Saturday, January 4, 2014

Rage Against Junk Debt Collectors

I awoke this morning in a feisty mood with the intent to guzzle coffee and to conceive a monkey wrench. Here is the outline for my monkey wrench: Throw with caution.
  1. Credit card companies avoid state usury laws by operating as National Banks or other federally chartered institutions.
  2. Federal law preempts state law for National Banks, etc. Thus, state usury laws do not apply to most credit card transactions.
  3. Upon a credit card debtor's default, these debts are frequently sold to junk debt collectors for a fraction of the amount owed.
  4. Upon the assignment of the debt from a National Bank, etc., to a junk debt collector that is not a National Bank, state usury laws become applicable to the debt in the hands of the junk debt collector.
  5. In the event a junk debt collector attempts to claim prejudgment interest at the prior credit card interest rate, which sometimes happens, the mere attempt may result in the forfeiture of all interest on the debt, and other civil penalties.
  6. KRS § 360.020 provides, in part, "The taking, receiving, reserving, or charging a rate of interest greater than is allowed by KRS 360.010, when knowingly done, shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carries with it . . . . "
It's something to think about on a cold Saturday morning.