She lost everything in a fire. Then her bank froze the savings she needed to move on
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Siraba Keita survived New York’s deadliest fire in decades — only to see her bank freeze the savings she needed to pick up the pieces.
According to consumer advocates, her story shows the difficulties of low-income Americans living in a system where debt collectors seem to be more important than customers.
Keita lived with her children in East 181 and rented an apartment.It is possible toStreet in Bronx where you can find a blazer killed 17 peopleJanuary 9, 2009. The family was on the third floor of the 19-story complex — the same floor where a faulty space heaterThey ignited them.
“We lost everything, not just the house — clothes, shoes, everything,” said Keita, 39, an immigrant from Mali, in West Africa.
Keita, J.P. Morgan Chase Customer, attempted to use her J.P. Morgan Chase bank card, but the transaction was rejected. Unbeknownst to Keita, a creditor had gotten a court order to freeze her money — the vestiges of old credit card debt that had spiraled out of control.
New York law is automatically applicable protectsA freeze may protect funds up to $3600. Additional funds, such as child tax credit payments monthly, could also be protected. Many states offer variations on these laws to assist customers in subsisting while they settle debt disputes. Federal law also provides protection for benefits such as Social Security.
But Chase withheld all of Keita’s savings — more than $5,000 — for weeks, despite several trips to her local bank branch and repeated phone calls, she and her attorney said.
Keita was living off savings and selling jewelry before the fire. Keita had stopped her work as a nurse assistant in order to take care of her son, aged 3, who is autistic.
Keita told Keita that all of her money was in the account. This was my entire life.”
CNBC attempted to reach Chase for comment, but they refused to speak to the media due to privacy concerns.
According to the spokesperson, “When we get a restraining note tied to a New York court order against a client to freeze funds that they owe to creditors, we comply to the law and notify customers in writing to clarify what’s happening and the steps they must take to access exempt funds.”
CNBC also identified others who believe that their bank violated the law when it improperly frozen funds due to a judgment.
Low earners bear the brunt of this — a group most likely to turn to high-interest debt but with the least ability to repay it, according to consumer advocates.
Although it is not clear how many people are affected each year, the number of debt collectors suing customers has been increasing in court.
Between 1993 and 2013, there were more than 4,000,000 debt collection cases in the state civil courts. accordingPew Charitable Trusts is a nonpartisan research organisation. It stated that the available data indicates this trend continues.
These suits make up approximately one fourth of all civil cases brought before state court. The ratio was just one in nine as early as the 1990s according to Pew.
Due to the end of most financial protections that were in place during the pandemic, like foreclosure moratoria or eviction moratorias, it is likely that debt litigations will increase. accordingTo the National Consumer Law Center
The second largest source of debt was already in collection complaintsIn 2020, the Consumer Financial Protection Bureau received over half of them. More than half of these were to collect on debts that weren’t due.
In the fourth quarter of 2007, household debt grew at its highest rate in four years at $16 trillion. accordingTo the Federal Reserve Bank of New York
Mary McCune of Legal Services NYC represented Keita and said, “I have been seeing it more that I would like.”
McCune said, “It sometimes feels like Dickensian times.” It’s called the criminalization and criminalization of poverty.
Others believe that banks are more aware of the law and have improved their compliance.
Cliff Dorsen of Skaar and Feagle, a Georgia attorney who handles consumer rights cases, stated that “In years past I’ve certainly witnessed banks do that.” It’s something I haven’t seen in quite some time.
He said, “But it doesn’t necessarily mean that they aren’t doing it.” “But nobody’s calling about it.”
According to documents, Keita owed Discover Bank approximately $5,200 of credit-card debt. This included principal, interest, and other charges. The debt was paid off in monthly installments of $100-200 per month. She failed to keep up. She became discouraged and stopped reading notices. She has stopped using credit cards.
Keita explained that she didn’t want it to turn out like this. I’m not bad. I can’t pay.”
Some customers didn’t know the debt existed. They only learned of it when their bank shut off the water supply. Even then, they weren’t privy to the debt’s origination — leaving them guessing as to its authenticity and navigating a legal morass.
Taneesha Woodyear (49) learned about a $2400 judgment after Chase called to alert her of an insufficient account.
In the end, she waited for more than five years, between May and October 2021 to be able to access her savings.
Woodyear lives in Harlem and said, “I kept my money for rainy days.” Then it rains, and the umbrella is useless.”
Following receiving Judgment Recovery Partners LLC’s restraining notice, the bank placed her funds on hold. Judgment Recovery Partners LLC was a New York debt collector. According to records filed at the Civil Court of New York, the judgment was more than a decade old and dated back to January 2011. Advantage Assets II Inc. had been the buyer of the 2011 judgment. Judgment Recovery Partners then bought the debt, and is trying to collect it.
The court ruled automatically in favor of Woodyear because he didn’t appear at a hearing and Woodyear didn’t even know about the debt. These default judgments are used in about 70% of debt collection cases. according(Pew. Interest keeps accruing on such loans, though — and Woodyear’s debt had ballooned to more than $4,600.
Third parties who buy loans, such as student and medical debts at a discounted price and attempt to recover the money.
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According to Carolyn Carter (Deputy Director of the National Consumer Law Center), it is not unusual for consumers to not know about a debt until too late.
So, for example: If a tenant moves out of an apartment believing it to be in great condition and the landlord then sues them for cleaning expenses, what happens? Even if the bill is not received, renters may still believe they don’t owe any money. Perhaps you are a cosigner on a loan car for your friend, child, aunt and they default years later. This could be a situation where you don’t know it.
