Last summer, Sandra Goodwin was sued by Jefferson Capital Systems for $5,562 in overdue debt, but Goodwin had never heard of or done business with the company.

“The paperwork said I was being sued,” said Goodwin, a former Madison resident who now lives in Stoughton. “I mean, I panicked.”

Goodwin sought free legal advice from Stacia Conneely, an attorney at the Madison branch of the nonprofit law firm Legal Action of Wisconsin. Conneely determined Jefferson Capital had purchased Goodwin’s debt — stemming from an online class she signed up for but never took — from LifeWay Credit Union.

Goodwin’s debt settlement is a small part of the multi-billion-dollar debt-buying industry that recently won a legislative victory in Wisconsin. Such companies buy and sell the right to collect debt, but consumer advocates say the result is sometimes a bill that the consumer might not recognize for an amount that can’t be verified from a company they have never heard of.

Wisconsin consumers have filed more than 2,000 complaints over the past four years with the state Department of Financial Institutions against debt collectors, including such debt-buying companies, outstripping complaints against payday lenders and auto loan-title lenders combined, a Wisconsin Public Radio analysis found. Many of these complaints were about threats or other improper telephone behavior, and some were about attempts to collect debt from the wrong person.

When a creditor such as a credit card company decides it cannot collect, the debt can be sold for pennies on the dollar to a third-party debt buyer. Then, debt buyers try to collect through traditional methods, such as phone calls, or they can sue for repayment.

According to a 2013 Federal Trade Commission report, however, 90 percent or more of people sued never show up in court, even if they have a good defense, including that the debt is too old to legally collect.

Unlike most states, some consumer debt in Wisconsin is erased after six years. Nationally, the FTC found that slightly over 12 percent of the debt purchased was more than six years old, which would put it beyond the statute of limitations in Wisconsin.

If a defendant fails to show up for court, the judge often issues a default judgment, allowing the creditor to garnish wages and put liens on real estate or other property, which can tarnish a consumer’s credit rating for years.

Organizations including the FTC, the U.S. Consumer Financial Protection Bureau, the National Consumer Law Center and Human Rights Watch have all called for stronger regulation of debt buyers, especially in court proceedings.

A bill signed into law March 1 by Gov. Scott Walker sends Wisconsin the opposite way, consumer advocates say. The law standardizes but in some cases lowers how much proof debt collectors must present in court at the beginning of a lawsuit.

“It moves in the exact wrong direction,” said Stoughton consumer attorney Mary Fons, who testified against the bill authored by state Rep. Mark Born, R-Beaver Dam.

The law is based on a nearly identical bill from the last legislative session, also sponsored by Born. Representatives from the Wisconsin Creditors’ Rights Association, which pushed the bill, did not respond to requests for comment by Wisconsin Public Radio.

Born also declined comment. In testimony late last year, he said the bill would help “both merchants and debtors save time and money associated with litigation.” He added that the change would make “credit markets function more efficiently, which benefits us all.”

Born’s 2013 proposal marked one of the few times the state Department of Financial Institutions has opposed a bill during Walker’s tenure, said Peter Bildsten, former secretary of the state Department of Financial Institutions.

“I’m very concerned about the lack of protection here in Wisconsin for borrowers like that,” he said. “They don’t have voices.”

Conneely said consumers can fight such actions if they can show it is the wrong amount, charged to the wrong person or already settled through bankruptcy.  Many people in debt, though, cannot afford an attorney, and “unfortunately sometimes it takes a lawyer to figure it out,” Conneely said.

Understanding The ‘Telephone Game’

Conneely said Goodwin’s situation isn’t uncommon. Debts can be bought and sold more than once. By the time someone is sued, how much is owed and to whom it is owed may be unrecognizable.

The FTC found that debt buyers often received very little information about the debts they purchased, usually packaged in one spreadsheet with many other debts. And the accuracy of the information isn’t guaranteed. The likelihood that the information is inaccurate grows as the debt ages.

“It’s sort of like the telephone game,” Conneely said. “It starts here, and by the time it comes around … years later, who knows what you’re going to see and what information is available?”

She said in Goodwin’s case, Jefferson Capital had purchased her debt, which originated from an online school called the College Network.

