Houston Lawyer Blog

Can I go to jail for not paying a debt? Will a warrant be issued for my arrest tomorrow? Will my wages be garnished if I don't pay my debt immediately?

Most likely, the answer is no. Debt collectors will do almost anything to get you to pay a debt. Of course, there are state and federal laws in place to protect consumers. The Federal Trade Commission regulates debt collection through the Fair Debt Collection Practices Act (FDCPA). In Texas, the Texas Finance Code (TFC) and the Texas Deceptive Trade Practices Act (DTPA) provide even more protections to Texas consumers. The FTC released this video for guidance on how some of the federal laws apply to consumers and debt collectors.

In general terms, the federal law is very similar to Texas laws governing debt collection. However, Texas laws do provide some added protections not otherwise available in other states. For example, it is illegal to garnish wages in Texas. With a few exceptions for taxes and child support, a debt collector may not garnish a Texas consumer's wages.

In addition, the Texas Finance Code provides additional regulations for third-party debt collectors. A third-party debt collector must have a bond on file with the secretary of state in order to collect in the state of Texas. If not, any collection attempt is a violation of the law and actionable under TFC and the DTPA. Also, a consumer may dispute the accuracy of a particular collection item in writing at any time. Upon receipt of the written dispute, the third-party debt collector must cease collection efforts and conduct an investigation of the accuracy of the debt. In Texas, the third-party debt collector must respond with the results of the investigation within 30 days of receiving the consumer's dispute.

If a debt collector fails to follow these Texas or federal laws contact an attorney, the Texas Attorney General or the Federal Trade Commission. In some cases, you can collect from a collection agency instead of the other way around.

For more information see the following helpful links:

http://www.statutes.legis.state.tx.us/docs/fi/htm/fi.392.htm
http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre27.pdf
http://www.ftc.gov/

Texas payday loans can quickly trap the unwary Houston consumer into a seemingly endless downward spiral of fees, interest and other charges. Due to borderline usurious tactics, in many cases consumers are forced to rollover interest and fees into their original payday loan as often as every two weeks in order to prevent default on the loan. As a result, consumers were sometimes forced to roll $60 or more into their original loans. Quickly, the compound interest and fees left many consumers paying two-week loans for more than a year.
Unfortunately, efforts to regulate this industry have failed. In 2001, the Texas legislature somewhat attempted to reign in these payday loan companies, but, were completely unsuccessful. They passed laws capping fees and interest a payday loan company can charge consumers. The Texas Finance Code now caps the maximum finance rate at $10 per $100 borrowed on these short term loans. Also, the law allows only one further "handling fee" to be charged at a maximum of $4 each month on loans over $100. This should have offered some protection to consumers who often found themselves in an endless cycle of fees, interest and other charges. However, the loan companies simply found a loophole to bypass all the new fee and interest caps placed on them.

Payday loan companies discovered they could slightly alter their business model and call themselves "Credit Service Organizations" (CSOs) rather than be highly-regulated as payday loan companies. CSOs fall under a different statute section, with almost no regulation because they are not considered lending institutions. CSOs are supposed to be credit repair companies helping consumers with their credit, rather than lenders extending loans.

So, how do these payday loan companies actually use the legal loophole to operate as a CSO? Once the registration fee is paid to the state, the new CSO acts as a "broker" for the loan at the payday loan storefront. The payday loan store collects a "referral fee" of $10-$40 for referring the client to the actual lender of funds. The payday loan store fills out the paperwork, for which they charge an application fee of roughly $10 per $100 borrowed, and then issue a "letter of credit" to the customer so that the lender will lend the funds. Because the actual lender collects the interest on the loan, they can maintain their status as a CSO with many of the benefits of a lender.

Texas Finance Code Section 302, which regulates usurious interest rates, does not apply to a company operating as a Credit Service Organization because they are not a lender but rather a credit repair organization. Because of this "loophole," payday loan companies have found new ways of charging additional interest and fees under the guise of a "broker." Therefore, under current law, there are no protections from what amounts to 800-900 percent interest rates for payday loans when granted under the umbrella of a CSO.

