Filed under: credit cards | Tags: andy sonderman, bmi credit union, client advisory, credit card default, debt elimination scheme, franklin county
By: Andrew J. Sonderman, Esq.
On June 30, the Court of Appeals for the Tenth District (Franklin County) affirmed a summary judgment for a credit union client of the Firm based on a credit card default (BMI Credit Union v. Timothy D. Burkitt, Case No. 09AP-1024) in an Appeal from the Franklin County Municipal Court. That much of the decision is unremarkable.
This decision is notable because the debtor attempted to employ a defense, and asserted a counterclaim, based on an internet debt elimination scheme employing sham pleadings disseminated through various websites. The debtor’s bizarre theory was that BMI Federal Credit Union (“BMI”) utilized his credit to obtain funding for his credit card transactions.
The debtor sought to support this claim by providing several documents as exhibits, including bogus form 1099’s for two years purporting to reflect non-existent loans by the debtor to BMI. The debtor also submitted an affidavit as an exhibit to his amended counterclaim labeled “DEMAND FOR DEBT VALIDATION”. This is a form he adapted from an Internet website. The Court noted that the “purported affidavit” set forth debtor’s personal lack of “record evidence” on 22 separate legal or factual points “ranging from the relatively straightforward…to the largely unintelligible” (1 see endnote). The purported affidavit required a sworn affidavit in response, and stated that failure to rebut each and every point in the “Demand” would be deemed admission of all points.
After holding that the affidavits and exhibits BMI submitted were sufficient to sustain its burden to demonstrate that no genuine issue of material fact existed and that BMI was entitled to judgment as a matter of law, the Court held that the “Demand” purported affidavit failed to demonstrate any genuine issue of material fact. First, the Court held that the “Demand” did not constitute denial of the documentary evidence BMI submitted. It noted the document instead sought to “raise legal arguments regarding appellant’s liability for the debt owed on the account” as follows:
These arguments have no support in the law or are irrelevant to the issue of appellant’s liability for debt owed on an account. Finally, there is no basis in the law for the process by which appellant claimed that the “DEMAND FOR DEBT VALIDATION” established his lack of liability for the debt owed.
Although the Court’s decision could have ended at that point with affirmance of the judgment below, fortunately it went on to deal with BMI’s motion to strike several sham pleadings filed by the debtor. These included a “CERTIFICATE OF FOREIGN JUDGMENT” attaching as an exhibit a “PRIVATE ADMINISTRATIVE DEFAULT JUDGMENT – DECISION”. This document purported to be a judgment in the amount of $1,800,000 against BMI and finding that the debtor owed nothing on the credit card, rendered by a panel of three notaries public acting as “private administrative judges”. That document also imposed a penalty of an additional $2,000,000 for any attempt to reverse the decision of the notary panel. Accompanying this “Certificate” were the affidavits of the three notaries repeating their conclusions that the debtor owed nothing on the card and that he was entitled to damages of $1,800,000.
The Court granted BMI’s motion to strike, finding:
[T]he documents have no basis in the law. Section 1, Article IV of the Ohio Constitution vests all judicial power in the state in “a supreme court, courts of appeals, courts of common pleas and divisions thereof, and such other courts inferior to the supreme court as may from time to time be established by law.” There is no provision in Ohio law allowing notaries public to constitute a court that may award judgments enforceable in the state. Although the “judgment” filed by appellant purports to be from outside the courts of Ohio and the United States, the authority of the members of the panel supposedly comes from their status as notaries public, a status that comes from their commission by the State of Ohio.
The Court also granted BMI’s motion to strike another debtor’s motion to vacate the municipal court’s judgment for lack of subject matter jurisdiction. This “ouster” of jurisdiction was also based on the purported preemptive effect of the “Private Administrative Judgment” of the notary panel. The Court also granted BMI’s motion for attorneys’ fees as sanctions under Appellate Rule 23. Finally the Court granted BMI’s motion to strike, and for attorneys fees as sanctions, as to another motion the debtor filed identified as “NOTICE OF UNCLEAN HANDS AND DEMAND THAT CASE BE DISMISSED”.
While the employment of these internet-based debt elimination scams has been proliferating, there have been few judicial precedents dealing with the invalidity of the tools. These schemes have routinely ascribed judicial powers to notaries public and claimed preemptive effect in their “judgments”. This decision provides some much-needed precedent in creditor efforts to meet and defeat such tactics.
