Steve Harms

Friday, May 20, 2011

Electronic Signatures on business contracts ARE enforceable!

Electronic signatures, such as confirming emails or click-ons ("I agree") or similar buttons are valid means of entering into contracts which are binding, and which will be upheld in court.

There are two main laws dealing with the topic of electronic signatures, the Electronic Signatures in Global and National Commerce Act (E-SIGN) and the Uniform Electronic Transactions Act (UETA).

E-Sign is a federal act enacted 10/1/2000 providing that no contract be “denied legal” effect solely because it is in electronic form. In other words, an electronic signature may be just as enforceable as a written one.

UETA is a state act enacted in 1999 to create uniformity in state laws pertaining to e-commerce. This act is very similar to E-SIGN in that it establishes that “records, signatures, and contracts may not be denied enforceability solely due to their electronic form.”

The state law, UETA, is a uniform act, which, like the UCC, has been adopted in some form by most states…Michigan has adopted it.

Now, what is important is that both sides agree to the use of electronic signatures and that there be a way to prove the customer/debtor did consent….for example, client should require debtor to email back, or have a click on button “I agree” or something similar. IF information is merely AVAILABLE online, that won’t be adequate.

Most states also have restrictions on what contracts can be made or cancelled with e-sign…for example, insurance companies still have to mail out written cancellations of policies even if the contracts to purchase insurance were done by e-sign.

There are cases at the appeal level which have upheld the validity of e-sign by email and click on agreements.

Then, there is the practical, as opposed to legal, factor: some judges aren’t in the 20th Century!

Find out more: Handling the Collection Case in Michigan

Thursday, May 12, 2011

Collection follow up -- when to place claim with a professional

If you have good collection policies, they include timeframes in which to take certain actions, such as the following:

* Following up with demand letters requiring payment when an account balance becomes delinquent.
* Following up with collection phone calls when demand letters don’t produce payment.
* Immediately following up with the debtor when the debtor doesn’t keep promises to make payment.

When you’ve taken the actions defined by your collection policy and your debtor still hasn’t paid, you shift into collections mode. Delay in initiating collection action, including bringing in collections professionals as appropriate, can be the death knell for collecting on the account. If your debtor still has (or may have) some ability to pay but continues to stall payment, you need to move quickly.

After you decide to start the collections process, do you collect the delinquent account yourself, or do you bring in a professional? You should consider placing an account with a professional when

* Lines of communication between you and the debtor have completely broken down.
* You can’t reach your debtor by phone, and you think your debtor may have skipped town.
* You sense that your debtor has financial difficulties and has several other unpaid creditors who will be going after what’s left of your debtor’s money.
* You don’t trust the debtor’s words or intentions because of the passage of time since the last payment and the number of promises the debtor has broken.
* Your debtor’s delinquency threatens your own credit by putting you in danger of violating standards set by your auditors, banks, factors, or receivable insurance contracts.
* Your instinct tells you it’s time to bring in a professional.

Strive for a team like relationship with your collection agency or attorney in which the agency or lawyer is an extension of your credit department. Without a good relationship, you may feel awkward referring a case to an outside collector, but relying on team members for assistance seems only natural.

Credit and Collections Kit is here to help you with this

Monday, May 9, 2011

Bankruptcy: Some of the features you need to know

Bankruptcy operates in its own little world. It has its own court system, and its own terminology. A bit of familiarity with bankruptcy jargon and procedures can be helpful:

* Automatic stay: The filing of a bankruptcy petition triggers a 120 day period during which creditors may take no action against a debtor or the debtor’s property. Under some circumstances it may be possible to get a bankruptcy court to grant relief from the automatic stay, but absent court permission a violation can trigger contempt sanctions.

* Filing a proof of claim: When you receive a notice of bankruptcy, stop your collection activity and file a proof of claim. Through doing so, you will receive a dividend or a payment equivalent to what other unsecured creditors will receive. If you do not file a proof of claim, you will probably not receive additional notices and you will also probably not receive a dividend.

* Preference payments: A preference is money paid to a creditor on the account while the debtor was insolvent and within 90 days of the bankruptcy filing. If you receive payment under those circumstances, the bankruptcy trustee may demand that you repay the preference amount. If you haven’t made any special deal with the debtor and he owes you the money, that may not seem fair. But the theory is that a bankrupt debtor shouldn’t be allowed to pick and choose which creditors he wants to pay within 90 days of the bankruptcy filing. (Besides, more often than not you won’t be the lucky creditor who received that $1,000, and it will somehow seem fairer that the money comes back into the pool.) Preferences are limited to amounts over $5000 in commercial and $600 consumer.

* Getting stuff back from the bankrupt debtor: Within 45 days of a bankrupt debtor’s receiving your product, you may be entitled to demand its return if the sale was an ordinary sale that occurred while the bankrupt was insolvent, and you make your demand while the debtor is still in possession of those goods. When you have the right to do so, make a written demand for the return of that product. As a practical matter, telephone the debtor first to let them know that the demand is forthcoming, then follow up with a quick writing. Once the debtor ships the goods to one of its customers, you lose the right to reclaim.

