WSJ: The Debt Collector vs. The Widow


M

mail1606808

The Wall Street Journal
April 28, 2007
PAGE ONE

The Debt Collector vs. The Widow
Viola Sue Kell thought her Social Security benefits were safe in the
bank. She was wrong.

By ELLEN E. SCHULTZ
April 28, 2007

Heart surgery halted Viola Sue Kell's work sewing carpets in a rug
mill in 2001. It was the end of 40 years of cleaning motel rooms,
restaurant jobs, "just hard stuff," says Mrs. Kell, a 64-year-old
widow. She applied for Social Security disability, and her monthly
$827 benefit now is her only income.

But when Mrs. Kell tried to pay her mortgage and electric bills in
2004, her checks bounced. Every cent of the Social Security check,
which went straight to her bank each month, had been taken by a debt
collector that had garnished her bank account.

Federal law says creditors can't take Social Security and Veteran's
benefits to pay debts. (See the assignment online1.) Yet the practice
is widespread. There is no established process for enforcing the
federal prohibition.

When banks receive a garnishment order, their standard response is to
freeze the customer's account. Banks say it's not their job to check
whether accounts contain cash from exempt sources. Collectors also
don't treat it as their job. So the burden falls on Social Security
recipients, typically elderly or disabled, who have suddenly lost
access to their bank accounts and have no idea what to do.

In 2003, a debt collector decided Mrs. Kell in Alabama owed $125 on a
three-year-old hospital bill. It obtained a court judgment and sent a
garnishment order to her bank. The bank froze her account, which
contained $679, all from Social Security. "I was scared to death,"
Mrs. Kell says. "I didn't have any way of getting any money."

At a loss, she looked in the yellow pages for a lawyer. "I'm not very
good with things when it comes to law. My husband took care of all
that," she says. She found a legal-aid office 60 miles away from her
rural home and drove over the mountain with her bank statements and
Social Security papers.

What Mrs. Kell didn't know was that account holders can file a claim
with a debt collector to have any funds that came from Social Security
or Veteran's benefits exempted. But federal law doesn't say who should
tell them this. Even Social Security's Web site doesn't. (See the
relevant item in Social Security's FAQ page.2)

"The Social Security Administration's responsibility for protecting
benefits from legal process ends when the beneficiary is paid," said a
spokeswoman. She said if benefits are taken "as part of a legal
process," beneficiaries can cite the exemption "as a defense against
such actions."

Legal Services Alabama helped Mrs. Kell file an exemption claim, and
her bank, First Federal in Fort Payne, Ala., released her account. The
bank said it had frozen it because it must comply with court orders.
"It's not a bank's place to raise an exemption claim for a customer,"
said a First Federal lawyer. "It would be overwhelming."

The garnishment process can be rewarding for banks. When they restrain
an account, they collect a range of fees -- for imposing the freeze,
for the resulting bounced checks, or for short-term loans to prevent
bounced checks. If the account contains Social Security, banks
commonly collect these fees and their loan repayment out of those
exempt funds. Banks argue that the ban on collecting debts out of
Social Security benefits doesn't apply to them.

Worsening the problem, paradoxically, is direct deposit of benefit
checks. This is meant to make benefits more secure. It means "you can
rest assured your money is safe," says the Social Security Web site.
(See the Web site.3) Direct deposit became mandatory in 1999 unless
beneficiaries opt out, and more than 80% of recipients of regular
Social Security use it, as do a majority of disability recipients.

But direct deposit has had an unintended result: an infrastructure
that makes it cheaper and easier for collectors to pursue elderly or
disabled subjects of old debts. These people can be hard for
collectors to find, sometimes because they've moved to retirement
areas. But debt collectors, knowing that millions of retirees are
having money sent straight to banks, can electronically ask a large
bank if a given individual has an account with the bank anywhere in
the U.S. If a direct-deposit Social Security account turns up, the
collector garnishes it.

Mrs. Kell decided to get her Social Security check by mail, and had to
drive 12 miles to cash the check at a Wal-Mart and buy money orders to
pay bills. (Later, after her lawyer spoke to the bank, she resumed
direct deposit.) She gets food donations from First Baptist Church and
free garden seeds from a Methodist group. "I'm pretty well fixed for
food," Mrs. Kell says. Once she's done paying off her debts, she says,
she hopes to save enough money to visit her husband's grave in
Georgia.
Two elderly people discuss how collectors took their Social Security
money from bank accounts to pay debts, and an attorney says there's a
lack of protection for such vulnerable individuals.

