Tuesday, January 21, 2014

Debt collection updates

Texting debt collector to settle FTC charges

Unlawful disclosure

In their text messages, phone calls and mailings, the defendants also falsely portrayed themselves as law firms -- by using the names National Attorney Services, National Attorney Service, National Attorney, and Abogados Nacionales. Building on their deceptive company name, the defendants falsely threatened to sue consumers for not paying their debts or to garnish their wages.
PhotoThe FTC also contends Donovan and his companies illegally revealed debts to the consumers’ family members, friends and co-workers. Among other tactics, the defendants used mailing envelopes picturing a large arm shaking money from a consumer who is strung upside down.
The law does not allow debt collectors to disclose publicly someone’s private debts, because doing so could endanger their jobs and reputations. Mailing envelopes can include only the name and address of the company, and cannot indicate that the consumer may owe a debt.
“No matter how debt collectors communicate with consumers -- by mail, by phone, by text or some other way -- they have to follow the law,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “The FTC has a zero tolerance policy for deception.”
In addition to the $1 million civil penalty, the settlement requires the defendants to stop sending text messages that do not include the disclosures required by law, and to obtain a consumer’s express consent before contacting them by text message.
The defendants also are barred from falsely claiming to be law firms, and from falsely threatening to sue or take any action – such as seizure of property or garnishment – that they do not actually intend to take.
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The Consumer Financial Protection Bureau (CFPB) is putting debt collection companies on notice that they will be held accountable for unlawful conduct.
The CFPB also announced that it is now accepting debt collection complaints and is publishing action letters for consumers to consider using in corresponding with debt collectors. 
“These bulletins make clear that it doesn’t matter who is collecting the debt—unfair, deceptive, or abusive practices are illegal,” said CFPB Director Richard Cordray at a field hearing in Portland, Maine. “Consumers need options to help them secure fair and respectful treatment from those debt collectors that fail to abide by the law. They can protect themselves by using our action letters to communicate with debt collectors and by submitting a complaint to us if they believe they are harmed by illegal conduct.”

Action letters

The sample action letters are for use by consumers when corresponding with debt collectors. They're intended to help consumers obtain valuable information about claims being made against them and may help consumers protect themselves.
The letters address situations when the consumer:
  • is seeking more information on the debt;
  • is disputing the debt;
  • wants to restrict how the debt collector can contact them;
  • has hired a lawyer to handle the case; and 
  • wants the collector to stop all contact.
More information is available on the CFPB website.
The CFPB is also releasing a second bulletin today that warns companies about statements they make about how paying a debt will affect a consumer’s credit score, credit report, or creditworthiness.
The Bureau is concerned that some of these statements – like telling consumers that paying a debt would improve their credit score – may be deceptive. The bulletin highlights examples of potentially deceptive claims debt collectors may be making to consumers about their credit reports and credit scores. The complete bulletin is available online.
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The world’s largest debt collection agench, Expert Global Solutions, has agreed to stop harassing consumers and will pay a $3.2 million civil penalty, the largest ever obtained by the Federal Trade Commission against a third-party debt collector.
In its complaint, the FTC charged that the Expert Global and its subsidiaries used illegal tactics such as calling consumers multiple times per day, calling even after being asked to stop, calling early in the morning or late at night, calling consumers’ workplaces despite knowing that the employers prohibited such calls, and leaving phone messages that disclosed the debtor’s name, and the existence of the debt, to third parties.
According to the FTC’s complaint, the companies also continued collection efforts without verifying the debt, even after consumers said they did not owe it, a violation of the Fair Debt Collection Practices Act.
Helen of Bisbee, AZ, recently wrote to ConsumerAffairs about her experience with NCO.
"I do not owe any money and have no debts. This company uses an automated phone system to call me at least once a day, sometimes twice, to request from me a return call," she said. "I attempted once to do this -- to request they stop calling or an option to contact me in writing only. I only got an automated system. So I did not get anywhere." 
With more than 32,000 employees and revenues in 2011 of more than $1.2 billion, the Texas-based Expert Global Solutions and its subsidiaries – ALW Sourcing, LLC; NCO Financial Systems, Inc.; and Transworld Systems, Inc., which also does business as North Shore Agency, Inc. – collectively are the largest debt collector in the world.  In addition to their U.S. offices, the companies operate in Canada, Barbados, India, the Philippines, and Panama.