Further, these CSOs are not required to obtain a state license, but merely pay a small registration fee before being allowed to operate freely. Because a payday loan company does not have to be licensed by the state when operating as a CSO, there is no threat of revocation to their lending privileges nor must they post a bond to remain licensed. That means the organizations can nearly act with impunity as there is no real consequence involved with their lending practices. This discovery of using the CSO loophole has seemingly been a major windfall to payday loan companies. A quick online search of the yellow pages shows, for example, that there are 582 payday loan stores within the city of Houston alone.

As good as these loans are for the payday loan companies, they are equally bad for the consumer. The loans rake in huge profit for the companies while at the same time trapping the unwary consumer in a vicious cycle of escalating debt at 300-900 percent interest. The ability of Texas payday loan companies to avoid regulation by adapting to the Credit Service Organization model has allowed them to operate in a near predatory fashion. The sad part is that desperate consumers with bad credit will continue to fall into these traps because most don't have many other options.

Houstonians and Texans alike have long been confused with credit scores, their meaning and overall composition.

The important thing to remember is that FICO (Fair Issac Corporation) scores are much more telling than any other scores available. Lenders, mortgage brokers and other credit institutions have long used FICO scores as the standard means of determining credit-worthiness. FICO's credit score model is a composite of factors such as payment history, credit utilization, length of credit history, types of credit and inquiries. The lower the FICO score, the higher the credit risk the consumer may be. FICO scores are the most used and trusted means of determining a consumer's credit worthiness.

However, this has not stopped other companies from developing their own schematics in terms of determining credit scores. In fact, the three major credit reporting agencies (Equifax, Experian and TransUnion) developed their own model to determine credit risk in order to cut into Fair Issac's market share. Up to this point, these efforts have not changed much in the minds of people in the credit business, as FICO scores are still the standard means of assessing credit risk.

The real dilemma is with the average consumer and their overall knowledge of types of scores, credit worthiness and overall credit risk. Many consumers receive scores from free websites or perhaps directly from the credit bureaus, which they believe are their true FICO credit scores. Unfortunately, this is not true, and can be very misleading in determining credit worthiness. In many instances, these FAKE-O scores may be inflated 40 points or more over traditional FICO scores. FICO scores can only be received from Fair Issac directly or from a lender that has pulled a consumer's credit report for the purpose of granting credit.

So, look for FICO rather than FAKE-O.

It all starts when you sign the bottom of your traffic citation, promising to appear in court to answer to the charges on your citation at a specific time & date. If you happen to miss your initial court appearance, you have now committed a new criminal offense in Texas, labeled as "failure to appear" and warrants are issued for your arrest as a consequence. These warrants allow any peace officer in the state of Texas to arrest you.

A failure to appear charge results in a new citation being added with your original offense. A failure to appear offense has a fine range between $1- $500 plus court costs. This is what you'll be facing when you attempt to later appear and answer to your original offense and the additional charges from the citation. Further, if those warrants remain active when it's time to renew your driver's license, it will cause your renewal to be denied and your privilege to drive to be suspended. If you are caught driving with that suspended driver's license, you have committed yet another offense for which you can be arrested or issued a citation.

As for your original traffic citation, the court has now added a 30 percent collection cost and additional warrant fees. At this point, you're likely to have incurred around $500 in costs between the fines and court costs on both citations, warrant fees and collection costs. Further, you also have warrants for your arrest to deal with. Some police agencies in Houston and surrounding areas actually send their peace officers out to serve these traffic warrants by arresting you at your home or even at work. One of the more common ways people often get arrested on these warrants is during future traffic stops after they have forgotten about the citation and failed appear in court. Of course, these arrests often happen at the most inconvenient of times.

To avoid getting arrested on these warrants before a peace officer is knocking on your door, there are three basic options to remove warrants:
1. You can either post a cash bond with the court that is roughly equal to the window fine on both of your charges, which would likely be over $300.
2. You can save a little money by posting a bond with a bonding company or attorney's office.
3. Another option to remove your warrants would be to appear at the court on a day and time when walk-ins are permitted and speak with the prosecutor. This would allow you to try to resolve your charges or enter a not guilty plea with the judge. The court would have the right to serve the warrant in court and take you into custody but not all courts have an interest in doing that and simply want the warrant taken care of.

