Posts Tagged ‘debtor-creditor law’

NYT on auto title loans

“With a crackdown on payday lenders, subprime borrowers are increasingly using auto title loans, whose high interest rates can lead to repossession and financial ruin.” [DealBook/NYT] Todd Zywicki at Volokh finds much lacking in the article’s analysis: “it turns out that those who use these products are not as stupid as the Times’s reporters imply they are.” Reihan Salam: “Remember when people said that cracking down on payday loans would have regrettable consequences?”

Update: Social Security still trying to collect decades-old parental debts

“The Social Security Administration, which announced in April that it would stop trying to collect debts from the children of people who were allegedly overpaid benefits decades ago, has continued to demand such payments and now defends that practice in court documents.” Robert Vogel, an attorney for clients whose refunds were seized, charges: “Their intention was to get the press off their backs and then go back to collecting their money. It’s just shocking that they believe that when someone turns 18, they automatically assume a crushing debt that was incurred by someone else.” [Marc Fisher, Washington Post; earlier here and here]

“Prosecutors Who Rent Out their Letterhead to Debt Collectors”

The American Bar Association’s Standing Committee on Ethics and Professional Responsibility moves against a dubious practice. “The demand letters are effective at scaring consumers because they are sent on prosecutor letterhead and contain threats of criminal prosecution — threats that no other debt collector could make.” However, they mobilize the prosecutor’s apparent public authority on behalf of legal threats which typically the prosecutor has not reviewed individually exercising professional judgment, and they can deceive debtors about the legal status of their claimed obligation. [Deepak Gupta, Consumer Law & Policy; earlier]

EPA seeks wage garnishment power

Now this is lovely: the Environmental Protection Agency intends to assert for the first time a power to garnish your wages without a court order to cover fines or other sums it may assess. The new “administrative wage garnishment” power is fueled by a 1996 federal law, the Debt Collection Improvement Act (DCIA), which authorizes more direct means for the seizure of “fines, penalties or fees assessed by federal agencies” and other moneys owed them. The EPA is taking comments through August 1. [Robert Gordon, Daily Signal]

More, a semi-defense of the agency from Brent Fewell: since Congress has pushed these new collection methods on many agencies besides the EPA, the most suitable course for critics would be to press lawmakers to change the debt collection law, the EPA’s underlying statutes, or both.

“You have a broken headlight, you get stopped….”

Time mag asked arch-leftwinger Barbara Ehrenreich about the best single way to reduce income inequality. I’d never have dreamed that David Henderson would agree with the answer she gave — or that I would too. More here on Ehrenreich’s views on the “criminalization of poverty” (which, not surprisingly, head off in directions very different from mine once you’re past the initial area of agreement).

One reader points out that laws against behaviors like driving with broken headlights or lapsed insurance are of universal benefit and improve road safety. But I don’t think Ehrenreich’s point (or Henderson’s or mine) amounts to “let’s legalize driving with broken headlights.” Not so long ago, many petty offenses of traffic and street life were illegal but the consequences of violation were much less harsh. The other day I got a transponder toll in the mail amounting to maybe $10, which would jump to $150+ if I didn’t get in a payment within 20 days; being your basic organized middle-class person, I dashed off a check that same day. Add one complicating factor — say I was a person whose mail was forwarded to me from another address — and it would have been a closer thing.

Why has government chosen to escalate once-petty fines over the past couple of generations? 1) It wants revenue and likes the idea of making agencies self-financing or better; 2) it listens more closely to its own agencies than to the populace; 3) when middle class policymakers (as they nearly always are) consider the issue, they think of what level of fine it would take to deter someone like themselves and worry less about whether fines at that level might capsize the little guy or small business (I hear often about how this framework of punitive small fines is a key deterrent to trying to run a small business with a couple of delivery trucks and maybe an urban commercial building or two to run up inspection and property fines.)

The reformist consumer finance literature, to which Elizabeth Warren was a big contributor as an academic, and with which Ehrenreich is no doubt well acquainted, decries $30 late fees and 20 percent interest rates as a business plan by which credit card companies can turn small debts into big ones at the expense of persons without middle-class money habits and skills. Which raises the question: why spend so much time belaboring the banks if government’s own policy on late fees, bounced checks, etc. is going to be so much less merciful? (& welcome Radley Balko readers)

P.S. An example? South Carolina man says he didn’t realize you needed to pay for a soda refill at VA hospital canteen. Contemplated consequences: $525 fine, federal criminal conviction, unable to return to workplace. (Update: following national publicity, let off with warning).