* Creditors’ Committees: In some large bankruptcies, primarily Chapter 11’s, creditors’ committees are formed of the 5 or 7 largest unsecured creditors. If your company is one of the larger creditors, you may receive a notice and an opportunity to sit on the creditors’ committee. Membership on a creditors’ committee is entirely optional and voluntary.

* Dischargeability and Nondischargeability: Some of the debts of a bankrupt debtor are dischargeable and others are nondischargeable. Typical dischargeable debts include ordinary trade debt, ordinary credit card debt, utilities, unsecured bank loans and other forms of unsecured debt. The debtor doesn’t have to pay any portion of a debt that is discharged.

Other forms of debt just never go away. The government, for example, gives itself a great deal of protection from bankruptcy. Taxes, court fines and student loans are usually nondischargeable debts because they are due to or guaranteed by the government. Other examples of nondischargeable debts include child support, and debts resulting from fraud or malicious acts taken against persons. Should you have a debt that you believe is nondischargeable, you may benefit from consulting a lawyer about filing a special action within the bankruptcy court to declare your debt nondischargeable. If the action succeeds, debtor will still have to pay the debt, even after bankruptcy.

* Reaffirmation and Redemption Agreements: Sometimes a debtor wants to keep secured collateral, such as a car or house that is subject to a lien or mortgage. Reaffirmation and redemption agreements allow the debtor to pay part or all of a debt owed to a secured creditor in order to keep the collateral. In a reaffirmation agreement, the debtor agrees to keep making payments on the loan in order to keep the collateral. Sometimes the terms of the loan are modified. In a redemption agreement, the debtor agrees to pay off the balance owed in order to keep the collateral. If the amount owed exceeds market value, redemption may occur following a motion with the court to permit redemption at market value.

* Dismissal of a bankruptcy proceeding: Sometimes debtors file bankruptcy in order to get people off their backs. Once the immediate pressure from creditors is removed, bankruptcies are sometimes quietly dismissed. Dismissal lifts the automatic stay, permitting you to proceed against the debtor as if bankruptcy had never been filed.

The Bankruptcy Act is about a million pages long and includes about a million incomprehensible terms, only a few of which are referenced above. Rather than trying to figure out the ins and outs of the law, your best bet is to file a timely proof of claim and just wait and see what happens. If you feel you have a special cause of action, such as fraud or the right to get your stuff back (goods shipped to the debtor within 45 days), consider talking to a bankruptcy attorney.

All the Credit and Collection Law you need: at your fingertips

Tuesday, May 3, 2011

Michigan Mortgage Foreclosures: MERS can't legally foreclose!

This is hot and important news for debtors and creditors who have mortgages expedited (how ironic) through MERS (Mortgage Electronic Registration Systems, Inc.) in Michigan.  The Michigan Court of Appeals just ruled in a 17 page opinion that MERS can't act to foreclose or evict in its name, because MERS, simply put, is not the owner of the debt which underlies the mortgage (a mortgage is just a lien, a debt is evidenced by a note).

So, MERS based mortgages are halted, but what about the foreclosures and evictions which have already cases on that issue...yet.  However, there are lots of mortgages in foreclosure right now, where the process of foreclosing may have to be re-started as the result of this ruling.

As many as 60 million mortgages were written by MERS, which is a company set up by big financial institutions to expedite the process. 

Perhaps the underlying law may be changed.  Perhaps future foreclosures will be done under the lender's name...who knows.

This information came through several sources.  Michigan Lawyers Weekly, Vol. 25 No. 25 page one has a great write up on the topic.  Its web site is attached: The case name is Residential Funding v. Saurman.

Garnishment of Social Security and SSI benefits after May 1, 2011

It has always been improper to take anyone’s SS or SSI or similar benefit from a bank or credit union pursuant to a garnishment ...the change you may be hearing about, which supposedly took place on May 1 made it more of a requirement for banks and other financial institutions to identify and exclude those funds from disclosures (the funds are being “tagged electronically” somehow) as the financial institution usually doesn’t KNOW what funds are garnishable and what funds are excluded. 

Some banks have been disclosing (that is, holding for the creditor) all the deposited funds, requiring the parties to fight about what should be excluded.  Some banks have been attempting to disclose only exempt funds...the practice by banks has varied widely, to be blunt about it...and the practice from state to state has also varied widely.
The May 1st requirements may put a big burden on these financial institutions not to disclose any excluded funds.

So, while creditors shouldn’t have been able to get at excluded funds, such as social security benefits,  prior to May 1st…the confusion lies in the new requirement for banks to be more proactive in excluding those funds from any garnishments.

There may be some further clarifications of the changes in how garnished financial institutions of individuals (not businesses) are to be handled....if I get any, I'll post 'em for you.

That’s my understanding. This is not legal advice, merely my comments and casual statements.