Woodyear was not permitted to reveal the source of her original debt to Woodyear nor her attorneys. However, she believes it was around the time that her mother died and when her finances were temporarily in disarray.
Woodyear had $7,180 in her bank account — well exceeding the $4,600 debt judgment. New York law allows banks to freeze twice the amount of the judgment. In this instance, Woodyear’s account was frozen at $9,200.
Ahmad Keshavarz, Emma Caterine and Emma Caterine, claimed that the bank violated state law (“The Exempt Income Protection Act”), which would have meant $3,600 should not have been lost.
The attorneys stated that she should also have been able to access other funds under pandemic-era regulations (federal stimulus payments starting in March 2021, and later child tax credit payments for her eleven-year old),
According to court records, the freeze continued even though Woodyear’s debt judgment was overturned by a judge on May 25. Chase eventually granted Chase access to Woodyear’s files in the fall months afterward.
Woodyear said that it was difficult to pay my rent and my bills. He also struggled with buying 11-year old clothes, shoes, and toiletries. It’s your money. The bank tells you that it’s not possible to have it.
Chase spokesmen could not speak to Woodyear’s particular case due to privacy issues. He repeated that Chase follows all laws and informs customers about the steps they can take to access funds.
Carter from the National Consumer Law Center states that all but one state (Delaware), allows creditors to seize bank accounts for debt satisfaction.
Similar to New York’s, the exemption laws in these states protect specific funds from being taken. These laws vary from one state to the next.
Arizona is one example. It exempts only $300 from any bank account. However, other assets such as a house worth more than $250,000 and a vehicle worth $6,000 are exempted. accordingTo the National Consumer Law Center
Mississippi covers a house worth $75,000 and provides an extra “wildcard” exemption of $10,000 for debtors.
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Carter explained that “self-executing” rules are available in six states: California (California), Connecticut, Massachusetts Nevada, New York, New York, and Washington. Without any action from the consumer, they exempt bank accounts up to a dollar value automatically from garnishment.
Bank funds may be frozen in almost all states once a debt collector files a garnishment or order. The protections are only available to consumers who take the necessary procedural steps, such as attending court hearings or filing papers in court.
These legalities can be complicated and can sometimes take up to months. Consumer advocates say that this is true even for those who are skilled. Delayed payments can lead to other problems: Late fees and outstanding checks can be bounced, landlords might move to evict you, your credit score may fall, and so forth.
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New York City has among the strongestThe National Consumer Law Center outlines the protections that are available relative to states other than their own.
Customers still have to fill out paperwork in order to be eligible for protected funds, such as unemployment benefits, if their income exceeds the $3600 threshold. These forms should be submitted to both the bank or creditor within 20 daysThe bank will then release the money to the creditor. They have a week to challenge it in court. The bank releases the money if everything goes well.
According to Susan Shin (legal director, New Economy Project), Aboubacar, 58 was an immigrant who came from Cote d’Ivoire in West Africa. He filed the Exemption Claim form within the required 20 days. For privacy purposes, he requested that his first name be used.
Capital One, the bank he used, had left around $10,000 unfrozen. However, the bank also kept thousands of dollars worth of protected funds such as a Small Business Administration Disaster Loan, Unemployment Benefits, and Child Tax Credit Payments, according to bank records.
From September 2021 to January 2022, he waited for Capital One’s release of the cash.. Aboubacar’s judgment on Aboubacar was dated 2000. Its source remains a mystery. Shin stated that the judgment, which was over 20 years old and therefore not legally binding, exceeded New York’s statute on limitation.
Aboubacar was a father to four and drove for a ride-share company. He made approximately $25,000 per annum at the time that his account was frozen.
Shin stated that Shin’s income places Shin and his family under the federal poverty level. Shin also said that the long-standing restraint contributed to their financial difficulties.
A Capital One spokesperson stated that they acted in lawful manner in Aboubacar’s matter.
According to a bank spokesperson, the bank never received the signed and dated exemption form from the customer. According to the bank spokesperson, this led to a long process that included a court hearing as well as the relaying of the court’s decision from the NYC Marshal’s and plaintiff’s attorneys offices to Capital One for processing the order. On Jan. 19, the bank released the account.
Aboubacar appears to have mailed the Exemption Claim Formula in the correct time. The bank stated that Capital One notified him September 9 regarding the account withholding. According to CNBC, a copy of the Certificate of Mailing from the United States Postal Service was obtained.
It’s unclear what happened after that — if the bank didn’t receive the forms at all, or if the bank received them and deemed them insufficient, for example. The spokesperson for the bank The request for comments on this issue was not answered.
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Shin said about New York’s regulations, “It is a strong law and it works in a lot of circumstances.” It is problematic when the banks are negligent and do not take corrective action. The banks leave customers at the mercy debt collectors who have all the power.
Some banks comply with the technical aspects of the law, but in ways that prove onerous for consumers — by sending a paper check or a prepaid debt card in the mail, for example, which the consumer doesn’t always receive, Shin said.
Keita was forced to flee the flames and finally got $3,600 by February mid-February. On March 14, she moved into an apartment in the Bronx. McCune, Chase’s attorney, informed Keita that Chase had told Keita, March 11, that she would have access to the $5,000 balance within days.
Woodyear also sued Chase in arbitration, seeking damages for the freezing. This case remains pending.
Woodyear explained that his money was still in the bank because he doesn’t know which bank was best. Woodyear said, “Once you have been burned by one bank you won’t know where to go.”
She added, “Sometimes I am afraid to check my banking account.” “I fear to see it being frozen.”