Tuesday, February 19th, 2013 at
The debt collection industry publication, InsideARM, recently published some insights about the rules of the road when it comes to debt collectors accepting check payments over the phone. It’s worth reading the entire article, which can be found here, but these are the primary takeaways:
1. When you verbally tell a debt collector that he can electronically transfer funds from your checking account, it’s a one-time authorization.
2. You have to provide a written, signed authorization for the debt collector to do a recurring transfer (as in a monthly payment). A debt collector can call you each month for a verbal authorization.
3. With your authorization, a debt collector can create a paper check with your account information, and deposit that check in the bank. You can verbally give your permission for recurring withdrawals via a paper check facsimile.
4. A debt collector can make recurring credit card charges with your verbal authorization.
The Inside ARM article contains valuable information about your rights and the responsibilities of debt collection agencies. However, because some debt collection agencies get their wires crossed or simply run afoul of the law, we recommend that you never give a debt collection agency your bank account or credit card information. This includes sending a debt collection agency a personal check, since your account information is on the paper check. Instead, it’s best to mail a bank check or money order.
Wednesday, April 25th, 2012 at
West Virginia Attorney General Darrell McGraw is vigilant when it comes to debt collection practices. His office recently announced that it filed suit against seven debt collection agencies that are unlicensed in West Virginia after the agencies refused to comply with subpoenas for records of their collection activities. According to a press release issued by McGraw’s office, the AG received complaints that the debt collection agencies “engaged in a wide range of abusive and unlawful debt collection practices, including repeated harassing phone calls, impersonating law enforcement and judicial officers, making false threats that nonpayment will result in arrest or criminal prosecution, and collecting nonexistent debts or debts that have already been paid.”
The debt collection agencies being sued are County Filing Services; Portfolio Investment Financial; Investment Management and Recoveries; Rosenthal, Stein and Associates; Vision Credit Solutions; National Capital Management; and Dorsey Thornton & Associates. Several individuals related to these companies are also named in the suits.
Monday, April 9th, 2012 at
According to a story in the Washington Post, the Federal Housing Administration has changed its approval procedure, barring loans to applicants whose credit reports show a combined total of $1,000 or more in collections or in disputed accounts. FHA loans have traditionally been a vehicle for lower or middle income families to purchase a home. The new rule, which took effect April 1, will likely disenfranchise those who the FHA should be serving.
The Post story quoted two mortgage lenders, one of whom said, “35 percent of borrowers who’ve obtained FHA financing historically [would be] ineligible.” Another said that an applicant had a high credit score, but then discovered that medical bills erroneously appeared on his credit report, causing his FICO score to plummet to 655. That would make him ineligible for an FHA loan.
The FHA rule says that credit report items don’t count if the amounts total less than $1,000 and are at least two years old, or if they’re caused by identity theft, credit card theft, or unauthorized use of credit. Still, the FHA should realize that debt collection agencies often submit negative information to credit reporting agencies about bills that have been paid off, that have been disputed, or that belong to someone else.
The takeaway here is to stay on top of your credit reports, and utilize the federally-mandated annual free credit report offered by Experian, TransUnion, and Equifax. You can obtain them from www.annualcreditreport.com.
Friday, February 17th, 2012 at
The Consumer Financial Protection Bureau has proposed a rule to gain oversight of the debt collection and credit reporting industries. The CFPB, which was created by 2010’s Dodd-Frank Wall Street Reform and Consumer Protection Act, is supposed to fill a vacuum in consumer protection and to tame the Wild West mentality of many non-banking financial institutions. The proposed rule would give the CFPB oversight of the largest debt collectors and credit reporting agencies.
According to the CFPB’s press release on the proposed rule, 30 million consumers are currently in collection, and four percent of debt collection agencies account for 63 percent of debt collection revenues. If the rule goes into effect, the CFPB would oversee debt collection agencies with more than $10 million in annual revenues.
The CFPB notes that the proposed rule would result in agency oversight of approximately 30 credit reporting agencies. People typically think that there are three credit bureaus (Experian, TransUnion, and Equifax), but there are many specialty consumer reporting agencies. This oversight seems especially important, given that many Americans who are already on the sidelines of the banking system are further disenfranchised by credit report resellers and specialty credit reporting agencies. After all, bad and faulty credit reports can make it virtually impossible for consumers to find housing, obtain employment, or qualify for loans, sending them into a downward financial spiral from which they can’t recover. CFPB oversight would help weed out the bad players, and give consumers the level playing field they deserve.
Wednesday, December 28th, 2011 at
This year, the debt collection industry has clamored to amend the Telephone Consumer Protection Act and the Fair Debt Collection Practices Act to allow them greater leeway in calling consumers’ cell phones. According to a recent press release issued by WhitePages, some debt collectors outshine the competition in pestering consumers with unwanted calls. WhitePages named the most aggressive “Call Spammers” of 2011, defining call spamming as unwanted calls or texts to mobile phones, and debt collection agencies nabbed six out of the top ten spots. Allied Interstate topped the list, followed by CBE Group, CMI Group, ER Solutions/Convergent, Portfolio Recovery Associates, Satlander.
