadings where many of the defenses alleged are irrelevant to the claims asserted.”

Barnes v. AT&T Pension Benefit Plan-Nonbargained Program, 718 F. Supp. 2d 1167, 1172 (N.D. Cal. 2010)

In United States ex rel. Patzer v. Sikorsky Aircraft Corp., 382 F. Supp. 3d 860, 868 (E.D. Wis. 2019), a US District Court in Wisconsin struck boilerplate affirmative defenses that lacked a “short and plain statement of the facts and...the necessary elements of the defenses.”

The District Court was following the Seventh Circuit Court of Appeals precedent that required defendants to allege the factual basis for the defense. Heller Fin., Inc. v. Midwhey Powder Co., Inc., 883 F.2d 1286, 1294 (7th Cir. 1989).

District Court Judge Adelman struck the defendant’s affirmative defenses reluctantly, stating:

“I would like to find that the defendants have adequately pleaded their defenses. However, under Seventh Circuit precedent, affirmative defenses must be pleaded with more detail than the defendants have supplied here. Therefore, I will strike the defenses. But because the defendants could cure this pleading deficiency, I will grant them leave to amend.”

Although the Sixth Circuit Court of Appeals has not expressly followed the Seventh Circuit’s strict position on pleading affirmative defenses, Williams v. Provident Inv. Counsel, Inc., 279 F. Supp. 2d 894 (US Dist. Court, ND Ohio 2003) adopted the test found in Renalds v. S.R.G. Restaurant Group, Chicago, LLC, 119 F.Supp.2d 800, 802 (N.D.Ill.2000) (citing Heller, supra at 1294).

(1) the matter must be properly pleaded as an affirmative defense; (2) the matter must be adequately pleaded under the requirements of Federal Rules of Civil Procedure 8 and 9; and (3) the matter must withstand a Rule 12(b)(6) challenge —in other words, if it is impossible for defendants to prove a set of facts in support of the affirmative defense that would defeat the complaint, the matter must be stricken as legally insufficient.

In the case of Greenspan v. Platinum Healthcare Group, LLC., No. 2: CV-05874-JDW (E.D. Pa. March 16, 2021 Wolson, J.) the court struck Affirmative Defenses from a Federal Court Answer filed by a Defendant in a case where the defendant failed to assert any allegations or cite any facts or evidence that would give rise to a good faith basis to plead the defenses that were asserted.

The court found that Defendant's Affirmative Defenses violated Rule 11 as they were pled with conditional language ("[t]o the extent that discovery and/or investigation may reveal.") that indicated that Defendant did not have evidence to support the assertion of the defenses at the time. Rather, the court seems to indicate that it felt that boilerplate defenses had been pled in the case.

The court ended the opinion by noting that “Pleadings are not an opportunity for lawyers to throw things against the wall and see what sticks.” The court noted that Rule 11 requires lawyers to give some thought to the assertions included in pleading before they are filed.

“The assertion of prophylactic affirmative defenses is not harmless. It expands discovery in the case and makes it harder to get cases to resolution. A plaintiff's lawyer faced with a multitude of prophylactic affirmative defenses has to serve interrogatories to ferret out the factual basis for each defense.”

It's not entirely clear how useful a plaintiff's motion to strike might be.

Credit repair services

Credit Repair Organizations Act 

This Act, Title IV of the Consumer Credit Protection Act, prohibits untrue or misleading representations and requires certain affirmative disclosures in the offering or sale of "credit repair" services. The Act bars companies offering credit repair services from demanding advance payment, requires that credit repair contracts be in writing, and gives consumers certain contract cancellation rights. 

15 U.S. Code § 1679 - Findings and purposes 

 (a) Findings The Congress makes the following findings: 

 (1) Consumers have a vital interest in establishing and maintaining their credit worthiness and credit standing in order to obtain and use credit. As a result, consumers who have experienced credit problems may seek assistance from credit repair organizations which offer to improve the credit standing of such consumers. 

 (2) Certain advertising and business practices of some companies engaged in the business of credit repair services have worked a financial hardship upon consumers, particularly those of limited economic means and who are inexperienced in credit matters. 

(b) Purposes The purposes of this subchapter are— 

(1) to ensure that prospective buyers of the services of credit repair organizations are provided with the information necessary to make an informed decision regarding the purchase of such services; and 

(2) to protect the public from unfair or deceptive advertising and business practices by credit repair organizations.

