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Collector going after statute-barred debts
Business Observer writer
Wednesday, August 02, 2006
Several Jamaicans have complained of being ambushed and bullied by a foreign company - International Assets Services (IAS) - into acknowledging and ultimately settling credit card debt in instances where the statute of limitation on the repayment was already in force.
Over the past few years, the New Kingston-based debt collection firm has been copiously filing letters to these former credit card holders, threatening them with lawsuits, and demanding that they visit its office to either settle the obligation, or make arrangements to pay.
Some of the complainants who, unaware of their legal protection, have gone into IAS' office and admitted to these statute-barred liabilities, have suddenly been faced with demands for hundreds of thousands of dollars, for forgotten debt with initial principal of a few hundred or a few thousand dollars.
Dennis Joslin, the Texan who first began to recover debt owed by former customers of failed banks
But four lawyers who were independently contacted by the Business Observer after this newspaper fielded complaints from some of the former credit card holders, concurred that in instances where the debt was outstanding for six or more years, the forced collection was statute-barred.
In other words, unless the credit card holder had, at the point when he was being issued the card, and in what would be a very unusual action, signed away the protection afforded by the statute of limitation, he could, under Jamaica's laws, simply walk away from the debt.
The lawyers explain that only a lawsuit initiated before the six-year period had expired, or a written acceptance of the liability by the debtor can remove the protection stipulated by law.
"If the collector had sued the debtor within the six-year period, then collecting the debt would not be statute-barred," explained a prominent corporate lawyer who asked the Business Observer not to reveal his identity. "If, on the other hand, the debtor has responded to the payment demand in a way that could be interpreted as an acknowledgement of the debt, then the money that is owed becomes current and collectable."
The American debt collection agency bought the portfolio of past due, and in some cases dud credit card receivables, from Joslin Jamaica Ltd several years ago for a fraction of the face value of the outstanding debt. The business model was apparently predicated on the idea that, by monthly or daily compounding the interest, the collecting agency could spin a healthy margin, even if only a modest percentage of the accreted balance was ultimately settled.
Dennis Joslin is the Texan who was mandated by the Beal Bank of the USA to enforce payment by local individuals and companies that had found themselves unable to service their loans. The Jamaican government had sold to the Beal Bank the right to collect billions of dollars in receivables - with the Americans paying the government a fraction of the face value of the outstanding debt.
The credit cards were issued in the late 1980s to mid-1990s by the four local banks that later collapsed in what was Jamaica's costliest financial sector meltdown. The banks were Workers, Island Victoria, Citizens, and Eagle. A huge chunk of NCB's portfolio was also sold to the Americans.
Joslin Jamaica which was later renamed the Jamaica Redevelopment Foundation, offloaded to IAS the credit card portion of the debt it had 'bought', also for a fraction of the face value of the balance due from the former card holders.
Since then, International Assets has been aggressively going after these former card holders, demanding from them amounts that represent significant multiples of the initial principal balance. In some instances, IAS has demanded well over $1 million for balances of under $30,000 when the account became inactive.
Said Everton Bryan, assistant collections manager in a letter to one individual: ""Since you have failed to respond to requests that you acknowledge and satisfy this obligation, we have no choice except to proceed to declare this obligation "IN DEFAULT" (his emphasis).
He continued: "Be advised that legal remedies are being pursued in order to protect our rights and interest in this matter.If you fail to communicate with this office, we will utilise all available collection procedures and legal remedies necessary to recover this debt. Again it is essential and in YOUR BEST INTEREST (his emphasis) to visit our offices."
The Business Observer has, over the past two weeks, sought explanation from the agency's executives including Patrick deCarish, about the bases for demanding payments on debts that appear to be statute-barred.
This newspaper, however, was unable to get a cogent explanation.
deCarish declined to comment on any aspect of the issue and instead directed the Business Observer to take its enquiry to Finsac.
Bryan in a conversation with this newspaper two weeks ago said only, "We have our way", without providing additional details.
In an attempted follow-up query last week, this time via written correspondence, the Business Observer had marginally better luck.
"It doesn't apply, we have gone through the courts," said Bryan, in what was evidently a minimalist approach in explaining the issues.
When pressed for further details, Bryan said he was advised by his lawyer to make no further comments. He too suggested that our reporters seek answers from Finsac.