Goodwin said she never took the online course she signed up for, and she tried unsuccessfully to cancel it. Although she did sign a promissory note in 2011, Goodwin said she was legally blind at the time because of a stroke and didn’t know what she was signing.

The law firm representing Jefferson Capital didn’t return messages seeking comment.

Conneely said she is working on an out-of-court settlement.

Examining A Growing Industry

The debt-buying industry took off during the savings and loan crisis of the late ’80s and early ’90s, growing significantly in the early 2000s. The industry took a hit during the recession that began in 2007 when desirable debt was in low supply and more expensive.

The industry is thriving again: Third-party debt buyers recovered approximately $55.2 billion in 2013, earning close to $10.4 billion in commissions and fees, according to a 2014 Association of Credit and Collections Professionals report.

By the FTC’s count, there are now “hundreds, if not thousands” of debt buyers. Although some are small, large players purchase most debt. In 2008, 76.1 percent of all debt sold in the U.S. was bought by nine large companies. Buyers in 2009 paid an average of 4 cents on the dollar, and older debt was generally cheaper than newer debt.

Beth Steelman, of Clinton, was sued by one of those big debt buyers last summer. She asked that the company not be named because she is afraid of getting sued again.

Steelman said she found out about the lawsuit when she was contacted by defense attorneys soliciting her business. She said she was never legally notified of the lawsuit. Online court records show the creditor attempted but failed to serve notice that she was being sued.

Once she confirmed that, Steelman asked the company to provide details about the debt, which was between $1,000 and $1,500. It provided the last six numbers of one of her old credit cards.

“If I had tried to fight it, I could tell I was really up against Goliath,” she said.

Steelman paid the company two installments of about $289 each, and the lawsuit was dropped. She continues to get collection letters and isn’t sure if she still owes the company money.

“I’m very paranoid now,” Steelman said, adding that she checks court records every week to ensure she isn’t being sued. She called the new law “terrifying” and “heartbreaking.”

“And that means now, I’ll probably be checking daily instead of weekly,” she said.

Some Engaged In A ‘Sewer Service’

In some cases, alleged debtors are never notified of the lawsuit, ensuring a no-show in court and a win for the creditor. In a practice sometimes called “sewer service,” a collector falsifies records saying a summons was served when it wasn’t, figuratively throwing the papers in the sewer. In 2010, New York’s attorney general sued to throw out about 100,000 judgments that had been obtained this way.

According to a new study by Human Rights Watch, the debt buying industry is “heavily reliant on litigation,” and judges often “rubber stamp” judgments that can be filled with errors and “enormous accumulations of interest.”

“Many debt-buyer lawsuits rest on a foundation of highly questionable information and evidence,” Human Rights Watch found. “Debt buyers do not always receive meaningful evidence in support of their claims when they purchase a debt, and in some cases the sellers explicitly refuse to warrant that any of the information they passed on is accurate or even that the debts are legally enforceable.”

Wisconsin’s online circuit court database shows that between 2003 and March 22 of this year, Jefferson Capital, the company that sued Sandra Goodwin, had filed 2,630 cases against Wisconsin consumers. Nearly 3,000 cases were filed by debt buyer Portfolio Recovery Associates since 1998. Another major player, Absolute Resolutions, has filed 535 cases against Wisconsin debtors since 2014. Hundreds more cases have been filed by companies including Unifund, Transworld Systems and Midland Funding.

Understanding ‘Zombie Debt’  

Once debts reach a certain age, they can be deemed no longer collectible. In Wisconsin, it is generally six years. Wisconsin and Mississippi are the only states where certain debts are completely extinguished once they are past that statute of limitations. Debt that is past that date but which creditors continue to pursue has been referred to as “zombie debt.”

In theory, the fact that a debt is no longer collectible should be a good defense in court. It’s already a violation of the federal Fair Debt Collection Practices Act to file an action in court to collect an expired debt. However, the National Consumer Law Center said most debtors don’t know the laws exist and may not show up in court to contest it. The center recommends a federal ban on any efforts to collect zombie debt, including phone calls or letters.

