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Affirms Decision Vacating $2.5MM Award to Debt Collectors; Finds Letters are Not Fraud



Accounts receivable entities which are inundated by seemingly auto-generated dispute letters have been paying close attention to the case filed by CBE Group, Inc. (CBE) and RGS Financial, Inc. (RGS) against Lexington Law (Lexington) and Progrexion, Inc. What at first seemed like a significant win for entities being flooded with these letters has seemingly ended with the opposite result.

Here’s a recap of the saga: in 2017, after years of receiving massive amounts of letters with consumer signatures that appeared to be auto-generated and not sent from the actual consumers themselves, CBE and RGS filed a lawsuit against Lexington and Progrexion. The suit alleged Lexington and Progrexion (as Lexington’s agent) committed fraud by making the letters appear to be from consumers when the letters were actually sent by Lexington on templates created by Progrexion. In July 2019, a jury returned a verdict awarding a total of 2.5 million dollars in actual and punitive damages to CBE and RGS, finding that the practice amounted to fraud, including by failing to disclose material facts.

What happened after the verdict?

After the jury came back with its award, Lexington and Progrexion filed post-judgment motions asking the District Court to set aside the jury’s verdict. In February 2020, the District Court granted the motions and overturned the jury verdict primarily on the basis that Lexington’s engagement agreement with its clients (1) allowed Lexington to send letters on its client’s behalf in their names, and (2) advised each client that the letters “will not be identified as being sent by Lexington.”  The District Court reasoned that since Lexington had the legal right to sign its client’s names, it did not make any false representations, material or otherwise when it sent the letters (a false representation is a requirement for a fraud claim).  

CBE and RGS appealed, and on April 1, 2021, the Fifth Circuit Court of Appeals affirmed the District Court’s ruling, confirming that as a matter of law, Lexington’s conduct did not amount to fraud. The Fifth Circuit also focused on the language of Lexington’s engagement agreements and rejected CBE and RGS’s contention that there was no true attorney-client relationship between Lexington and its clients. Instead, the Court noted that the engagement agreements had not been shown to be invalid, and even if Lexington’s clients misunderstood the terms of the engagement agreement, they were still bound by it. Like the District Court, the Fifth Circuit concluded that since Lexington was operating with its clients’ consent, it did not make any false representations when it sent the letters, nor did Lexington create any false impressions requiring disclosure.

Further, the court held that the fraud claims must fail because CBE and RGS did not “justifiably rely” on the alleged misrepresentations since their internal policies and procedures require them to investigate and respond to dispute letters sent by consumers third parties alike. Regarding Progrexion, the Court held “there is no evidence that Progrexion sent dispute letters; rather the evidence is that Progrexion provided template letters to Lexington [] for its use, hence Progrexion cannot be liable for fraud since it like Lexington law did not make any material misrepresentations.”

insideARM Perspective

As we stated when the District Court vacated the judgment in 2020, this is an unfortunate ruling in the fight against a practice that ultimately harms consumers. Legitimate debt collectors understand the importance of accurately reporting account information to the credit bureaus, and they build robust compliance processes and procedures to ensure they are reporting correctly and are able to investigate quickly—and, if necessary, correct—disputed information. It is believed that many credit report disputes, such as the ones from credit repair organizations, are not legitimate; instead, they are an attempt to remove correct, but unwanted, derogatory items from credit reports. If debt collectors are flooded with these illegitimate disputes, it makes it more difficult to separate the wheat from the chaff and help consumers who have legitimate disputes.  Maybe there is a different legal theory to pursue in this battle, but the Fifth Circuit has made clear that if the credit repair organization is acting in accordance with its engagement agreement, a fraud suit may not be successful.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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