Month: June 2011

Your Legislature Gets One Right: Revised Tenn. Code Ann. § 35-5-101 Allows Postponement of Foreclosure Sales

There are a number of reasons why a lender would postpone a foreclosure sale, but the most common is that the borrower and lender are trying to resolve the default and avoid the sale. This usually involves the payment of enough money to bring it current (or “current enough”). These efforts often fail, because time runs out, and the lender doesn’t want to incur the expense of cancelling and later re-publishing the sale notice.

In the past, Tennessee law has been unclear as to, first, whether a published sale can be postponed, and, second, whether the lender needs to re-run the Sale Notice publication for a postponement.

As to the first question, most lenders look at their mortgage instrument, to see whether there is express language allowing adjournment. Absent that, the lender will not postpone the sale.

As to the second, there has been no real consensus, other than a vague “it depends on how long the postpone is for.”

In this past session, the Tennessee Legislature provided an answer, in changes to Tenn. Code Ann. Sec. 35-5-101, effective July 1, 2011, which allow for postponements for up to one year after the initial sale date and require certain notices to the borrower.

This is a law that should be good for both borrowers and lenders. It provides lenders with some assurance that they can slow the process down and negotiate with their borrowers, but without the risk of introducing a defect into their sale process. For borrowers facing potential foreclosure, it provides more time to get the issues resolved.

A rare case where everybody wins.

Using Social Media to Collect Debt: If You Can Navigate the Ethical Minefield, It Works 5% of the Time

A new trend in lawyer Continuing Legal Education are seminars advocating use of Social Media to Collect Debts. The seminars either advocate for social media as the tool of the future or caution that it is an ethical trap for debt collectors.

It’s a hot issue in debt collection. NPR did a story on this last year, and the Federal Trade Commission recently conducted a “Debt Collection 2.0” workshop on the issue. Frankly, it’s such a new issue that the Fair Debt Collection Practices Act (FDCPA) doesn’t exactly fit, but it’s close.

It’s definitely a trap for the debt collector, especially given that the FDCPA seems to apply to all communications, regardless of whether it’s a letter, e-mail, or friend request. Does a creditor have to identify themselves as a debt collector under the Act in an initial friend request? Does the friend request (i.e. an “initial communication”) have to be followed by the Act’s required debt validation warning (15 USC 1692g)?

I have no idea. My philosophy is, when in doubt about ethics, choose the safe route. Here, the safe route is avoiding affirmative contact but, if the profile is public, then by all means use whatever you can publicly find.

Just yesterday, I was trying to locate a defendant who had disappeared–all of the searches kept going back to his old house, where the residents swore he no longer lived. But, I found an online profile for him on Map My Walk, a site that allows people to track their running and walking routes. You can guess the rest: everyday, his walks started and ended at the address that I had, providing confirmation of his address (and what time he was home in the afternoon).

At one time, I saw social media as the future of debt collection, especially in the early days of social networking sites (Myspace, Friendster, early Facebook), when people didn’t think twice about privacy settings. Now, people are more savvy about online privacy. (And it’s not necessarily to dodge debt collections–it’s more likely to avoid the boss seeing your party photos.)

Even though people can post pictures of their new car or brag about their promotion at work, most people know better. But, not everybody knows better–and, if they are going to put it online where anybody can see, they can’t complain when a debt collector finds it.

My final take? It’s not the wave of the future in collections. It’s a box to check in the process, but not the solution to finding debtors or their assets.