(1) The Court quoted this example of the latter:
“TIMOTHY D. BURKITT has no record or evidence that, in part, TIMOTHY D. BURKITT’S remedy is not provided within the Supplemental Rules of Admiralty, wherein the Remedy to a hostile presentment, which is a criminal scienter act, is to file a Certificate of Exigency with the Clerk of Court (Warrant Officer), who is then [sic] accept, concur and agree to all statements and claims made herein by TIMOTHY D. BURKITT, by simply remaining silent pursuant to 5 U.S.C. 556(d)”.
If you have any questions, please contact Andrew J. Sonderman, Esq. Andrew is Of Counsel and concentrates his practice in the Litigation & Defense department of the Columbus office of Weltman, Weinberg & Reis Co., LPA. He can be reached at 614-857-4383 or via email at email@example.com.
Filed under: Uncategorized | Tags: appraisal, consumer protection act, cpa, default, dodd-frank wall street reform, foreclosure, HUD, larry rothenberg, modification, mortgage, protecting tenants at foreclosure act of 2009, ptaf
By: Larry R. Rothenberg, Esq.
President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act, (the “Dodd-Frank Act”) in reaction to the financial crisis. In furtherance of the stated objective of insuring financial stability, the Dodd-Frank Act, which is effective immediately, imposes requirements for oversight and regulation of activities such as appraisal activities, mortgage resolution and modification, etc.
Tucked into the Dodd-Frank Act is an Amendment to the Protecting Tenants at Foreclosure Act of 2009 (“PTAF”). That amendment may greatly increase the number of leases and tenancies that can qualify for protection under the PTAF, to the detriment of REO owners.
Since 2009, the PTAF provided protection to tenants who entered into bona fide leases or tenancies prior to the “notice of foreclosure.” In order to qualify as a bona fide lease or tenancy, the tenant could not be the mortgagor, or the child, spouse, or parent of the mortgagor, and the lease or tenancy must have been the result of an arms-length transaction for rent that is not substantially less than fair market rent for the property, unless the rent is reduced or subsidized due to a federal, state or local subsidy.
The term “notice of foreclosure” was not defined in the PTAF, and was therefore ambiguous. Did it mean the lis pendens date, which in Ohio is the date the foreclosure complaint was filed, or did it mean the date of service of the summons on the mortgagor, the date the notice of the sale was filed in the case, the date the notice of the sale was served on the mortgagor, the date of the sheriff’s publication of the sale, the date of the court’s entry of the order confirming the sale, or even actual notice of the foreclosure to the tenant?
In any event, the REO owner acquired title to the property subject to the rights of a “bona fide tenant” under a bona fide lease or tenancy entered into prior to the date that the particular judge would deem to be the “notice of foreclosure.” In order to recover possession of the property through legal action, the REO owner was required to provide a qualifying tenant with written notice, at least 90 days prior to the effective date of the notice, to vacate the premises.
The Dodd-Frank Act’s amendment to the PTAF clarifies the ambiguity to a large extent by stating: “For purposes of this section, the date of a notice of foreclosure shall be deemed to be the date on which complete title to a property is transferred to a successor entity or a person as a result of an order of a court or pursuant to provisions in a mortgage, deed-of-trust, or security deed.”
Therefore, it can no longer be argued, for example, that the PTAF is only applicable to leases or tenancies entered into prior to the lis pendens date. While some ambiguity still remains, the PTAF as now amended, will likely be interpreted to apply to leases or tenancies entered into any time prior to the recording of the sheriff’s deed or other conveyance resulting from the foreclosure. In other words, the PTAF will now apply to a tenant, other than the mortgagor, or the child, spouse or parent of the mortgagor, who enters into a lease or tenancy even after the sheriff’s sale, and probably even after confirmation of the sheriff’s sale, until the sheriff’s deed is recorded, as long as the lease or tenancy appears to be an arms-length transaction for an amount not substantially less than fair market rent, unless subsidized.
The amendment does not provide an express exception even if the tenant had actual knowledge of the foreclosure proceedings, as long as the lease or tenancy otherwise qualifies. This opens the door wider than before to potential fraudulent leases or tenancies through the use of straw-man tenants or others, as a strategy to significantly delay the REO owner from recovering possession of the property. It may be difficult to prove that such a lease or tenancy was not an arms-length transaction. “Strategic renting” may now join “Strategic defaults” in our lexicon.
It is also unclear as to whether this change will be imposed retroactively to pending eviction actions or those not yet commenced, where the sheriff’s deed was recorded prior to the Dodd-Frank Act. Although ordinarily, statutes such as this would provide only prospective relief and not be applied retroactively, the clear intent of the Dodd-Frank Act can easily influence a court to interpret the prior ambiguity in the PTAF more favorably to the tenant.