Here is what a Finsac representative offered: "It varies on a case-by-case basis. It depends on the agreement that the customer had with his or her bank."
Three of the six former card holders interviewed by the Business Observer were actually willing to go on the record with their story, because, according to them, they felt passionate enough about the issue to publicly identify with it.
However, this newspaper decided to keep their identities anonymous in order to avoid any possibility of placing their case with the collecting agency in any form of legal jeopardy.
One of these individuals, Rona Lake (not her real name) told the Business Observer that in the early 1990s she held two credit cards with two separate banks (name withheld). She recalls each card having credit limit of around $20,000.
Lake, who was also carrying a modest debt for an old model small car, later fell on hard times, and by her recollection, ceased payments in the mid-1990s.
About two years ago, she responded to the importunate demands from International Assets for a visit to its office to discuss a possible settlement. By the company's calculations, Lake now owed nearly half a million dollars.
"I made the mistake of agreeing to pay a certain amount," she said.
A few weeks later, IAS sent a bailiff to seize Lake's car while she was at her office.
Lake told the Business Observer that she was unable to secure any documentation from IAS regarding the car - for example, the price at which it was sold, and what portion of the debt had been settled through the sale. She said she had not heard from the agency since her car was seized. That was two years ago.
The owner of a small manufacturing company said he narrowly escaped a similar fate- thanks to a well-informed and alert friend.
This businessman who said he got caught in the vicious debt trap of the 1990s, was lucky to have rejected the counsel of his lawyer to try and settle the 10-year-old debt with IAS.
He said a friend alerted him to the fact that the long-standing debt had been statute-barred.
The businessman said that during initial discussions with International Assets, its agents tried to link a debt on which the time limit had already expired, with a relatively small one, which was contracted during the same period of the early 1909s, but which was current because it was subject to an ongoing court dispute.
"It was my friend who alerted me to the fact that they could no longer take me to court for the larger debt because the time had expired," he said. "He explained to me that by offering me a settlement by linking the two together was their means of going after the big debt on which they could no longer collect. I immediately fired my lawyer, because if I had listened to her, I would be salt today."
This entrepreneur, like several others, said that he did not just refuse to pay out of a sense of irresponsibility. His small manufacturing business struggled with high overdraft interest rates and low turnover in the early to mid-1990s, and just could not pay its bills, he said.
"My van and furniture were seized," he said. "In fact, when the bailiff came to my business place sometime in 1994, and saw the state of the business, he turned to me and said he would recommend to the bank that they write off the debt. I did not hear from them again until 2004 when International Assets wrote to me."
International Assets said he owed over $2 million.
This businessman says he will continue to ignore the demand, citing the six-year statute of limitation protection provided under the laws of Jamaica.
Yet, the concern of another complainant, was the failure of IAS to provide written, documented evidence of the debt.
"Each time they call I ask them for evidence, and all they do is to demand that I come to their office," said the complainant.
"I also realised from the conversations that they were fishing around and totally confusing various accounts that I had with two institutions. It just did not feel right."
The four lawyers interviewed by the Business Observer for this story, all agreed that in theory, it was possible for financial institutions to write into their loan agreements, clauses that removed the time limit on the pursuit of debt collection.
Said the attorney who is of the view that banks may be able to remove the limit through agreement with the customer:
"It depends on what the agreement is between the parties. It's like a situation where you lend me money and I don't pay you for six years, then if during the six years you never made a demand on me then the matter becomes statute-barred after six years. But if you and I entered into an agreement and that agreement said that you didn't have to place a demand on me for the money, then the debt would become due even though the six years has passed."
This lawyer believes that it made sense for banks to routinely insert such a clause in the fine prints to their loan agreements in order to protect their long-term interest.
"You can almost be positive that the banks would protect themselves from any limitations in case at anytime in the future they wish to bring the action and recover their debt," she argued.
However, two of the lawyers interviewed by the Business Observer strongly disagree, and insisted that such a clause, even if present, could not override the statute of limitation.
For example, John Leiba, the president of the Jamaican Bar Association (JBA), and the only attorney who was willing to go on record, said he doubted that these private agreements could override the statute of limitation.