While collectors can take many of the steps to garnish an account
electronically, it's up to seniors and the disabled to file physical
papers to prove their benefits are exempt. As a practical matter, if
they don't get help from a lawyer, they may not know their funds are
exempt. And depending on the state they live in, if they don't claim
an exemption in time -- generally between 10 and 30 days -- benefits
that were garnished can be lost for good.

Dolores and Robert Weise moved to a mobile home in Hernando, Fla.,
from New Windsor, N.Y., three years ago, looking for a cheaper place
to live. Robert, a 70-year-old former paper salesman, was fighting
colon cancer, and the medical bills "put us down the drain," says Mrs.
Weise, 65. She opened an account at a Florida branch of Wachovia
Corp., which received their Social Security by direct deposit.

In July 2005, Mrs. Weise tried to withdraw $20 at an ATM for
chemotherapy co-payments. But her account was frozen. The bank had
received a garnishment order.

Mrs. Weise didn't know Social Security was exempt and the bank didn't
tell her, according to an account from her that is supported by
correspondence among Mrs. Weise, the bank and the debt collector. The
bank told her to take up the matter with the collector, a New York
firm called Mel Harris & Associates.

The collector also didn't tell her funds were exempt, according to
Mrs. Weise. But she says it told her that if she authorized her bank
to wire it $3,109 for an old credit-card debt, Harris would lift the
garnishment order.

Collectors obtain such orders by suing debtors, usually in small-
claims court. These clogged courts issue the orders routinely if the
named debtor doesn't show up or fight the request, for any reason.
Sometimes, the reason is that a summons was sent to an old address. In
the Weises' case, the garnishment order shows the summons was sent to
an outdated address in New York state.

At her bank, Mrs. Weise says, "I was on my knees. It was like our last
dollar. I didn't even have money to buy gas to get home." Distraught,
she authorized the bank to send Mel Harris the money. The bank then
unfroze her remaining funds, minus a $108 processing fee.

Mel Harris declined to comment. Wachovia said it couldn't comment on a
customer because of privacy rules but is "committed to protecting the
safety of our customers' funds while complying with state and federal
law." It said state codes provide instructions for customers to claim
their exemptions. "We are required to honor valid garnishment orders
and are simply following the rules and regulations set forth in
federal and state laws," said a bank spokesman.

However, the garnishment order for the Weises' account stated: "Funds
defined as 'exempt' or otherwise excluded under applicable law must
not be restrained under this notice." The Wachovia spokesman said
banks "are not in a position to determine the character of funds at
any given point in the account."

Garnishment orders often originate with big debt buyers that acquire
large portfolios of old debts written off by credit-card firms,
retailers and so forth. In the Weises' case, a debt buyer had
purchased a batch of old credit-card debts and hired Mel Harris to try
to collect them. Debt buyers and collectors obtain millions of
garnishment orders each year.

A trade group representing debt buyers said they have "a positive role
in the economy, returning to creditors a portion of their investment,
which benefits consumers in the form of more credit and lower interest
rates." Barbara Sinsley, general counsel of the group, DBA
International, added: "It isn't the intention of debt buyers to
garnish exempt funds."

BANKS COLLECT TOO

As James Cain found out, banks are tapping into Social Security funds
too. But the banks' rationale is that they just "offset" money owed
them -- they aren't really collecting debts. Read the story
..
SOCIAL SECURITY'S SAY

[Art] · On the protection5 of Social Security and Veterans benefits

· Lack of notification of filing for exemption6 from debt collection

· On the safety of direct deposit7


Legal-aid offices say they often get calls from frantic seniors
wrestling with collectors who've frozen their Social Security money
and won't let go. The offices say some collectors appear to
automatically deny exemption claims and drag out the process until the
oldsters give up or die.

Cloette Rice, 79, faced possible eviction from her nursing home in
late 2002 after a collector garnished her bank account three times,
seeking repayment of a department-store debt incurred before she had a
stroke. A social worker at Ebenezer Ridges Care Center in Burnsville,
Minn., repeatedly wheeled Ms. Rice to her office and put her on the
speakerphone to the bank, collectors or Social Security. "She was just
so completely stressed out about it," says the social worker, Kimberly
Worrall.