The Dodd-Frank Act also creates a HUD sponsored program to provide funding for legal assistance not only to mortgagors in default, but to tenants at risk of eviction as a result of a foreclosure. This will enable tenants, to a much greater extent than in the past, to retain attorneys to engage in legal proceedings to delay or prevent the REO owner’s from gaining possession of the property.
As originally enacted, the PTAF contained a sunset provision terminating the Act on December 31, 2012. The Dodd-Frank Act extends the sunset provision to December 31, 2014.
For a copy of the original PTAF, go here.
For a copy of the Dodd-Frank Act’s Amendment to the PTAF, go here.
If you have any questions or would like to discuss this issue in more detail, please contact Larry Rothenberg at 216-685-1135 or via email at firstname.lastname@example.org. Larry is the partner-in-charge of the Cleveland real estate and foreclosure department of Weltman, Weinberg & Reis Co., L.P.A. He is the author of the Ohio Jurisdictional Section contained within the treatise, “The Law of Distressed Real Estate”, published by The West Group. The firm handles foreclosures and related litigation throughout Ohio, Kentucky, Indiana, Illinois, Pennsylvania and Michigan.
Today’s blog comes courtesy of Shari Storm, Senior Vice President and Chief Marketing Officer of Verity Federal Credit Union. Shari is the author of the new book ‘Motherhood is the New MBA”, available here.
I often watch this video for the sheer “pick-me-up” of it.
With all that’s going on in the banking world and the economy, it’s hard to step back and be grateful for what we have. After attending WOCCU’s Global Women’s Conference, I have, at least for now, a new appreciation for how good things actually are for us.
Contrasting our situations with the situations of the women from around the globe gave me a swift perspective re-alignment. Yes, the new regulations and the new economy are tough, but I realized last week that it could be a lot tougher.
There were the two women from Zimbabwe who, when asked what their delivery channels are, looked at us curiously. After a short pause, they said, “We walk money to their home.” And what do you do if they don’t pay you back? “We must take their goat, or their radio, or whatever else they promised. We sell it in the market.” I don’t think anyone at my credit union has ever had to walk to someone’s house for anything. We get annoyed when we have to park more than two blocks away from our building. And our economy is so rich, that using a radio for collateral is unthinkable – let alone a goat.
There was the woman from Mexico who runs a credit union in a remote mountain range where none of her branches have Internet access, and many have no computers. They rely on a two-way radio to call in their daily transactions. Could you imagine a radio being your professional form of communication? How could you possibly check your Facebook account on your lunch break?
Lastly, I met a woman from Macedonia. She has been the head of her financial co-op for the past ten years. She is the only female licensed banking executive in the country. While some may grumble about the lack of diversity at the upper echelons of our industry, we still have countless examples of CEOs of every race, gender and religious background. If you are any type of minority and want to find a role model or mentor, you can in our industry.
Not to get too sentimental about it, but the mere fact that everyone in our country has clean drinking water, electricity, access to computers, the right to attend school, an overall culture of tolerance and a national financial system, while sometimes flawed, is reliable, efficient, and diverse, is something to be grateful for everyday.
Filed under: Uncategorized | Tags: education, rob rutkowski, seminars, webinars
By: Mala Mason, Marketing Communications Coordinator, WWR
Rob is a busy man the rest of the year! Here is a list of where he is speaking and the topics he is speaking on for the remainder of 2010:
July 19, 2010
Topic: Business Lending Certification Institute Fundamentals
Location: Madison, WI
August 18, 2010
Topic: Disaster Preparedness and Recovery
August 19, 2010
Topic: Preventing Credit Union Failure Given the Passage of Regulatory Reform
September 1, 2010
Audience: Illinois Credit Union League
Topic: Decendent Accounts
September 10, 2010
Audience: Minnesota Credit Union League
Topic: Legislative/Regulatory Update & Director/Officer Liability
Location: Brainerd, MN
September 22, 2010
Audience: Association of Credit Union Internal Auditors
Topic: Bank Secrecy Act
October 6, 2010
Topic: Replevins, Repossessions, Protecting the Credit Union When Using Loan Modifications, Managing Your Collections Attorney, Collecting from Deceased Accounts, Post-Judgment Remedies and Collection Tools
Location: San Francisco, CA
October 11, 2010
Audience: CUNA Volunteer Institute
Topic: Compliance Fundamentals Workshop, Compliance Update
Location: Henderson, NV
November 3, 2010
Audience: California Credit Union League
Topic: Opening Deposit Accounts Online: Risk, CIP and CDD Issues
December 2, 2010
Audience: Illinois Credit Union League
Topic: Member Business Loans
Filed under: Uncategorized | Tags: "credit union", advertising, Side Business Lending, Side Business Loans
This blog has become successful because we provide content here, not advertising. My challenge in talking about this is to tell you about it without selling it. In other words, I have to cover my own story. It’s probably impossible and if this sounds like advertising, feel free to tell me so in the comments.