Victory! Social Security suspends stale-debt collection program

Huge win for justice and good sense: facing a mounting public furor, “The Social Security Administration announced Monday that it will immediately cease efforts to collect on taxpayers’ debts to the government that are more than 10 years old.” [WaPo] Credit goes above all to the Washington Post and its reporter Marc Fisher for exposing the most outrageous features of the IRS’s refund-interception program last week, as recounted in this space; I like to think I helped as well by beating the drum early and repeatedly since then with Cato’s help. Overlawyered’s Facebook post on the subject has been seen by more than 60,000 people and shared more than 700 times in the past few days. (Have you liked us yet?)

The next step should be to establish for the public record how the provision in question got slipped into the farm bill, and at whose behest. Congress’s refusal to be forthcoming on this topic speaks volumes about its lack of a felt sense of responsibility toward the people it represents.

And a theme I’ve been repeating for almost as long as I’ve been writing about law: statutes of limitations developed in civilized legal systems for a reason. They protect us not only from cost, uncertainty, and the misery of legal process, but from injustice of a hundred other kinds, and they protect society itself from spiraling into a legal war of all against all. Stop trying to abolish them!

More: Ed Morrissey, Megan McArdle. And here’s a Cato podcast just out on the subject in which Caleb Brown interviews me on the topic:

Citing decades-old claims, feds seize tax refunds

Marc Fisher reporting in the Washington Post:

Across the nation, hundreds of thousands of taxpayers who are expecting refunds this month are instead getting letters like the one [Mary] Grice [of Takoma Park, Md.] got, informing them that because of a debt they never knew about — often a debt incurred by their parents — the government has confiscated their check.

The Treasury Department has intercepted $1.9 billion in tax refunds already this year — $75 million of that on debts delinquent for more than 10 years, said Jeffrey Schramek, assistant commissioner of the department’s debt management service. The aggressive effort to collect old debts started three years ago — the result of a single sentence tucked into the farm bill lifting the 10-year statute of limitations on old debts to Uncle Sam.

No one seems eager to take credit for [the provision]…

While a variety of stale disputes are involved, some of the most controversial involve alleged Social Security overpayments to long-deceased parents that the government says it has a right to reclaim because they contributed or might have contributed to the support of now-grown children. Targets say they are helpless to contest the seizures in many cases because financial records have long since been thrown out, in line with the IRS’s own guidelines which do not encourage the keeping of financial records for decades. State as well as federal refunds can be intercepted, and the taxpayer who wants to argue must sue to get the money back.

A spokeswoman says the feds attempt to contact targets about the claims before attaching refunds, but the Washington Post’s report cites examples in which notice was sent to decades-old post office boxes or addresses, even though both tax and Social Security authorities held current correct addresses for the taxpayer.

Need it be added that many of the methods the government is using would be deemed unlawful if asserted by creditors trying to collect private debts? To name only the most egregious of the problems, children cannot ordinarily be made to pay parents’ debts, even when there is a writing by the parent acknowledging the debt as valid (which will ordinarily be lacking in after-the-fact assertions of overpayment).

It is at most a minor ironic consolation that taxpayers are likely to react to these outrageous tactic by scaling back hard on the widespread practice of voluntary over-withholding, reasoning that it is unsafe to build up a big refund if authorities can snatch it away for unpredictable reasons with little hope of recourse.

P.S. More from J.D. Tuccille, Reason.

Update: Victory! Social Security Administration announces Apr. 14 that it’s suspending collection of debts older than 10 years (& welcome Andrew Sullivan readers).

Banking and finance roundup

  • Presumed-reliance (“fraud on the market”) theories, which SCOTUS is likely to reconsider in Halliburton, aren’t just confined to securities litigation, but crop up in various other areas of litigation including third-party payer drug suits [Beck, Drug and Device Law; more background]
  • Why restrict alienability?, pt. CLXXI: Neil Sobol, “Protecting Consumers from Zombie-Debt Collectors” [NMLR/SSRN]
  • Will Congress step in to curtail fad for eminent domain municipal seizure of mortgages? [Kevin Funnell, earlier here and here]
  • More commentary on J.P. Morgan settlement [Daniel Fisher, Michael Greve, earlier here, here, and here]
  • Judge Jed Rakoff: Why have no high level execs been prosecuted over financial crisis? [Columbia Law School Blue Sky Blog]
  • Treasury Department’s Financial Stability Oversight Council (FSOC) turns its sights to investment advisers. The logic being…? [Louise Bennetts, Cato/PJ Media]
  • Property-casualty insurer association challenges new HUD disparate-impact rules [Cook County Record]