Fons confirmed that creditors sometimes do secure judgments on these so-called zombie debts “because they (companies) don’t get caught very often.”

Consumer Concerns Grow

From 2011 through 2015, the Wisconsin Department of Financial Institutions received 2,351 complaints about debt collectors, including third-party buyers, Wisconsin Public Radio found.

At the federal level, Wisconsin consumers have filed more than 1,100 complaints with the Consumer Financial Protection Bureau since July 2013 about all kinds of debt collectors. Americollect, a Manitowoc-based collections agency that uses the slogan “ridiculously nice collections,” was the most complained-about company with 44 complaints.

“Debt was paid” and “debt is not mine” were common reasons cited in the  complaints.

Even with so many complaints, the FTC has found consumers dispute only 3.2 percent of cases in which debt buyers attempted to collect. The commission noted that this figure “is likely to understate these problems.”

Debate Surrounds Debt Buyer Law

The new law signed by Walker standardizes but in some cases loosens the required proof at the beginning of a lawsuit for these kinds of legal actions under the Wisconsin Consumer Act. Creditors and third-party debt buyers now must provide a single billing statement as proof at the beginning of a lawsuit.

Under the previous standard, they were required to show all documents “evidencing the transaction,” which could include the initial contract and a record of any charges and additional fees or interest. The law also was changed to make sure the new requirements apply to all creditors, including third-party debt buyers.

Born said in a press release after the Assembly passed his bill in November that the legislation “closes a loophole that has been exploited by bad actors to avoid paying debts.”

Streamlining litigation could hurt consumers, Fons said.

“We don’t need it quicker,” she said. “We need more accountability, we need more accuracy.”

University of Wisconsin-Madison finance Professor Jim Johannes, who testified in favor of the bill, said it standardizes courts’ interpretation of what is required in order to sue.

“It puts a fork in what you need as evidence when you approach the courts in the pleading stage of a case,” he said. “It provides clarity for the courts. Previously, before this the courts could interpret it any way they wanted to.”

For Stacia Conneely, this wasn’t a problem.

“That’s what judges are for, is to review the law and decide what they think it means,” she said.

Johannes said he believes the new law will protect consumers while preventing people from getting out of paying their debts.

“I am all about consumers,” he said. “But I’m not going to sit there and allow somebody to get around paying a debt just because they found a loophole in the law that a judge can now define what they need at the pleading stage.”

Conneely countered that the new law has created a different type of loophole — one that benefits creditors. Now, the required billing statement can be drawn up any time the creditor chooses. It might not include crucial information about the account’s history, she said.

“So, it doesn’t provide the other information that people are going to need, such as how did it get to that amount, and that’s often the question people have,” Conneely said.

At the heart of the disagreement is who is responsible to prove a debt is accurate and can be legally collected — the consumer or the creditor.

In 2014, Georgia Maxwell, then-assistant deputy secretary of the Department of Financial Institutions, testified against Born’s bill.

“DFI would not support legislation that unduly shifts onto consumers the burden of determining the accuracy of the debt they may —  or may not — owe,” Maxwell told the Assembly Committee on Financial Institutions.

In 2015, the CFPB took action against two of the nation’s largest debt buying companies, Encore Capital Group and Portfolio Recovery Associates. The agency charged that the companies often did not verify the debt, collected payments by “pressuring consumers with false statements” and were “churning out lawsuits using robo-signed court documents.” The companies were ordered to pay refunds and fines totalling tens of millions of dollars and to halt collection efforts on another $128 million in debt.

Other states have taken steps to fix the system. In 2013, Minnesota started requiring creditors to show evidence including the terms of the original contract and the chain of custody of the debt. New York also enacted stricter requirements in 2014 by changing court rules.

Conneely is keeping an eye on the number of judgments obtained by debt buyers each month  now that the law has changed. She expects to see more, adding, “We’re just waiting to see how many more.”

