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Wingo Smith
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I've worked quite a bit on garnishments in Georgia. The new federal rules don't say that Social Security benefits lose their exemption if they are co-mingled or greater than the protected amount under the new rules. The debtor can still raise any additional exemption as they would before, for example in a garnishment proceeding. 31 CFR 212.8. The comments in the final interim rule support a debtor's right to raise greater exemptions than the new rules allow. I think the banks' biggest coup was that the new rules do not give private rights of enforcement and the banks no longer have to trace funds moved from one account to another. We have seniors with multiple accounts who clearly transfer their SSA benefits from account to account. However, those second accounts are being seized and seniors rarely know the process to raise the exemption in the garnishment.
I went and looked at the Attorney General's complaint briefly and stopped dead at paragraph 19. Minnesota was the state that helped shut down the National Arbitration Forum whose ability to fairly adjudicate consumer issues was called into question because it was owned by a large debt collection law firm, Mann Bracken. Well guess what? Accretive was part of that world, too. The complaint is here, I've copied paragraph 19 below. There's something fundamentally worrisome about creating self-serving legal worlds that are unhampered by a community's sense of what's just and fair. 19. Accretive, LLC has a controversial history in the debt collection business in Minnesota and nationwide. By 2009, through a series of acquisitions, corporate formations, management contracts, and asset transactions engineered by Accretive, LLC, the equity fund simultaneously took control of the nation’s largest debt collection enterprise and became affiliated through ownership and governance interests with the nation’s largest consumer debt collection arbitration company. This occurred through a series of transactions engineered by Accretive, LLC involving three major companies: National Arbitration Forum (an arbitration company based in Minnesota), Axiant, LLC (a debt collection agency), and Mann Bracken (at the time, the nation’s largest collection law firm). The transactions can be summarized as follows: a. Accretive, LLC formed a series of private equity funds under the name “Agora” (Greek for “Forum”), which in turn acquired a $42 million, 40percent financial interest and governance rights in the Minnesota-based National Arbitration Forum. The Forum was the nation’s largest arbitration firm for consumer credit card collections, handling over 200,000 consumer arbitrations each year. b. Accretive formed and funded a large national debt collection agency called Axiant, LLC, which became a debt collector for the credit card industry and debt buyers. Accretive, LLC owned over 68 percent of Axiant. c. Axiant then acquired the assets and collections operations of the Mann Bracken law firm, the nation’s largest collection law firm (which had previously acquired two other large national collection law firms). Of the 214,000 consumer arbitrations processed by the National Arbitration Forum in 2006, 125,000, or almost 60 percent, were filed by Mann Bracken and its predecessors. 20. Through these transactions, Accretive, LLC essentially took control of the entire “revenue cycle” (e.g., the collection agency, the prosecuting law firm, and the neutral arbitrator) for consumer credit card collections in the United States. Accretive, LLC wanted to form a “broad arbitration ecosystem” which would pay huge financial dividends for the equity fund. Prior to this scheme, law firms were generally owned by individual lawyers due to professional regulations that prohibit for-profit corporations or non-lawyers from owning law firms, such that Wall Street could not profit from law firm revenues. Through these transactions, Accretive, LLC essentially sought to “monetize” for Wall Street investors the profits to be made from debt collection law firms. According to Accretive, LLC’s internal documents, the executives wanted their debt collection and arbitration system to expand to “become a comprehensive, alternative legal system.”
Toggle Commented Aug 29, 2012 on A Question Answered at Credit Slips
Along the lines of Mr. Doran's comment, I pictured you giving a benefit concert in Peoria singing a revised version of Joni Mitchell's "Big Yellow Taxi."
I apologize if my post was misleading. I agree that RALs make no financial sense. The only issue that I had with the comments were that time issues did play a role in folks' decisions to get a RAL (especially where rent or utilities were unpaid to afford Christmas or property taxes). There's no doubt that people are better off using their refund rather than one of these loans. Kudos to the FDIC.
Toggle Commented Mar 2, 2011 on RALs - Will They Become Extinct? at Credit Slips
RALs do have a function for a lot of folks living check to check because of their timing. Many places used to offer a RAL when you brought in your last pay stub, i.e. the last week of December or first week in January before people get their W-2s. First, this can cover rent and other monthly bills that people did not pay during Christmas. Second, RALs at the end of the year were also used by low-income homeowners to pay their property tax which comes due at the end of the calendar year. Many of RALs other uses might be less time dependent than these two examples. It appears to me that RALs are often used to help make bigger purchases or down payments that could not ordinarily be made based on income (and savings in some instances) alone. Buy here, pay here lots sell cars with the RAL as your down payment (crazy, right?). I've also met people who use it as a down payment on rent-to-own furniture. This may not change even if their tax deductions are correct as a major part of a tax return for low-income folks comes from tax credits designed to help low-income workers or families (e.g. the Earned Income Tax Credit and Child Tax Credit) and are not dependent (I don't think) on money withheld from their paycheck.
Toggle Commented Feb 28, 2011 on RALs - Will They Become Extinct? at Credit Slips
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Feb 28, 2011