"There is a six-year limit (for legal enforcement)" said Leiba. "To the best of my knowledge, you cannot bypass this law."
In other words, what Leiba and the corporate lawyer interviewed by this newspaper are arguing, is that even if such a clause exists, it could not protect the bank if it waited over six years to move against customers who have defaulted on their payments.
In addressing this specific issue, here is what Jamaica's Law of Limitations Act number 51, says:
"All actions of account, or for not accounting, and suits for such accounting, as concern the trades of merchandise between merchant and merchant, their factors or servants, shall be commenced and sued within six years after the cause of such actions or suits, and no claim in respect of a matter which arose more than six years before the commencement of such action or suit shall be enforceable by action or suit by reason only of some other matter of claim comprised in the same account having arisen within six years next before the commencement of such action or suit."
A Business Observer review of the fine prints of the credit card agreements of three banks, did not provide any support for the view that financial institutions may have inserted clauses that would get around the statute - except for an oblique reference to this matter in the RBTT agreement.
Said RBTT credit card agreement, note 20b, under the subheading waiver of rights: "Any delay or failure by the bank at any time to exercise any of its rights hereunder shall not be deemed to be a general waiver of such right."
When asked about this specific clause in which RBTT appears to be abrogating the customer's rights to the six-year protection, the attorney said that the rights of the bank to collect its debt would still be subordinated to the six-year statute of limitation.
Moreover, although credit card customers of the Bank of Nova Scotia (BNS) were not involved in the IAS deal, the bank's corporate secretary, David Noel, was clear that his institution had to operate within the statute of limitation.
"(Scotia) abides by the limitations period for the breach of contract, which is six years," said Noel. "It is six years from the breach in terms of failing to pay an amount when it is due, but if the debt is acknowledged after that, then the period starts to run again."
Noel said that this law was introduced in 1997 and that to his "understanding", was enforced upon all institutions.
"I haven't seen it in any of our agreements that allows us to bypass the statute of limitations," he said.
RBTT was created in 2001 from an amalgamation of the four failed banks from which most of the credit card accounts that were sold to IAS originated. Its officers declined comments for this story.
Officers of NCB also declined comments.
Collector going after statute-barred debts
Business Observer writer
Wednesday, August 02, 2006
Several Jamaicans have complained of being ambushed and bullied by a foreign company - International Assets Services (IAS) - into acknowledging and ultimately settling credit card debt in instances where the statute of limitation on the repayment was already in force.
Over the past few years, the New Kingston-based debt collection firm has been copiously filing letters to these former credit card holders, threatening them with lawsuits, and demanding that they visit its office to either settle the obligation, or make arrangements to pay.
Some of the complainants who, unaware of their legal protection, have gone into IAS' office and admitted to these statute-barred liabilities, have suddenly been faced with demands for hundreds of thousands of dollars, for forgotten debt with initial principal of a few hundred or a few thousand dollars.
Dennis Joslin, the Texan who first began to recover debt owed by former customers of failed banks
But four lawyers who were independently contacted by the Business Observer after this newspaper fielded complaints from some of the former credit card holders, concurred that in instances where the debt was outstanding for six or more years, the forced collection was statute-barred.
In other words, unless the credit card holder had, at the point when he was being issued the card, and in what would be a very unusual action, signed away the protection afforded by the statute of limitation, he could, under Jamaica's laws, simply walk away from the debt.
The lawyers explain that only a lawsuit initiated before the six-year period had expired, or a written acceptance of the liability by the debtor can remove the protection stipulated by law.
"If the collector had sued the debtor within the six-year period, then collecting the debt would not be statute-barred," explained a prominent corporate lawyer who asked the Business Observer not to reveal his identity. "If, on the other hand, the debtor has responded to the payment demand in a way that could be interpreted as an acknowledgement of the debt, then the money that is owed becomes current and collectable."
The American debt collection agency bought the portfolio of past due, and in some cases dud credit card receivables, from Joslin Jamaica Ltd several years ago for a fraction of the face value of the outstanding debt. The business model was apparently predicated on the idea that, by monthly or daily compounding the interest, the collecting agency could spin a healthy margin, even if only a modest percentage of the accreted balance was ultimately settled.