A legal-aid lawyer filed repeated exemption claims over nine months
with the collector, a law firm in Plymouth, Minn., called Messerli &
Kramer P.C. The law firm said on more than one occasion that it hadn't
received the paper work. It denied the exemption.

At a resulting court hearing, a judge, after a three-month delay,
agreed Ms. Rice's funds were exempt and ordered Messerli & Kramer to
return $1,472 and pay Ms. Rice $100 for disregarding her claims in bad
faith. The law firm did so. But two days later, it filed a garnishment
order again -- the fifth time it had done so.

"Mrs. Rice said this caused her more stress than having her stroke,"
said Kathleen Eveslage, of Southern Minnesota Regional Legal Services.
"They basically made her last days hell." In November 2003, she died.

About a year later, Minnesota's attorney general sued Messerli &
Kramer, alleging that it repeatedly garnishes accounts containing
exempt funds and unlawfully denies exemption claims. Messerli & Kramer
said it can't comment during the suit, pending in Dakota County
district court. (See Minnesota's suit8, and Messerli's response9.)
[Thomas Bender]

"These people keep garnishing because they know many will just walk
away, especially these poor little old ladies, who need their dollars
when they get them," said another target of Messerli & Kramer, Thomas
Bender. An 84-year-old disabled veteran of two wars, he uses a walker
and a wheelchair, disabilities due partly to a back injury incurred
while flying dive-bombing missions in Korea.

For a time, he once collected debts himself, for a credit union. Yet
even he didn't know how to protect his Social Security. After his home-
based travel-agent business folded in 2001, the Richfield, Minn.,
widower fell behind on car payments to Ford Motor Credit Co. He
surrendered the car, but the creditor turned the remaining debt over
to Messerli & Kramer, which demanded he pay a balance of $5,757.

Mr. Bender offered to work out a repayment plan, but the collector got
a default judgment against him and garnished his credit-union account,
which contained his Social Security and his Veteran's benefits.

He sent an exemption claim, attaching a letter from the Social
Security Administration. Messerli & Kramer rejected the claim, saying
he had "failed to provide sufficient proof that the funds withheld are
exempt."

In an attempt to protect his future checks, Mr. Bender stopped direct
deposit. He then had to arrange, a week in advance, to have a bus
service for the disabled take him to a bank to cash his check and pay
bills. Even though he no longer had the car he'd bought, and although
all of his income was exempt from creditors under law, Mr. Bender was
determined to pay off the car loan. He filed a bankruptcy petition
that enabled him to set up a long repayment schedule, finally paying
it off this month.

Many banks say it's too hard to keep track of whether money in
accounts is exempt from debt collection. Yet some banks find it
possible. Banco Popular says when it gets a garnishment order it looks
at account deposits for the past 90 days and if all of them involved
exempt funds, it rejects the order. If it finds a mixture of exempt
and non-exempt funds, it advises the creditor of this, says the bank,
which is based in Puerto Rico and has U.S. and Caribbean operations.

Consumer advocates say banks should be able to keep track because they
have complex software that tracks all sorts of other things about
accounts. And direct deposits bear electronic tags. One of the Weises'
Social Security deposits appeared on their statement as "Automated
Credit US Treasury 303 SOC SEC."

Each time banks freeze an account, they charge its holder a processing
fee, typically $100. More fees soon follow -- for bounced checks or
for instant loans to prevent bouncing.

In 2005, a collector got a judgment against Marlene Butts, 72, a
former toll-taker in New York, for $920 of unpaid dental bills. Chase
bank froze her account on Sept. 27. It contained $929, mostly from
Social Security.

The freeze caused a $53.83 check Mrs. Butts wrote two days earlier to
Time Warner Cable to bounce. Chase debited the frozen account a $30
fee for that, reducing the balance to $899.

In the next week, six more checks bounced -- including the Time Warner
check again, which Chase resubmitted for payment even though it had
frozen the account. Each of these brought another $30 fee to Chase,
which also collected $125 for freezing the account.