Friday, September 9th, 2011 at
A federal judge has ruled against Consumer Portfolio Services in a case that may have widespread repercussions through the debt collection industry. The U.S. District Court judge for the Northern District of Illinois Eastern Division denied Consumer Portfolio Services’ motion for summary judgment for alleged violations of the Telephone Consumer Protect Act in calling and texting consumers’ cell phones.
The motion in the case, Griffith and Cain v. Consumer Portfolio Services (10 C 2697), revolved around whether CPS’ predictive dialer is an “automatic telephone dialing system” as defined by the TCPA. With predictive dialers, consumers are “robo-called,” and then routed to a live person if they answer. The TCPA defines an “automatic telephone dialing system” as “equipment that has the capacity – (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” In 2002, the Federal Communications Commission found that “a predictive dialer falls within the meaning and statutory definition of ‘automatic telephone dialing equipment’ and the intent of Congress.” In 2008, the FCC affirmed that predictive dialers are “subject to the TCPA’s restrictions on the use of autodialers.”
In the District Court case, CPS argued that predictive dialers don’t fall under TCPA restrictions. In the ruling, the judge noted, “CPS’s interpretation of the FCC’s orders, which it supports by quoting portions of those orders out of context, is a transparent attempt to win through litigation a battle that other companies lost before the FCC…. CPS finally resorts to the argument that the FCC cannot have meant what it said….”
The bottom line? Debt collection agencies routinely use predictive dialers. When this case goes to trial, it’s a sure bet that many of them will be anxiously watching from the sidelines. If calling and texting consumers’ cell phones is found to be a violation of the TCPA, it will be a victory for consumers.
Wednesday, May 11th, 2011 at
The debt collection industry rakes in big money, yet one hears persistent whining from its trade association. The whining includes a constant stream of complaints about the ways in which the Fair Debt Collection Practices Act and resulting caselaw makes it difficult for debt collectors to do their job. Seemingly, it’s just terribly inconvenient for them to refrain from harassing and abusing consumers. Another ubiquitous strain of whining relates to consumers (and fair debt attorneys) who sue debt collection agencies that violate the FDCPA. Consumers are painted as acting in bad faith, and fair debt attorneys are portrayed as simply evil. You see, it costs so much for debt collection agencies to mount a defense against FDCPA violations. Debt collection industry publications position debt collectors as the victims of pesky government regulations and frivolous lawsuits, both of which make it hard for the poor debt collection agencies to make a buck.
Juxtapose this whining against some publicly traded debt collection agencies’ reported earnings, and a different picture emerges. For example, debt buyer Portfolio Recovery Associates (NASDAQ: PRAA) recently released its first quarter earnings. The company collected a “record” $166.7 million during the first three months of 2011, resulting in a net income of $23.1 million. The company’s collections represented a 40% increase over Q1 in 2010, and its net income a 56% increase in Q1 in 2010. During the first quarter, Portfolio Recovery Associates bought $1.49 billion (yes, billion) worth of debt for the low, low price of $107.9 million. That’s a little less than 8 cents on the dollar. Mind-boggling. Even more so its “productivity” measure, i.e.,. “a record $241 per collector hour paid…as measured by cash collections per collector hour paid. “
It’s time for the debt collection industry to stop whining. They’re clearly laughing all the way to the bank.
Thursday, February 10th, 2011 at
If you or someone you know has a defaulted student loan, you may be interested in StopCollector’s new Resource Center section on Student Loan Debt Collection. In in, we have pages on:
- How student loans differ from other debts
- Department of Education student loan collections
- Disputing a student loan
- Student loan collections & debt collection agencies
We hope you find the information useful!
Friday, January 28th, 2011 at
We regularly discuss the problem of debt collectors crossing the line into abhorrent behavior. What isn’t as well-known is that some debt collectors have criminal histories. The Minneapolis Star-Tribune has done an outstanding job of investigating the underbelly of the debt collection industry, and recently reported that the state’s Commerce Commission, Mike Rothman, has put debt collection agencies on notice. State law says that debt collection agencies must conduct criminal background checks on their collectors, but Rothman is alleging that some of the major players have failed to do so.
Rothman notified Allied Interstate, AllianceOne, Bureau of Collection Recovery, I.C. System, Financial Recovery Services, NCO Financial Systems, Receivable Management Solutions, and Van Ru Credit Corp. that he’s prepared to go after their business licenses, and that his office must review their screening procedures. The Star Tribune found that one in 12 debt collectors had criminal records in Minnesota.
Wednesday, January 19th, 2011 at
A recent article by Courthouse News Service reminds us why it’s important to pay close attention to bills and demand letters sent by debt collection agencies. All too often, debt collectors tack on fees and interest, above and beyond what your credit agreement states. Courthouse News reports that I.C. System added a 33 percent collection charge and a 7 percent interest fee to an Atlanta woman’s veterinary bill. Although she disputed the charges, I.C. System failed to remove the amounts from her bill. She sued the debt collection agency, which argued that the case should be dismissed because the mistake was made by the veterinarian. In doing so, I.C. System used what’s called a “bona fide error” defense. Although the judge agreed with the debt collection agency, the 11th Circuit reversed the lower court’s decision, saying that the debt collection agency’s procedures for detecting errors weren’t stringent enough to assert a bona fide error defense.