Dennis Joslin is the Texan who was mandated by the Beal Bank of the USA to enforce payment by local individuals and companies that had found themselves unable to service their loans. The Jamaican government had sold to the Beal Bank the right to collect billions of dollars in receivables - with the Americans paying the government a fraction of the face value of the outstanding debt.
The credit cards were issued in the late 1980s to mid-1990s by the four local banks that later collapsed in what was Jamaica's costliest financial sector meltdown. The banks were Workers, Island Victoria, Citizens, and Eagle. A huge chunk of NCB's portfolio was also sold to the Americans.
Joslin Jamaica which was later renamed the Jamaica Redevelopment Foundation, offloaded to IAS the credit card portion of the debt it had 'bought', also for a fraction of the face value of the balance due from the former card holders.
Since then, International Assets has been aggressively going after these former card holders, demanding from them amounts that represent significant multiples of the initial principal balance. In some instances, IAS has demanded well over $1 million for balances of under $30,000 when the account became inactive.
Said Everton Bryan, assistant collections manager in a letter to one individual: ""Since you have failed to respond to requests that you acknowledge and satisfy this obligation, we have no choice except to proceed to declare this obligation "IN DEFAULT" (his emphasis).
He continued: "Be advised that legal remedies are being pursued in order to protect our rights and interest in this matter.If you fail to communicate with this office, we will utilise all available collection procedures and legal remedies necessary to recover this debt. Again it is essential and in YOUR BEST INTEREST (his emphasis) to visit our offices."
The Business Observer has, over the past two weeks, sought explanation from the agency's executives including Patrick deCarish, about the bases for demanding payments on debts that appear to be statute-barred.
This newspaper, however, was unable to get a cogent explanation.
deCarish declined to comment on any aspect of the issue and instead directed the Business Observer to take its enquiry to Finsac.
Bryan in a conversation with this newspaper two weeks ago said only, "We have our way", without providing additional details.
In an attempted follow-up query last week, this time via written correspondence, the Business Observer had marginally better luck.
"It doesn't apply, we have gone through the courts," said Bryan, in what was evidently a minimalist approach in explaining the issues.
When pressed for further details, Bryan said he was advised by his lawyer to make no further comments. He too suggested that our reporters seek answers from Finsac.
Here is what a Finsac representative offered: "It varies on a case-by-case basis. It depends on the agreement that the customer had with his or her bank."
Three of the six former card holders interviewed by the Business Observer were actually willing to go on the record with their story, because, according to them, they felt passionate enough about the issue to publicly identify with it.
However, this newspaper decided to keep their identities anonymous in order to avoid any possibility of placing their case with the collecting agency in any form of legal jeopardy.
One of these individuals, Rona Lake (not her real name) told the Business Observer that in the early 1990s she held two credit cards with two separate banks (name withheld). She recalls each card having credit limit of around $20,000.
Lake, who was also carrying a modest debt for an old model small car, later fell on hard times, and by her recollection, ceased payments in the mid-1990s.
About two years ago, she responded to the importunate demands from International Assets for a visit to its office to discuss a possible settlement. By the company's calculations, Lake now owed nearly half a million dollars.
"I made the mistake of agreeing to pay a certain amount," she said.
A few weeks later, IAS sent a bailiff to seize Lake's car while she was at her office.
Lake told the Business Observer that she was unable to secure any documentation from IAS regarding the car - for example, the price at which it was sold, and what portion of the debt had been settled through the sale. She said she had not heard from the agency since her car was seized. That was two years ago.
The owner of a small manufacturing company said he narrowly escaped a similar fate- thanks to a well-informed and alert friend.
This businessman who said he got caught in the vicious debt trap of the 1990s, was lucky to have rejected the counsel of his lawyer to try and settle the 10-year-old debt with IAS.
He said a friend alerted him to the fact that the long-standing debt had been statute-barred.
The businessman said that during initial discussions with International Assets, its agents tried to link a debt on which the time limit had already expired, with a relatively small one, which was contracted during the same period of the early 1909s, but which was current because it was subject to an ongoing court dispute.
"It was my friend who alerted me to the fact that they could no longer take me to court for the larger debt because the time had expired," he said. "He explained to me that by offering me a settlement by linking the two together was their means of going after the big debt on which they could no longer collect. I immediately fired my lawyer, because if I had listened to her, I would be salt today."