In FTC v. Gill, 265 F.3d 944 (9th Cir. 2001) Circuit Judge Paez wrote:

 "It has been said that bad credit is like a "Scarlet Letter." As Americans' reliance on credit has increased, so-called "credit repair clinics" have emerged, preying on individuals desperate to improve their credit records. These organizations typically promise they can have any negative information removed permanently from any credit report ... for a fee. On September 30, 1996, Congress enacted the Credit Repair Organizations Act ("CRO Act"), 15 U.S.C. §§ 1679-1679j, to ensure that the clinics provide potential customers with the information needed to decide whether to employ the services of such an organization and "to protect the public from unfair or deceptive advertising and business practices by credit repair organizations." 15 U.S.C. § 1679(b)."

The three levels of debt collection

 There are three levels to debt collection

The foundation level is the original debt. It might be a credit card debt, a student loan, a medical debt, or any other type of consumer debt obligation. The original creditor is the credit card company, the bank that made the loan, or the hospital that provided medical services.

The next level is the debt collection agency or the debt buyer who purchased the original debt.

Finally, there are the credit reporting agencies such as Equifax, TransUnion, and Experian.

A debt collection can impact you on each of these three different levels The problems caused by a debt collection must be solved on the level where the problem arose. For example, if a debt collection is time-barred by the statute of limitations on the first level it can still legally stay on your credit report for seven years.  But, if a collection agency improperly threatens to sue on this old “zombie debt”, it is possible to go after the debt collector directly in court for a Fair Debt Collection Practices Act violation and clean up your credit report in the process.

Never underestimate the power of litigation in the hands of a wizard attorney.

FCNB Spiegel credit card - collection question

Question

I received 2 leters in the mail, both stating that a lawsuit has been filed against me by Midland Funding LLC. the first letter is from "American Mediation & Alternative Resolutions", the other from "Ferrey & Nicholas, Inc." both want to work with me to settle my case before trial. To begin with I have not been served with a summons for a lawsuit. I called the small claims court clerk and she would only say that I have not been served yet and the address she quoted was the wrong P.O. box number on the case. From what research I have found it is for a FCNB Spiegel credit card I had a few years ago. I fell on some hard times and got behind on my payments. I then was contacted by "NAFS Collections"with whom I made regular payments that were automatically deducted from my account. Then one day they called and said that I had to settle the account and they would accept $463.02 to be paid in full and I had to do it that day because it was the end of the month. I made the payment but I never recieved anything in writing saying it was paid in full. Now this. I'm not sure if just copies of checks made out to this collection agency will work to prove I paid since there is no account number on it to reference and I never got anything in writing, also is Midland Funding LLC the same as NAFS Collections and Midland Credit Management Pinnacle Financial Group. What should I do now, I have not been served and since the address is wrong the court clerk said I can go there and be served? I don't want them to go to court and not be there, I will lose for sure.

Midland Funding

My answer:

1. Spiegel Group Inc., went bankrupt in 2003 and effective June 30, 2003, the New York based Cardholder Management Service (CMS) took over tracking and collection of about 4 million credit card accounts, replacing First Consumers National Bank (FCNB), the Spiegel private label card issuer. DirectMag.com

2. American Mediation & Alternative Resolutions and Ferrey & Nicholas, Inc. are each debt settlement companies that were trolling public records looking for lawsuits, and trying to drum up business for themselves. These two have nothing to do with your alleged debt or the lawsuit. You can safely ignore their letters.

3. Although you have not been served with a summons, you actually know about the lawsuit. Not only do you know about the lawsuit, you talked to the court clerk and they know that you know about the lawsuit. No doubt a note was made in the clerk's file when you inquired about the case, and you cannot deny that you know about the lawsuit. Actually receiving the summons is not essential since you in fact know about the lawsuit. That's all the summons does anyway. It informs you of the lawsuit. The clock is ticking!

Except, of course, if you live in Texas. The Texas courts have made some strong statements about the necessity of actual service. Many other jurisdictions are not as picky and look to evidence of constructive notice. The best you can do when you know you've been sued, however you get that knowledge, is to act quickly. In this situation, delay is not your friend.

4. NAFS Collections (probably National Action Financial Services - Williamsville, NY) is not the same company as Midland Credit Management, and Pinnacle Financial Group is a different company yet. Midland Credit Management is likely related to Midland Funding LLC, but I'm not sure. This needs to be researched or verified.

5. What must be done immediately is to go to the court clerk's office and get a copy of the complaint, which then must be answered pronto! Remember, they have the burden of proof, and since it has been bouncing around from collection agency to collection agency for years, they might not have the paperwork anymore. Spiegel is long gone. You may also have a statute of limitations defense in addition to the fact that you already paid.

Does this Spiegel debt show up on your credit report?

American Express may pay $300 to close account

"Pay off your entire balance between March 1, 2009 and April 30, 2009, and we will send you a $300 value prepaid card1 to thank you2. Enrolling in this promotion will automatically cancel your account."

link to AmEx offer page.