Then came two tiny pre-authorized debits, for $4.15 and for 95 cents.
The freeze blocked both, and Chase charged a fee of $30 for each. By
Nov. 22, fees had consumed all of the Social Security funds deposited
in Ms. Butts's checking account, which were supposed to be exempt from
the debt collector anyway.

A spokesman for Chase, a unit of J.P. Morgan Chase & Co., said it
couldn't comment on an individual depositor but that if the customer
had told the bank about the situation, it could have helped resolve
things.

Pennsylvania's Supreme Court recently issued a rule that barred banks
from freezing accounts that contain only direct deposits of Social
Security. In California, banks may not freeze the first $2,425 of any
individual's account that receives such checks, even if it also
receives non-exempt funds.

Despite this law, Washington Mutual Inc. in November froze the account
of Helen and Martin Yack, which received Social Security and contained
just $237. A debt collector was pursuing the Yacks, of Oroville,
Calif., for unpaid medical bills dating from Mrs. Yack's pancreas
surgery and her 74-year-old husband's treatment for prostate cancer
and a heart attack.

"They just took every penny," said Mrs. Yack, 67. "We had no money for
food for Thanksgiving. We had to eat what we could find."

Asked why it froze the account in view of California law, Washington
Mutual said it couldn't comment on a customer's case. Its policy is to
"comply fully with all state and federal laws governing garnishments,
levies and legal process," said a spokesman, adding: "We do what we
can to ensure that our customers understand their rights, but cannot
act as their attorney or agent in applying for exemptions."

URL for this article:
http://online.wsj.com/article/SB117771581256385451.html
 
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2

2Phat

There is a way to enforce it. It's called a law suite as it is a violation
of FEDERAL LAW the creditor is to be sued. That will stop them a nice multi
million dollar law suite.

And I'd also hold the bank accountable in the law suit as they see SOCIAL
SECURITY in the deposit and they operate with the blessing of the Federal
Government. IF they see it's a Vet of SSI deposit they do not have to
comply with the court order and cite the reason I'm sure. Granted they
would get into a local city/state ruling vs. a federal law but, someone has
to have some responsibility in this.

So now 2 lawsuits. The banks will defiantly but an end to freezing social
security or vet benefits.

Then also if the local court judge, who by all accounts should know the law,
cites the federal law in his order to the bank, then the bank can see, hey
this is social security or VA benefits. We can't comply with the order.
Bam! Issue resolved, unfair collection practices resolved and life goes on.

The Wall Street Journal
April 28, 2007
PAGE ONE

The Debt Collector vs. The Widow
Viola Sue Kell thought her Social Security benefits were safe in the
bank. She was wrong.

By ELLEN E. SCHULTZ
April 28, 2007

Heart surgery halted Viola Sue Kell's work sewing carpets in a rug
mill in 2001. It was the end of 40 years of cleaning motel rooms,
restaurant jobs, "just hard stuff," says Mrs. Kell, a 64-year-old
widow. She applied for Social Security disability, and her monthly
$827 benefit now is her only income.

But when Mrs. Kell tried to pay her mortgage and electric bills in
2004, her checks bounced. Every cent of the Social Security check,
which went straight to her bank each month, had been taken by a debt
collector that had garnished her bank account.

Federal law says creditors can't take Social Security and Veteran's
benefits to pay debts. (See the assignment online1.) Yet the practice
is widespread. There is no established process for enforcing the
federal prohibition.

When banks receive a garnishment order, their standard response is to
freeze the customer's account. Banks say it's not their job to check
whether accounts contain cash from exempt sources. Collectors also
don't treat it as their job. So the burden falls on Social Security
recipients, typically elderly or disabled, who have suddenly lost
access to their bank accounts and have no idea what to do.

In 2003, a debt collector decided Mrs. Kell in Alabama owed $125 on a
three-year-old hospital bill. It obtained a court judgment and sent a
garnishment order to her bank. The bank froze her account, which
contained $679, all from Social Security. "I was scared to death,"
Mrs. Kell says. "I didn't have any way of getting any money."

At a loss, she looked in the yellow pages for a lawyer. "I'm not very
good with things when it comes to law. My husband took care of all
that," she says. She found a legal-aid office 60 miles away from her
rural home and drove over the mountain with her bank statements and
Social Security papers.