In the end, missing your initial court date on a traffic citation can easily result in fees in excess of $500 and possibly your arrest.

Many of the credit card companies are saying that the amount of consumer debt has decreased in recent months. Consumers are paying more than they are borrowing for the first time in a long time. In addition, recent reports state the number of consumer bankruptcies is down 18 percent since July. Are consumers finally getting tired of debt? Are we finally coming out of the country's deep recession?

The jury is still out on that front. One reason for decreased debt suggests that many Americans have defaulted on their credit cards and other consumer debt. Others state the lowered amount of bankruptcies is merely a result of the changes to bankruptcy laws, making it harder to file in the first place.

In any event, consumers need to fight their debt battles with smart spending strategies and better budgeting. Consumers need to realize that that new cardigan is not really worth it if you pay 29 percent interest. Ask yourself how much that cardigan is really costing you by the time you pay it off? You should always know your interest rates on your credit cards and other lines of credit. If you don't, then the cardigan could cost as much an IPAD by the time you pay it off.

Here are some simple tips to free yourself of debt:

1. Make a budget based on your monthly income and expenses.

2. Find out the interest rates on all your debt.

3. Work on paying down the higher interest debt first. Pay more on the higher interest debt than the lower interest debt, as your budget allows of course. There is no sense in paying anything more than the minimum payments on low or zero interest rate debt. If you are lucky enough to have low interest debt, you want to maximize that benefit as long as possible.

4. Make a timeline for when you want to get out of debt. Studies show that people who give themselves deadlines get much better results.

5. Separate the need purchases from the want purchases. By cutting down spending, you can devote more funds to your higher interest debt.

6. Do not use credit cards to survive! If your budget will not sustain your current standard of living, then do not compensate by using credit cards. Instead, adjust your budget to meet your current means. If necessary, cut up all your credit cards if you feel inclined to use them when you know you shouldn't. It wont cancel the card, but at least it will make it more difficult to use. (TIP: Do NOT cancel open revolving accounts, such as credit cards. Cancelling your open revolving credit will hurt your credit scores! Open revolving accounts are some the best things you can have on your credit report; try to have at least one open at all times.)

By changing your attitude towards debt and consumer spending, you can really make a huge impact in your overall life. You will find that you can spend the same amount of money but have more money in your pocket at the end of the day. Hopefully, by following these tips you will be one of the lucky people to be debt free.

Whoever said change is good was not referring to recent bankruptcy reform. On October 17, 2005, Congress instituted federal bankruptcy changes that were supposed to eliminate the "deadbeats" filing bankruptcy. The changes were designed to make it more difficult for those consumers trying to run from debt through bankruptcy.

Under the changes, the new first step is to undergo credit counseling. The counseling step is designed to analyze debt to income ratio and the ability to pay debt. The system is designed to determine which people could be steered into a debt management plan and away from bankruptcy. Moreover, this step is designed to deter abuse of the bankruptcy system. However, a study by the National Association of Consumer Bankruptcy Attorneys (NACBA) concluded that 97 percent of consumers were unable to repay any debt. More surprisingly, 79 percent of consumers were put into "dire financial straits by circumstances beyond their control, such as the loss of a job, catastrophic medical expenses or the death of a spouse."

Once a consumer concludes credit counseling, consumers face even more hurdles in determining which specific chapter to file. The two types of consumer bankruptcy chapters are 7 and 13. Chapter 7 provides the debtor a discharge of his or her debts via a liquidation of assets. In Chapter 13, the debtor receives a discharge through payment into a reorganization plan. Here, the debtor pays a monthly amount into a plan that cures overdue debts. In the past, Chapter 13 was not widely used as Chapter 7 provided a discharge without any obligation to pay debt. In addition, most people protected their most prized possessions through federal or state bankruptcy exemptions.