This offer is not available to all American Express cardholders, and the verification code is being delivered by mail.

CreditMattersBlog.com

If you receive the offer, enroll by February 28, and pay off your account balance in full before April 30, 2009. they promise to send you a $300 pre-paid AmEx card.

12 Ways to Get out of Credit Card Debt

1. Stop running up balances
2. Find your best offer
3. Stop the solicitations
4. Pay more than the minimum
5. Cash in investments
6. Turn to friends and family for a loan
7. Consider a home equity loan
8. If you have a 401(k), consider borrowing from it
9. Renegotiate terms with your creditors
10. Consider the debt doctors
11. If all else fails, file for bankruptcy
12. Create a budget and live by it

From: Salary.com

Credit card poll - January 2009

Have any of these actions been taken by your credit card provider this year?

• Credit Card Account Closed (22.9%)
• Credit Limit Lowered (38.4%)
• Credit Limit Increased (28.0%)
• Interest Rate Increased (54.9%)
• Interest Rate Lowered (12.4%)
• Some Fees Raised (22.8%)
• Some Fees Reduced (2.1%)
• New Fees Added (14.3%)
• Rewards Program Changed (11.5%)
• Other Changes Raising Costs (6.8%)

Source: CardTrak.com

Credit card interest rates - January 2009

Average annual credit card interest rates in January, 2009 according to CardTrak.com

	Jan 2009	July 2008	Jan 2008
Promotional:	1.60%	2.01%	2.70%
Super-Prime:	8.46%	9.83%	10.95%
Prime:	12.94%	14.09%	15.46%
Sub-Prime:	20.02%	20.94%	22.78%
Punitive:	27.99%	29.08	30.16%

Note: Average Rates based on FICO Credit Scores.
Super-Prime = 760-850; Prime = 660-759; Sub-Prime = 500-659.
Source: CardTrak.com

Minimum payments - general concepts

The minimum monthly payment required by your credit card company almost universally includes all outstanding interest charges, fees, and penalties. In addition, a fraction of the principal loan balance is included in the minimum payment. The amount of principal re-payment required differs from one credit card company to the next.

Components of monthly payment:

1. Interest - this includes all fees and penalties
   
2. Principal

Ten years ago it was common practice that 5% of the balance be paid every month. As of 2009, however, the amount may be as little as 1%.

Five percent solution:

This top chart shows the rate of decline in the loan balance over time when 5% of the principle is included in the monthly payment, at a 12% annual rate of interest. On an initial loan of $1000.00 the balance is paid down to less than $200 in about 28 months, and the total interest paid for the loan is about $165.00.


One percent solution:

The bottom chart shows the rate of decline in the loan balance over time when only 1% of the principle is included in the monthly payment, at a 12% annual rate of interest. On the same $1000.00 loan, it takes nearly 81 months for the balance to be paid down below $200. At that point in time the cardholder has paid nearly $400 in interest.



See also: Credit card minimum payments

First debt collection letter - Example 1

I. C. SYSTEM, INC.
444 Highway 96 East, P.O. Box 64887
St. Paul, MN 55164-0887
Phone: 1-866-903-1001
MON-THU 7A-10P
FRI-SUN 7A-9P
CENTRAL TIME

December 30, 2008

RE:

Washington Mutual
Balance as of December 30, 2008: $7,605.86
Account No: xxxxxxxx-xxx-xxx-xxx
File Number: xxxxxxxxxxxxxxxx

Dear _______________:

Your account is past due and has been referred by Washington Mutual to our agency for collection. The balance shown above is the amount due as of the date of this letter. This amount may change due to interest or other charges that may be added to the account after the date of this letter.

This is a serious matter! If you respond, you may be able to avoid any further contact from us.

Call us at 1-866-903-1001 if you wish to pay this account, but need to make payment arrangements. We want to give you the opportunity to resolve this debt.

Make your check or money order payable to Washington Mutual and send it to:

Washington Mutual Payment Processing
PO Box 660548
Dallas, TX 75266-0548

We are a debt collector attempting to collect a debt and any information obtained will be used for that purpose.

Sincerely,

Beth

NOTICE

Unless you notify this office within 30 days after receiving this notice that you dispute the validity of this debt or any portion thereof, this office will assume this debt is valid. If you notify this office in writing within 30 days from receiving this notice that you dispute the validity of this debt or any portion thereof, this office will obtain verification of the debt or obtain a copy of a judgment and mail you a copy of such judgment or verification. If you request of this office in writing within 30 days after receiving this notice this office will provide you with the name and address of the original creditor, if different from the current creditor.


Telephone calls to or from our General Office are randomly monitored by supervisory personnel for business reasons not directly related to your account. Calls may be recorded for quality assurance.