What Mrs. Kell didn't know was that account holders can file a claim
with a debt collector to have any funds that came from Social Security
or Veteran's benefits exempted. But federal law doesn't say who should
tell them this. Even Social Security's Web site doesn't. (See the
relevant item in Social Security's FAQ page.2)

"The Social Security Administration's responsibility for protecting
benefits from legal process ends when the beneficiary is paid," said a
spokeswoman. She said if benefits are taken "as part of a legal
process," beneficiaries can cite the exemption "as a defense against
such actions."

Legal Services Alabama helped Mrs. Kell file an exemption claim, and
her bank, First Federal in Fort Payne, Ala., released her account. The
bank said it had frozen it because it must comply with court orders.
"It's not a bank's place to raise an exemption claim for a customer,"
said a First Federal lawyer. "It would be overwhelming."

The garnishment process can be rewarding for banks. When they restrain
an account, they collect a range of fees -- for imposing the freeze,
for the resulting bounced checks, or for short-term loans to prevent
bounced checks. If the account contains Social Security, banks
commonly collect these fees and their loan repayment out of those
exempt funds. Banks argue that the ban on collecting debts out of
Social Security benefits doesn't apply to them.

Worsening the problem, paradoxically, is direct deposit of benefit
checks. This is meant to make benefits more secure. It means "you can
rest assured your money is safe," says the Social Security Web site.
(See the Web site.3) Direct deposit became mandatory in 1999 unless
beneficiaries opt out, and more than 80% of recipients of regular
Social Security use it, as do a majority of disability recipients.

But direct deposit has had an unintended result: an infrastructure
that makes it cheaper and easier for collectors to pursue elderly or
disabled subjects of old debts. These people can be hard for
collectors to find, sometimes because they've moved to retirement
areas. But debt collectors, knowing that millions of retirees are
having money sent straight to banks, can electronically ask a large
bank if a given individual has an account with the bank anywhere in
the U.S. If a direct-deposit Social Security account turns up, the
collector garnishes it.

Mrs. Kell decided to get her Social Security check by mail, and had to
drive 12 miles to cash the check at a Wal-Mart and buy money orders to
pay bills. (Later, after her lawyer spoke to the bank, she resumed
direct deposit.) She gets food donations from First Baptist Church and
free garden seeds from a Methodist group. "I'm pretty well fixed for
food," Mrs. Kell says. Once she's done paying off her debts, she says,
she hopes to save enough money to visit her husband's grave in
Georgia.
Two elderly people discuss how collectors took their Social Security
money from bank accounts to pay debts, and an attorney says there's a
lack of protection for such vulnerable individuals.

While collectors can take many of the steps to garnish an account
electronically, it's up to seniors and the disabled to file physical
papers to prove their benefits are exempt. As a practical matter, if
they don't get help from a lawyer, they may not know their funds are
exempt. And depending on the state they live in, if they don't claim
an exemption in time -- generally between 10 and 30 days -- benefits
that were garnished can be lost for good.

Dolores and Robert Weise moved to a mobile home in Hernando, Fla.,
from New Windsor, N.Y., three years ago, looking for a cheaper place
to live. Robert, a 70-year-old former paper salesman, was fighting
colon cancer, and the medical bills "put us down the drain," says Mrs.
Weise, 65. She opened an account at a Florida branch of Wachovia
Corp., which received their Social Security by direct deposit.

In July 2005, Mrs. Weise tried to withdraw $20 at an ATM for
chemotherapy co-payments. But her account was frozen. The bank had
received a garnishment order.

Mrs. Weise didn't know Social Security was exempt and the bank didn't
tell her, according to an account from her that is supported by
correspondence among Mrs. Weise, the bank and the debt collector. The
bank told her to take up the matter with the collector, a New York
firm called Mel Harris & Associates.

The collector also didn't tell her funds were exempt, according to
Mrs. Weise. But she says it told her that if she authorized her bank
to wire it $3,109 for an old credit-card debt, Harris would lift the
garnishment order.

Collectors obtain such orders by suing debtors, usually in small-
claims court. These clogged courts issue the orders routinely if the
named debtor doesn't show up or fight the request, for any reason.
Sometimes, the reason is that a summons was sent to an old address. In
the Weises' case, the garnishment order shows the summons was sent to
an outdated address in New York state.