Brands Constellation Inc. STZ,
+ 0.69%
announced on Wednesday that it recorded a net loss of $ 908.1 million, or $ 4.74 per share, in its first fiscal quarter ended May 31, less than the loss of $ 177.9 million, or 94 cents per share, recorded during the period of the previous year. Adjusted earnings per share were $ 2.33, while earnings excluding its stake in Canadian cannabis company Canopy Growth Corp. CGC,
-2.25%
CANNABIS,
-1.92%
came to $ 2.51. The FactSet consensus was $ 2.35. Sales reached $ 2.027 billion from $ 1.963 billion a year ago, beating the FactSet consensus of $ 2.021 billion. Sales growth was driven by Meiomi wine, The Prisoner Brand Family, Simi, Ruffino and High West, the company said in a statement. Managing Director Bill Newlands said the beer business saw double-digit net sales and profit growth, while the wine business was poised to deliver accelerated growth and profitability. The company said it now expects EPS for fiscal 2022 to be between $ 2.70 and $ 3.00 and adjusted EPS to be between $ 10.00 and $ 10.30. . The FactSet consensus is $ 10.06. It plans to repurchase about $ 500 million of its own shares in the second quarter, after repurchasing 2.2 million shares for $ 523 million until June 30. Shares were slightly higher pre-market and gained 5% in the year to date, while the S&P 500 SPX,
+ 0.03%
gained 14%.

Constellation brands (STZ) – Get a report posted slightly lower than expected profits in the first quarter, but raised its full-year profit guidance as improved beer sales offset the continued decline in its wines and spirits division.

• Four major groups of plaintiffs have come out in favor of Steinhoff’s global settlement proposal for the litigation it faces due to the sharp drop in its stock price.
• The retailer says the four groups will now suspend their lawsuits against it and its former executives.
• Steinhoff offered 943 million euros (around R17 billion) to be split among all the claimants, which were split into two broad categories.

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Four major groups of plaintiffs have lent their weight to Steinhoff’s comprehensive settlement proposal to settle litigation stemming from the sharp decline in its stock price, the retailer announced Wednesday.

In an update to shareholders, the Stellenbosch-headquartered conglomerate said Burford Capital, Deminor Recovery Services and DRRT/Therium would urge their constituents, which include South African investors, to support Steinhoff’s proposal.

“Any litigation initiated by these active plaintiff groups against Steinhoff and its former directors and officers will be immediately stayed,” he said.

In July last year, another major claimant group, European Investors-VEB, voiced support for the proposal.

Steinhoff faces more than 100 lawsuits in South Africa and Europe totaling more than R130 billion stemming from the precipitous drop in its share price at the end of 2017 when its CEO Markus Jooste abruptly resigned and an accounting scandal was revealed for the first time. The group’s shares have fallen more than 95% since Jooste’s resignation.

Last year, he offered a settlement to all his litigants to resolve all the claims he faces. It offered €943 million (around R17 billion) to be split among all the claimants, which were divided into contract claimants and market purchase claims.

The retailer said it could not afford to offer more to litigants and warned it could face liquidation if the settlement proposal is not accepted, due to a debt of around 10 billion euros.

The insurance groups underwriting liability cover for directors, as well as its former auditors, Deloitte, have both added 78 million euros each (R1.3 billion) to the proposal, subject to conditions.

The four groups are all market purchase seekers, meaning they can expect payouts of up to 10%* of their verified claims if the proposal goes ahead. Verified contract applicants can expect higher payout rates of between 18% and 29%.

‘Unfair’

Although the announcement of support from the four plaintiff groups was a victory for Steinhoff, not all of the litigants who lost in the stock price crash came out in favor of the deal.

Dublin-headquartered Hamilton, which is pursuing claims of 14 billion rand against Steinhoff, has taken legal action to try to stop the process, arguing that the terms of the proposed settlement are unfair. Steinhoff opposes the action and called Hamilton’s motion “unwarranted and premature.”

As Fin24 reported last week, Steinhoff’s BEE partner Lancaster 101 is suing the SA Reserve Bank for allegedly allowing Steinhoff to move assets worth 19 billion euros overseas while the group was technically insolvent – and allowing its local entities to settle claims of foreign investors “to the detriment of the South African economy”. The bank and Steinhoff say they will oppose Lancaster’s litigation.

The settlement does not need 100% of plaintiffs to vote yes for it to proceed, which means Steinhoff can afford some litigants to vote against at upcoming hearings in South Africa and the Netherlands.