Several months ago, I had an idea. What if credit unions could help replace some of the lost overdraft services revenue through a target marketing lending program? What if this program could become almost universal across the movement to the point where people associated this type of lending with credit unions? What if it could be done so cheaply and easily that it would have few barriers for adoption by credit unions?
Side Business Lending™ is that idea brought to fruition. This is a target marketing program that is essentially 95% marketing and 5% compliance. Credit unions in the program market their loans to their members in a way that encourages them to pursue a hobby or an interest or a side-business via loans from the credit union. But it’s more than that. It involves two forms of marketing: traditional and collaborative among credit unions in the program. Moreover, the credit union’s involvement with the member does not end in making the loan.
Up until today, the program was two thirds complete. I protected the IP and drafted the policy for credit unions in the program. The third component is the website that lets credit unions in the program collaborate on the marketing. Today that website is up.
There are a lot of ways to develop a site on the Internet. I got a referral from my good friend Brent Dixon. He knew a developer named Chad Gowan. Chad is doing development work with Brent right now in addition to his day job (and is also in a band). He’s one of those renaissance guy types. He met my budget and my deadlines and was really good to work with.
So that’s it. I’ve told you about a new thing I’ve developed and tried my hardest not to make it sound like an ad. I cannot tell you how excited I am about this, though.
Today’s blog comes courtesy of Denise Wymore, owner of consulting service for cooperatives, Denise Wymore, LLC.
10 years ago…….
If you had told me that…..
- We would have an African-American for President
- Tiger Woods would be divorced and disgraced
- Michael Jackson would be dead
- A show like Glee would be crazy popular
- Amazon.com and Zappos.com merged and Tony Hsieh’s book would be #1 on the NY Times Bestsellers List
- One of the largest banks in the US would be out of business due a bank failure
- The Post Office is going to shut down Saturday mail deliver
- NCUA would be suing itself
- 1 out of every 200 homes will be foreclosed upon and
- I’d be a guest blogger for a lawyer’s site, I would’ve thought you were:
b. Both optimistic and pessimistic
c. On to something
So if I had a crystal ball and could see 10 years down the road, I would make these predictions:
- The Rolling Stones will still be touring, sponsored by AARP
- The Post Office will be privatized
- Another major bank in the U.S. will collapse
- Tiger Woods will have retired
- McDonalds and Jack in the Box merge to make “Jack n’ the Mac”
- Steve Jobs is rumored to be running for President in the next election
- CUNA and NAFCU will finally be on the same page and in the same house, and
- Credit unions experienced a boom and now hold 25% of the marketplace
What do you think?
Filed under: Current Issues in Credit Unions
This month, Faith and Rob are joined by newcomer John Porter and special guest, Robbie Wright. Here are the topics:
–Regulation Z, even though we hate it.
–Chatting about BSA.
–Last call on July 1.
–Update on the interchange rules.
–The buzz on the new governing body for financial institutions
–Summer reading recommendations from the Cast of CIiCU.
The CIiCU hosts are:
Farleigh Wada Witt,
Attorneys at Law
121 SW Morrison Street, Suite 600
Portland, Oregon 97204
Telephone: 503-228-6044 503-228-6044 503-228-6044 503-228-6044
Messick & Weber P.C.
211 North Olive Street
Media, PA 19063
Telephone 610-891-9000 610-891-9000
American Airlines Credit Union
P.O. Box 619001
DFW Airport, TX
(800) 533-0035 (800) 533-0035
AFCU Director of Regulatory Compliance
NAFCU – National Association of Federal Credit Unions
3138 10th Street North
Arlington, VA 22201-2149
Telephone: 703-522-4770 703-522-4770
Toll-Free: 800-336-4644 800-336-4644
Weltman, Weinberg & Reis Co., L.P.A.
323 W. Lakeside Avenue, Suite 200
Cleveland, Ohio 44113
Telephone: 216-739-5004 216-739-5004 216-739-5004 216-739-5004
Subcribe to the show via iTunes Music Store: http://phobos.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?id=151785964&s=143441