At her bank, Mrs. Weise says, "I was on my knees. It was like our last
dollar. I didn't even have money to buy gas to get home." Distraught,
she authorized the bank to send Mel Harris the money. The bank then
unfroze her remaining funds, minus a $108 processing fee.

Mel Harris declined to comment. Wachovia said it couldn't comment on a
customer because of privacy rules but is "committed to protecting the
safety of our customers' funds while complying with state and federal
law." It said state codes provide instructions for customers to claim
their exemptions. "We are required to honor valid garnishment orders
and are simply following the rules and regulations set forth in
federal and state laws," said a bank spokesman.

However, the garnishment order for the Weises' account stated: "Funds
defined as 'exempt' or otherwise excluded under applicable law must
not be restrained under this notice." The Wachovia spokesman said
banks "are not in a position to determine the character of funds at
any given point in the account."

Garnishment orders often originate with big debt buyers that acquire
large portfolios of old debts written off by credit-card firms,
retailers and so forth. In the Weises' case, a debt buyer had
purchased a batch of old credit-card debts and hired Mel Harris to try
to collect them. Debt buyers and collectors obtain millions of
garnishment orders each year.

A trade group representing debt buyers said they have "a positive role
in the economy, returning to creditors a portion of their investment,
which benefits consumers in the form of more credit and lower interest
rates." Barbara Sinsley, general counsel of the group, DBA
International, added: "It isn't the intention of debt buyers to
garnish exempt funds."
 
N

No 33 Secretary

There is a way to enforce it. It's called a law suite as it is
a violation of FEDERAL LAW the creditor is to be sued. That
will stop them a nice multi million dollar law suite.
I'm not sure I'd take legal advice from someone who doesn't know how
to spell "lawsuit."

--
"What is the first law?"
"To Protect."
"And the second?"
"Ourselves."

Terry Austin
 
2

2Phat

AND I'm now attorney so why would you?
Also when typing fast, type o's happen. Deal with it.
 
N

No 33 Secretary

AND I'm now attorney so why would you?
Can you translate that in to English, please? I really can't figure
out what the **** you're jibbering about.
Also when typing fast, type o's happen. Deal with it.
If you can't communicate in a common language with your client(s),
then what good you you, attorney or not? Seriously.


--
"What is the first law?"
"To Protect."
"And the second?"
"Ourselves."

Terry Austin
 
2

2Phat

What FUCKING clients, you fool! I'm NOT an attorney so why seek legal
advice from me? This is a NG for all, not attorney only. Go communicate
with your hand up your ass.
 
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N

No 33 Secretary

What FUCKING clients, you fool! I'm NOT an attorney so why seek
legal advice from me?
As I said, I couldn't figure out what you were jibbering about, but
you seemed to be claiming to be a lawyer. Let me quote the
nonesensical part again:

"AND I'm now attorney so why would you?:

Learn to post in enligsh, 'tard-boy, and maybe people will know
what you're jibbering about.

But that's the point, isn't it? You being a troll and all, and
nothing more.
This is a NG for all, not attorney only.
Go communicate with your hand up your ass.
You have a fascination with men's asses, do you? Pervert.

--
"What is the first law?"
"To Protect."
"And the second?"
"Ourselves."

Terry Austin
 
2

2Phat

O sorry, DO NOT REPLY to TROLLS if you think I am.

What an Idiot!

"
 
N

No 33 Secretary

I'm a FEMALE you fool.
On the internet, everybody is a sixteen year old girl.
Learn to tell the difference and read as I never claimed to be
an attorney.
Hard to tell, when you're to fucking illiterate.

--
"What is the first law?"
"To Protect."
"And the second?"
"Ourselves."

Terry Austin
 
N

No 33 Secretary

O sorry, DO NOT REPLY to TROLLS if you think I am.

What an Idiot!
I know you are, but what am I?

--
"What is the first law?"
"To Protect."
"And the second?"
"Ourselves."

Terry Austin
 
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W

wizard

WOW what mastery of the thought you have. KILL FILE Bitch.
I'll take that as an admission that you know you're just not man enough to win.


--
"What is the first law?"
"To Protect."
"And the second?"
"Ourselves."

Terry Austin
 

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