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.

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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.

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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.

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CFPB’s proposal for collection of decedent debt: a misguided approach (Part II)

Gary W. Becker

In my blog post yesterday, I shared my concerns regarding the potential consequences of the CFPB’s proposed 30-day hold on all collection contacts after the date of a consumer’s death.  A 30-day holding period in which collectors are prohibited from contacting a surviving spouse about a debt would, standing alone, have little impact on the way that decedent debt is collected today at the major agencies that specialize in this work.  However, combining the 30-day hold with the radical proposal to prohibit all collector contact with the tens of thousands of personal representatives who regularly administer the majority of probate estates would completely change the way decedent debt is collected.

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GAO issues report on CFPB SBREFA panels

Barbara S. Mishkin

The Government Accountability Office has issued a report on the CFPB’s use of Small Business Regulatory Enforcement Fairness Act (SBREFA) panels in its rulemaking process.  The report, “Observations from Small Business Review Panels,” addresses the extent to which the CFPB solicited, considered, and incorporated small entity inputs into rulemakings, and the views of small entity representatives (SER) on the rulemaking process.

The GAO looked at the CFPB’s rulemaking process and documents in the four final rulemakings for which the CFPB convened SBREFA panels, all of which were mortgage-related: TILA/RESPA integrated disclosure rule, mortgage servicing rule, mortgage loan originator compensation rule, and HMDA.  (The CFPB has also convened SBREFA panels in connection with its proposed arbitration and payday lending rules, and will soon be convening a SBREFA panel in connection with its debt collection rulemaking.)

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CFPB Credit Union Advisory Council to meet Sept. 1

Barbara S. Mishkin

The CFPB has published a notice in the Federal Register announcing that a meeting of its Credit Union Advisory Council (CUAC) will be held on September 1, 2016.

The notice indicates that the CUAC will discuss youth financial capability and debt collection.  Presumably, the CFPB will seek input from CUAC members on the debt collection proposals it is considering, which it outlined last month in anticipation of convening a SBREFA panel.


CFPB Monitor

CFPB debt collection proposals would create problematic new substantiation standard

Gary W. Becker

The debt collection proposals outlined by the CFPB for the SBREFA panel are driven in large part by the CFPB’s reliance on the data derived from its complaint portal and a consumer survey conducted by the Bureau over several months in 2014-15.  The survey results are remarkable in how closely they mirror the complaint portal data.  Both sources indicate that the most common complaints made by consumers are that collectors have the wrong person or are asking for the wrong amount.  The CFPB has never attempted to demonstrate systematically whether the complaints in the portal have any factual validity.  And despite the fact that the survey developers apparently employed sophisticated methodology in targeting respondents, the Bureau also made no effort to take a subset of survey responses and attempt to verify whether or not the complaints had any basis in fact.

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