Debt collectors & collection agencies

Debt collection has become a $13 billion industry with more than 40,000 employees chasing down those who have fallen behind on bills…or not. According to the Consumer Finance Protection Bureau (CFPB), one out of three American adults – about 77 million people — have credit files with debts in collection. It only takes a few missed payments before debt collectors start to call to demanding money.

Debt collectors generally can’t call before 8 AM or after 9 PM. If your first contact with a collector is by telephone, you may want to tell the caller that you want all future contact in writing rather than by phone. You can also instruct the collection agency not to call you at work. Follow up on any requests in writing right away. Your letter should include requests about contacting you and other matters discussed in your first contact. All correspondence, including disputes, should be sent to both the collection agency and the creditor by Certified Mail, Return Receipt Requested. If you notify collection agencies not to contact you at all, they are entitled to contact you one more time to explain how they intend to proceed. We provide sample letters below.

read more

Drawbacks to debt consolidation

Most Americans carry some form of debt. It can be student loans, credit cards, mortgages, auto loans or business loans. Because they can be overwhelming, especially after a setback that reduces income, soome consumers turn to debt consolidation loans to simplify or improve the terms on their borrowing obligations. But be warned, consolidation loans can sometimes turn out to be a disadvantage in the long run.

Debt consolidation loans work by turning multiple debts into a single loan through one lender. This means that you are paying down one large loan rather than holding an assortment of smaller loans with multiple payments. Debt consolidation loans loans are usually offered by many financial institutions, such as banks and credit unions, but there are also consolidation services through more specialized companies.

read more

The debt settlement process

In debt settlement, a legal process, debtors have the opportunity to relieve, adjust, or restructure their debt through various measures and efforts. The goal is reach an agreement on an acceptable settlement on behalf of both the debtor, as well as on behalf of the institution in ownership of the defaulted loan. Most settlements take place through negotiation between the financial institution in ownership of the outstanding debt and the person with a loan.

The debtor can range from a private citizen to a business enterprise who has incurred debt through the inability or failure to repay an outstanding loan furnished by a lender or lending institution.

read more

CFPB’s national debt collection consumer survey findings lays groundwork for future enforcement and rulemaking priorities

Stefanie Jackman and Daniel L. Delnero

Early this morning, the CFPB released the findings of its national debt collection consumer survey.  Both the headline of the CFPB’s press release and Director Cordray’s remarks highlight the survey’s finding that “over one-in-four consumers contacted by debt collectors feel threatened” during the collections process.  The press release also highlights likely areas of on-going CFPB focus with respect to collections: failing to honor cease-and-desist requests, collecting on debt impacted by incorrect information (e.g., wrong amount, do not owe, different family member), failing to abide by call-time limitations, excessive contact, and default judgment rates in debt collection litigation.

read more

CFPB settles FDCPA claims against debt collection law firms

Barbara S. Mishkin

The CFPB announced that it has entered into a consent order with two law firms specializing in the collection of medical debts and their president for alleged FDCPA violations.  The consent order also settles allegations that the respondents violated Regulation V (which implements the Fair Credit Reporting Act).  The consent order requires the respondents to pay $ 577,135.20 in consumer redress and a $ 78,800 civil money penalty to the CFPB.

According to the consent order (whose findings of fact and conclusions of law are neither admitted nor denied by the respondents), the respondents violated the FDCPA by engaging in the following conduct:

read more

CFPB announces senior leadership changes

Barbara S. Mishkin

The CFPB announced that the following individuals are joining its senior leadership team:

  • Leandra English is returning to the CFPB to serve as the Chief of Staff.  Ms. English previously served in several senior CFPB leadership roles, including deputy chief operating officer, acting chief of staff, deputy chief of staff, and deputy associate director of external affairs.  Most recently, Ms. English served as the principal deputy chief of staff at the Office of Personnel Management.
  • Jerry Horton will serve as the CFPB’s Chief Information Officer.  Before joining the CFPB, Mr. Horton worked at the Department of State where he started and led the Office of the Chief Architect for State’s global information presence.  He also previously served as the chief information officer at the U.S. Agency for International Development and at the U.S. Mint in the Department of the Treasury.
  • Paul Kantwill will serve as the CFPB’s Assistant Director for Servicemember Affairs.  Prior to joining the CFPB, Mr. Kantwill served as the director of the Pentagon’s Office of Legal Policy, Office of the Under Secretary of Defense, Personnel & Readiness.  In that position, Mr. Kantwill was the Department of Defense’s legal policy expert on the financial industry and the effects of financial products and services on military members and their families.
  • John McNamara will serve as the CFPB’s Assistant Director of Consumer Lending, Reporting, and Collections Markets.  Mr. McNamara previously served in the same capacity in an acting role, and before that was the CFPB’s debt collection program manager.
  • Elizabeth Reilly will serve as the CFPB’s Chief Financial Officer.  Ms. Reilly previously served as the CFPB’s deputy chief financial officer.

read more

CFPB releases report on student loan debt owed by older consumers

John L. Culhane, Jr.

The CFPB has released a new report, “Snapshot of older consumers and student loan debt,” that provides statistics on the growing number of consumers age 60 and over (older consumers) who owe student loan debt and the growing amount of such debt.  The report also discusses complaints about student loan debt submitted by older consumers to the CFPB from March 2012 to December 2016.  According to the CFPB, the report can offer insight to policy makers examining “potential changes to the higher education finance market, including changes to federal student loan programs,” as to “how changes in the availability of borrowing and repayment options may affect the long-term financial well-being of older consumers.”

read more

CFPB December 2016 complaint report highlights debt collection complaints, complaints from Arizona consumers

Barbara S. Mishkin

The CFPB has issued its December 2016 complaint report which highlights complaints about debt collection.  The report also highlights complaints from consumers in Arizona and the Phoenix metro area.

General findings include the following:

  • As of December 1, 2016, the CFPB handled approximately 1,058,100 complaints nationally, including approximately 23,100 complaints in November 2016.
  • Debt collection continued to be the most-complained-about financial product or service in November 2016, representing about 29 percent of complaints submitted.  Debt collection complaints, together with complaints about credit reporting and mortgages, collectively represented about 64 percent of the complaints submitted in November 2016.
  • Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 120 percent from the same time last year (September to November 2015 compared with September to November 2016).  In February 2016, the CFPB began accepting complaints about federal student loans.  Previously, such complaints were directed to the Department of Education.  As we have noted in blog posts about prior complaint reports issued beginning in April 2016, rather than reflecting an increase in the number of borrowers making student loan complaints, the increase most likely reflects the change in where such complaints are sent.
  • Prepaid card complaints showed the greatest percentage decrease based on a three-month average, decreasing about 59 percent from the same time last year (September to November 2015 compared with September to November 2016).  Complaints during those periods decreased from 444 complaints in 2015 to 183 complaints in 2016.  Prepaid cards also showed the greatest decrease based on a three-month average in the November 2016 complaint report.
  • Iowa, Georgia, and Alaska experienced the greatest complaint volume increases from the same time last year (September to November 2015 compared with September to November 2016) with increases of, respectively, 39, 37, and 35 percent.
  • Vermont, Rhode Island, and Idaho experienced the greatest complaint volume decreases from the same time last year (September to November 2015 compared with September to November 2016) with decreases of, respectively, 23, 20, and 17 percent.

read more