* Update: This article has been updated to reflect that market purchase claimants can expect to receive payment of up to 10% of their verified claims when contributions from insurance groups underwriting liability coverage for directors and former auditors of Steinhoff, Deloitte, are added.

KANSAS CITY, Mo. — By the metric that matters most, Alex Smith has failed in his five seasons with the Kansas City Chiefs. He couldn’t take a talented, well-drilled team to the Super Bowl despite four trips to the playoffs, and as a starting quarterback, that’s on his record.

By all other gauges, Smith was a success. Smith stabilized what had been a precarious position for the Chiefs, with seven different players starting at least one game for them at quarterback in the six seasons before he arrived in 2013.

He also guided a desperate franchise, which had lost at least 12 games in four of the six seasons before it walked through the door, to the playoffs four times. The Chiefs have also won the AFC West for the past two seasons, the first time in franchise history that they have won back-to-back division titles.

The Chiefs couldn’t do much with those opportunities. They were 1-4 with Smith in the playoffs, their four losses being one, seven, two and one runs. They scored just 16 points in their playoff loss to the Pittsburgh Steelers in 2016 and were shutout in the second half of their playoff loss to the Tennessee Titans this season.

Those failures are a big part of why the Chiefs traded last year in the first round to sign quarterback Patrick Mahomes II, and why the Chiefs sent Smith to Washington on Tuesday in exchange for a third-round pick plus running back. Redskins corner Kendall Fuller in compensation, sources told ESPN.

Step back in time to 2013, however, and the Chiefs would then have happily accepted what Smith ultimately delivered. After six seasons of Damon Huard, Brodie Croyle, Tyler Thigpen, Matt Cassel, Tyler Palko, Kyle Orton and Brady Quinn, the Chiefs desperately needed a quarterback who could help them win games.

Smith did that. He won 50 of his 76 starts in Kansas City, for a team that had won 24 of its previous 76 games prior to his arrival. Smith threw 102 touchdown passes with 33 interceptions for the Chiefs, making him one of three quarterbacks with more than 100 touchdowns and fewer than 40 interceptions in the past five years.

The others are Tom Brady and Aaron Rodgers.

From a 2013 perspective, it’s great. From the perspective of 2018, this is no longer enough. The Chiefs, with the help of Smith, raised the bar. They will no longer be satisfied with what they would have five years ago.

It’s Smith’s legacy in Kansas City. For that, the Chiefs owe a debt of gratitude to their former starting quarterback.

FirstEnergy Corp., based in Ohio, has reached a settlement with holders of pollution control tickets issued by its bankrupt subsidiary FirstEnergy Solutions that depends on the outcome of an asset sale.

First Energy Solutions Corp. and its affiliates filed for Chapter 11 in Akron, Ohio on March 31. power plants in the competitive or unregulated electricity generation industry.

The deal includes a combination of cash payments and tax notes designed to provide $628 million in value to creditors, according to a securities filing. The creditors, who hold $1.8 billion worth of pollution tickets, agreed to work hand in hand to sell or recapitalize the assets to increase the amount recovered.

There is no cash payment. First Energy and FES have agreed to share any sale proceeds greater than 60 cents on the dollar with debenture holders. Senior bondholders will have the first dibs on the sale proceeds whenever it occurs.

The agreement represents a “significant step towards the final exit from bankruptcy of FES, its related entities and FENOC,” FirstEnergy said in a press release on Monday.

FES and its subsidiaries have $516 million in pollution control tickets expiring between April and December 2018 and $1.3 billion in pollution control tickets expiring between 2019 and 2021. Approximately $612 million dollars of debt are in secured notes, the remainder in unsecured debt issued by Beaver County Pennsylvania Industrial Development Authority, Ohio State Air Quality Development Authority and the Ohio Water Development Authority.

The private power plant operator sold the debt to fund air and water pollution control facilities and sewage and solid waste facilities at its power plants. Under Internal Revenue Service rules, bonds for such pollution control projects are eligible for tax exemption.

“I’m surprised at how quickly the ad hoc group of bondholders and FES came to an agreement,” said Dean Myerow, portfolio manager at Las Olas Wealth Management of NatAlliance Securities LLC. “This bodes well for creditors, as complex cases like this have the potential to be litigious for years.