This entrepreneur, like several others, said that he did not just refuse to pay out of a sense of irresponsibility. His small manufacturing business struggled with high overdraft interest rates and low turnover in the early to mid-1990s, and just could not pay its bills, he said.
"My van and furniture were seized," he said. "In fact, when the bailiff came to my business place sometime in 1994, and saw the state of the business, he turned to me and said he would recommend to the bank that they write off the debt. I did not hear from them again until 2004 when International Assets wrote to me."
International Assets said he owed over $2 million.
This businessman says he will continue to ignore the demand, citing the six-year statute of limitation protection provided under the laws of Jamaica.
Yet, the concern of another complainant, was the failure of IAS to provide written, documented evidence of the debt.
"Each time they call I ask them for evidence, and all they do is to demand that I come to their office," said the complainant.
"I also realised from the conversations that they were fishing around and totally confusing various accounts that I had with two institutions. It just did not feel right."
The four lawyers interviewed by the Business Observer for this story, all agreed that in theory, it was possible for financial institutions to write into their loan agreements, clauses that removed the time limit on the pursuit of debt collection.
Said the attorney who is of the view that banks may be able to remove the limit through agreement with the customer:
"It depends on what the agreement is between the parties. It's like a situation where you lend me money and I don't pay you for six years, then if during the six years you never made a demand on me then the matter becomes statute-barred after six years. But if you and I entered into an agreement and that agreement said that you didn't have to place a demand on me for the money, then the debt would become due even though the six years has passed."
This lawyer believes that it made sense for banks to routinely insert such a clause in the fine prints to their loan agreements in order to protect their long-term interest.
"You can almost be positive that the banks would protect themselves from any limitations in case at anytime in the future they wish to bring the action and recover their debt," she argued.
However, two of the lawyers interviewed by the Business Observer strongly disagree, and insisted that such a clause, even if present, could not override the statute of limitation.
For example, John Leiba, the president of the Jamaican Bar Association (JBA), and the only attorney who was willing to go on record, said he doubted that these private agreements could override the statute of limitation.
"There is a six-year limit (for legal enforcement)" said Leiba. "To the best of my knowledge, you cannot bypass this law."
In other words, what Leiba and the corporate lawyer interviewed by this newspaper are arguing, is that even if such a clause exists, it could not protect the bank if it waited over six years to move against customers who have defaulted on their payments.
In addressing this specific issue, here is what Jamaica's Law of Limitations Act number 51, says:
"All actions of account, or for not accounting, and suits for such accounting, as concern the trades of merchandise between merchant and merchant, their factors or servants, shall be commenced and sued within six years after the cause of such actions or suits, and no claim in respect of a matter which arose more than six years before the commencement of such action or suit shall be enforceable by action or suit by reason only of some other matter of claim comprised in the same account having arisen within six years next before the commencement of such action or suit."
A Business Observer review of the fine prints of the credit card agreements of three banks, did not provide any support for the view that financial institutions may have inserted clauses that would get around the statute - except for an oblique reference to this matter in the RBTT agreement.
Said RBTT credit card agreement, note 20b, under the subheading waiver of rights: "Any delay or failure by the bank at any time to exercise any of its rights hereunder shall not be deemed to be a general waiver of such right."
When asked about this specific clause in which RBTT appears to be abrogating the customer's rights to the six-year protection, the attorney said that the rights of the bank to collect its debt would still be subordinated to the six-year statute of limitation.
Moreover, although credit card customers of the Bank of Nova Scotia (BNS) were not involved in the IAS deal, the bank's corporate secretary, David Noel, was clear that his institution had to operate within the statute of limitation.
"(Scotia) abides by the limitations period for the breach of contract, which is six years," said Noel. "It is six years from the breach in terms of failing to pay an amount when it is due, but if the debt is acknowledged after that, then the period starts to run again."
Noel said that this law was introduced in 1997 and that to his "understanding", was enforced upon all institutions.
"I haven't seen it in any of our agreements that allows us to bypass the statute of limitations," he said.
RBTT was created in 2001 from an amalgamation of the four failed banks from which most of the credit card accounts that were sold to IAS originated. Its officers declined comments for this story.
Officers of NCB also declined comments.
Collector going after statute-barred debts
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