However, new hurdles like the "means" test has affected the eligibility of many would-be Chapter 7 filers. Now after the reform, debtors must pass what is known as the "means" test in order to file Chapter 7. A debtor is forced into Chapter 13 when he or she fails the "means test." The "means" test states that if the prospective filer's current monthly income (CMI) multiplied by 12 exceeds the median income for a family of the same size in the same state, then the debtor is forced to file Chapter 13 bankruptcy. This provision was designed to limit the number of people abusing the system. In reality, it creates a presumption of abuse. As a result, consumers are now given limited freedom in choosing which bankruptcy chapter to file.

The legislature did not leave out Chapter 13 in terms of change. It also endured an overhaul. For instance, the length of repayment plans is now five years. Also, unsecured creditors are now treated more favorably under bankruptcy laws. As such, Chapter 13 plans will not be approved if they provide less to unsecured creditors than if the debtor liquidated his or her assets in Chapter 7. As a result, some consumers might not be able to file bankruptcy at all.

Continue reading "Bankruptcy Reform: Fighting the Uphill Battle" »

Recently, a local news station filed a report on a Houston based company that has undergone a rash of consumer complaints. Consumers in Houston, and throughout Texas, are alleging that Telecheck, a check verification company, has been harassing them regarding debts from bad checks. Many of the consumers state that they had never even shopped at many of stores where the alleged bad checks were written.

If you are receiving phone calls and letters from businesses seeking to collect debts, there are certain guidelines they must follow to legally attempt to collect a debt. If you have knowledge of these guidelines, you can protect yourself and your credit. For example, debt collectors are not allowed to contact you outside of the hours of 8 am to 9 pm, unless they have your consent.

Surprisingly, debt collectors are allowed to contact other people in regards to your debt. However, they are limited to only asking questions about your address, home phone number, or place of business. It is illegal for a debt collector to discuss the debt with anyone other than you, your spouse, or your attorney. You may ask a debt collector to stop contacting you, but the only way to insure that this happens is by sending them a letter, certified mail, return receipt. Once you request no further contact, the debt collector must abide.

There are a number of things that debt collectors can and cannot say to you, according to both federal debt collection laws and Texas debt collection laws.

If these third party debt collectors violate federal and state laws, you may be able to pursue legal action. If the debt collector is found liable, you can collect for actual damages such as lost wages and medical bills. You may also be able to recover statutory damages and recover for your attorneys' fees and court costs. Arming yourself with the knowledge of what these debt collectors can or cannot due is your best protection for yourself and your credit.

Over one million estimated illegal immigrants reside in the state of Texas. As the most populated city in Texas, Houston houses its fair share of these illegal immigrants. In many cases, these illegal immigrants live, work and function normally with other Texans. In fact, many of these illegal immigrants are lucky enough to find love and marry United States citizens while residing here illegally. Many people believe these illegal immigrants are automatically legalized the moment they say "I do."

Unfortunately, immigration laws in the United States provide a different outcome for many such illegal immigrants. By definition, illegal immigrants have no legal status in the United States. Therefore, they may not simply have a spouse file an I-130, Petition for Alien Relative, in order to receive a green card. Ordinarily, immediate family members (such as a spouse) of a U.S. citizen have special priority for green cards. Due to this special priority, these aliens do not have to wait for a visa number to become available. Without question, it is much easier to receive a green card through this process.

Illegal immigrants without status will not be able to take advantage of this special priority. Complications will arise because illegal immigrants with no legal status in the United States could be subject to a bar on admissibility for up to 10 years, depending on the amount of time spent in the United States illegally. This means these illegal immigrants would have to leave their families and return to their home countries in order to wait out the bar on admissibility.

In such cases, the only hope left is to file an I-601, Application for Waiver of Ground of Admissibility. However, these waivers are only granted if the applicant can show extreme hardship to a U.S. citizen. As you might imagine, extreme hardship is not an easy threshold to meet.