Under the settlement, First Energy and FES have reached a tentative agreement to share 50/50 of any business salvage value above 60 cents on the dollar for up to three years after the plan’s effective date. .

Myerow said the settlement agreement between creditors FE and FES proposes a distribution based on the tax savings from the settlement of the proposed tax sharing agreement. FE will waive the 2017 overpayment owed by FES/FENOC and reinstate the 2018 compensation amount. “, Myerow said.

The tentative agreement, which has yet to be approved by the bankruptcy court, commits FirstEnergy to provide assistance to FES and FirstEnergy Nuclear Operating Co.

It also bodes well for the employees of First Energy Solutions. “My reading of the term sheet suggests FE will pay existing pre-petition claims for pensions, deferred severance, life insurance and long-term equity incentives,” Myerow said. “This is a huge win for employees who won’t face lengthy litigation.”

If approved, the settlement would release FirstEnergy from all claims and liabilities in the Chapter 11 proceedings.

FirstEnergy said the two groups of creditors who signed the terms would seek approval from the official committee of unsecured creditors, as well as any other key creditors by June 15.

FirstEnergy Solutions, its subsidiaries and FENOC filed for Chapter 11 bankruptcy on March 31. The distribution, transmission, regulated generation and Allegheny Energy Supply subsidiaries of FirstEnergy Corp. were not part of this file.

Prior to the filing, the company had already announced its intention to shut down all three nuclear power plants and has shut down several coal-fired generators since 2012. On March 29, it filed a petition with US Energy Secretary Rick Perry asking for federal intervention. to save society’s unregulated coal. and nuclear power plants. The proposed intervention would be a “grid emergency” that would require the electric grid operator to guarantee profit from the company’s coal and nuclear generators, according to Bloomberg News.

FirstEnergy CEO Chuck Jones said on a conference call with analysts and investors on Monday that the deal would mean a clean break with the cash-strapped subsidiary, although he plans to continue to personally lobby. for the unit’s coal and nuclear power plants to operate.

Jones also intends to continue to press for “regulatory or legislative solutions, including FES’ request to the U.S. Department of Energy for an emergency order under the Federal Power Act” for financial support for old coal-fired nuclear power plants. Under the deal with creditors, if the amount of coal or nuclear subsidies exceeds a certain threshold, “then, yes, we will share some of it. But that’s not why we’re doing it,” said Jones.

S&P Global Ratings raised its outlook for FirstEnergy to “positive” based on the deal and affirmed the parent company’s BBB-minus rating. The revised outlook means there is potential for the utility ratings to improve over the next 12 months, S&P said. Moody’s Investors Service rates the utility Baa3, stable outlook.

On April 2, S&P lowered its issuer credit rating on FES to D from CCC-minus and downgraded all issue-level ratings to D. Moody’s withdrew the rating from FES.

Myerow said that on news of the deal, unsecured bond bonds jumped in value Monday morning “from high 20s to mid 40s, overnight.” Senior bonds traded between the high of the 80s and the low of the 90s depending on their age.

DTEK Energy has agreed terms for the restructuring of Eurobonds and large bank debt with Eurobond creditor-holder committees and banks, the group’s press office said.
The company notes that the completion of the restructuring will ensure the stable operation of the company in the long term, a flexible mechanics of debt service, taking into account the financial forecasts and an unstable external environment.
DTEK’s Director of Strategy and Finance, Oleh Tymkiv, whose comment is given in the report, said that DTEK was building the trading process “like a reliable partner fulfilling its obligations”.
“This has helped to maintain constructive relationships and balance the company’s loan management capabilities and continued development,” he said.
According to him, during the negotiation process, DTEK was able to ensure that creditors fully understood the consequences of the crisis caused by the COVID-19 pandemic, both on the country’s economy and on the energy industry.
“This was reflected in their balanced constructive position, mainly aimed at finding a compromise solution. As a result, we managed to secure the best terms for both sides of the new deal,” Tymkiv summed up.

Related

BANK DEBT, DTEK, EUROBOND, RESTRUCTURING

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