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 seeking information on use of alternative data in credit process, including by small business lenders

Stefanie Jackman and Scott M. Pearson

The CFPB has issued a request for information (RFI) that seeks information about the use of alternative data and modeling techniques in the credit process.  On March 21, 2017 from 12:00 to 1:00 p.m. ET, Ballard Spahr attorneys will hold a webinar: The New Frontier of Alternative Credit Models: Opportunities, Risks and the CFPB’s Request for Information.  A link to register is available here.

According to the CFPB, the RFI stems from the Bureau’s desire “to encourage responsible innovations that could be implemented in a consumer-friendly way to help serve populations currently underserved by the mainstream credit system.”  The CFPB had signaled the likelihood of future action relating to alternative credit data in a May 2015 report, “Data Point: Credit Invisibles,” that reported the results of a research project undertaken by the CFPB to better understand the demographic characteristics of consumers without traditional credit reports or credit scores.  The report, which the RFI cites, concluded that the current credit reporting system is precluding certain populations from accessing credit and taking advantage of other economic opportunities.

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FTC sends letter to CFPB on 2016 debt collection activities

Barbara S. Mishkin

The FTC has sent a letter to the CFPB summarizing the FTC’s debt collection activities in 2016.  The letter is intended to provide the CFPB with information for its annual report to Congress on the federal government’s FDCPA activities.

The letter includes a discussion of the FTC’s collaboration with the CFPB on two amicus briefs in cases involving FDCPA issues.  In one such case, the FTC and CFPB argued in the Seventh Circuit that an unpaid parking fee is a “debt” within the meaning of the FDCPA.  In the other such case, the FTC and CFPB argued in the Ninth Circuit that the FDCPA requirement for a debt collector to provide certain information to the consumer “after the initial communication” does not apply only to the first debt collector that contacts a consumer to collect a particular debt but applies to each debt collector that contacts the consumer to collect that debt.

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CFPB January 2017 complaint report highlights mortgage complaints, complaints from Tennessee consumers

Barbara S. Mishkin

The CFPB has issued its January 2017 complaint report that highlights mortgage complaints.  The report also highlights complaints from consumers in Tennessee and the Memphis and Nashville metro areas.

General findings include the following:

  • As of January 1, 2017, the CFPB handled approximately 1,080,700 complaints nationally, including approximately 22,900 complaints in December 2016.
  • Debt collection continued to be the most-complained-about financial product or service in December 2016, representing about 31 percent of complaints submitted.  Debt collection complaints, together with complaints about credit reporting and mortgages, collectively represented about 65 percent of the complaints submitted in December 2016.
  • Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 109 percent from the same time last year (October to December 2015 compared with October to December 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 (October to December 2015 compared with October to December 2016).  Complaints during those periods decreased from 458 complaints in 2015 to 189 complaints in 2016.  Prepaid cards also showed the greatest decrease based on a three-month average in the November and December 2016 complaint reports.
  • Payday loan complaints in December 2016 were 23 percent less than payday loan complaints in November 2016, representing the product with the greatest month-over-month decrease in complaints.
  • Alaska, Georgia, and Louisiana experienced the greatest complaint volume increases from the same time last year (October to December 2015 compared with October to December 2016) with increases of, respectively, 357,46, and 32 percent.
  • Wyoming, Vermont, and Delaware experienced the greatest complaint volume decreases from the same time last year (October to December 2015 compared with October to December 2016) with decreases of, respectively, 20, 19, and 12 percent.

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