Ultimately, the easiest way to avoid these problems is to always have legal status in the United States. Of course, for illegal immigrants, this means a return trip to his or her home country will be the only way to avoid inadmissibility. These illegal immigrants must leave their families and return to their home countries to apply to enter the United States legally. This presents problems for many immigrants that have spent almost their entire lives in the United States. Many don't know anyone from their "home" country or even speak the language, but nevertheless, they are forced to go back in order to avoid the ban on admissibility. Additionally, with increased dangers in Central and South America, some who return to their home countries are unable to make it back at all. For some, the risks associated with returning to their home countries are far greater than the risks associated with staying in the United States illegally. As a result, many illegal immigrants will continue to live here illegally despite their special priority in being married to a U.S. citizen.

On August 31, 2010, the Texas Residential Construction Commission will cease operations. The TRCC Act, contained in Chapter 16 of the Texas Property Code will no longer be valid law. This law was short lived and well-debated. As housing sales increase in Houston, Texas, new homeowners should be aware of how the abolishment of this supposedly "consumer friendly" law may actually help them.

For years, Texas courts have held that homeowners were entitled to certain warranties upon purchasing new homes. These warranties were implied, not written, and were automatically in effect from the time of the home's purchase. These implied warranties include a warranty of habitability, good and workmanlike construction, and good and workmanlike repair.

The TRCCA abolished these implied warranties. Instead, it provided statutory warranties with finite time periods. Builders were required, by statute, to provide homeowners with a 1 year warranty for workmanship and materials, a 2 year warranty for mechanical delivery systems, a 10 year warranty for structural components of the home, and a 10 year warranty of habitability.

When any of these warranties were breached, and a homeowner became dissatisfied with how the situation was handled, the homeowner had to follow a step by step process to solve the situation. The TRCCA created a state-sponsored dispute resolution process, or SIRP. Homeowners had to follow this process before they were allowed to seek other remedies, such as filing suit. The homeowner was required to provide the builder with written notice of every defect. The Builder was then provided an opportunity to inspect the home. If the dispute was not resolved in 30 days, the homeowners then had to contact the TRCC for state-sponsored inspection and dispute resolution. For this notification to be considered valid, the homeowner was forced to meet a list of technical requirements in the written notice. A neutral state inspector would then inspect the property.

While the TRCCA was enacted to expedite resolution and assist homeowners, the opposite effect occurred. This process would often take months. If the problem was not corrected, the homeowner could then go through the guidelines laid out in the Residential Construction Liability Act (RCLA). Under this act, the homeowner must provide written notice, by certified mail, of the defect. The builder is again afforded a reasonable opportunity to inspect and cure any alleged defects. The homeowner was not allowed to file suit until after 60 days after the RCLA letter.

Continue reading "Texas Homeowners May Benefit From Repeal of "Consumer Friendly" Law" »

In Texas, it is mandatory that all motorists carry Personal Injury Protection (PIP) as part of their automobile insurance. PIP provides coverage for you and your passengers if you are involved in an auto accident. PIP benefits are paid out regardless of who caused the accident. You choose coverage based on a maximum dollar amount that you will be paid out.

This coverage generally pays for your medical expenses, including dental and vision. If you are unable to work, you can recover lost wages. If you need help performing household tasks due to injuries sustained in the accident, Personal Injury Protection will pay for substitute services. If the accident results in death, funeral expenses are also covered. PIP not only covers the driver, but all the passengers as well.

While PIP is mandatory, this coverage can be waived in Texas if the consumer signs off in writing. Many people elect to waive PIP because they feel it overlaps with their medical benefits. If they are in an accident, regardless of fault, their medical insurance will pick up the slack. However, most medical plans will not pay for lost wages or costs of your household care. Also, if any of your passengers are uninsured, your medical benefits would not cover their care. Personal Injury Protection Coverage will. PIP coverage also has no deductible. If you have a medical plan with a high deductible, you may pay all of your expenses out of pocket without PIP.

If you are involved in an accident that is not your fault, your PIP coverage will kick in and take care of your needs. Your insurance carrier will then seek to recover its costs from the other driver, or that driver's insurance carrier. However, when liability for an accident is in question, PIP is nice to have. It could take months or years to hash out a legal dispute over who was at fault. Some insurance providers may drag their feet on paying for your necessary care until liability is determined. This can be quite a hassle to deal with. Personal Injury Protection can give you piece of mind while dealing with your legal issues.