Must verify the debt

PhotoUnder the proposed settlement, whenever a consumer disputes the validity or the amount of the debt, the defendants must either close the account and end collection efforts, or suspend collection until they have conducted a reasonable investigation and verified that their information about the debt is accurate and complete.
Juan of China, CA, is one of many consumers who've complained about  NCO refusing to verify the amount of the alleged debt. Jua said he received a bill for $389.76 but had no clue what it was for.
"They proceeded to [say] you do owe this money with an angry tone and that it was from a hospital bill. I mentioned to them I received one bill only from the hospital and never an additional one. They argumentatively wanted me to accept these charges," Juan said.
"I never did receive a bill for any other charges. I had received one and has been paid for. I have proof of a zero dollar balance. They push it to the limit where I asked to speak to a supervisor and they didn't have anyone to which to speak to only other sales rep. I had also called the hospital asking if I had ever sent any bill to collection. I received a no from the accounts payable personnel named Julie."
The proposed FTC order also restricts situations in which the defendants can leave voicemails that disclose the alleged debtor’s name and the fact that he or she may owe a debt.

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Consumer Financial Protection Bureau continues to expand its jurisdiction
A day after announcing it would police credit reporting agencies, the Consumer Financial Protection Bureau (CFPB) proposed a rule that would allow it to supervise the larger consumer debt collectors for the first time.
The CFPB also released the field guide that examiners will use to ensure that companies and banks engaging in debt collection are following the law.
“Millions of consumers are affected by debt collection, and we want to make sure they are treated fairly,” said CFPB Director Richard Cordray. “Today we are announcing that we will be supervising the larger debt collectors in the market for the first time at the federal level. We want all companies to realize that the better business choice is to follow the law — not break it.”

Source of complaints

Debt collectors are a frequent source of complaints from consumers, who feel they are being unfairly pursued. Often times they complain of harassment both at home and at work.
PhotoDebt collectors are, in fact, allowed to collect legitimate debts but must abide by the Fair Debt Collection Practices Act. Under the law, a collector may contact you in person, by mail, telephone, telegram, or fax. However, a debt collector may not contact you at inconvenient times or places, such as before 8 a.m. or after 9 p.m., unless you agree. A debt collector also may not contact you at work if the collector knows that your employer disapproves of such contacts.
Approximately 30 million Americans have, on average, $1,500 of debt subject to collection. Debt collectors often report consumers’ collection status to the credit bureaus.
If they get the information wrong, this can be the difference between getting approved or denied for such financial products as a mortgage or a car loan.

Types of debt collectors covered

The consumer debt collection market covered by the rule includes three main types of debt collection: first, firms that may buy defaulted debt and collect the proceeds for themselves; second, firms that may collect defaulted debt owned by another company in return for a fee; and third, there are debt collection attorneys that collect through litigation.
A single company may be involved in any or all of these activities. By expanding the supervision program to oversee the non-banks that are larger participants in the consumer debt collection market, the CFPB would have a window into every stage of the process – from the origination of credit to debt collection.
The CFPB’s supervision authority over these entities will begin when the rule takes effect on January 2, 2013. Under the rule, any firm that has more than $10 million in annual receipts from consumer debt collection activities will be subject to the CFPB’s supervisory authority. This authority will extend to about 175 debt collectors, which account for over 60 percent of the industry’s annual receipts in the consumer debt collection market.
In the past the Federal Trade Commission (FTC) has had jurisdiction over debt collectors. Once the new rule takes effect, consumers will have another avenue to air their complaints about debt collectors they believe to be abusive.

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