Credit and Collection News now lets you post comments and discuss all the relevant news on our newsletter. Check out what our readers are saying about the Credit and Collection Industry.
This is one of the most common ‘explanations’ we get while providing commercial collection services. How the debt collector responds to this assertion can have a big impact on understanding what is really going on and figuring out how to get paid even if they don’t get paid.
We know that many debt collectors will respond to this explanation very forcefully with something like: “It doesn’t matter if you are owed money. You agreed to pay for this product (service), you are X days late, and if you don’t pay immediately, then _____________ ” (fill in the blank with the extremely unpleasant consequence of your choice).
If this works, great! But if it doesn’t, the collector has gone a long ways towards shutting down communication and cooperation with the debtor or customer.
When we hear this explanation, our biggest fear is that it might be true. Since the financial crisis a few years ago, we’ve seen a much greater proportion of smaller businesses fail because a couple of their larger customers ceased operating without paying large receivables. This is a real domino effect which has even taken down a couple of our smaller clients as their delinquent receivables were not recoverable from
At the same time, we are excited, because the debtor has started with a specific explanation which can be scrutinized and thereby gives us the opportunity to establish communication and professional rapport. We start by giving positive reinforcement for their acknowledgement of the outstanding balance and the commitment to pay. We may even focus on getting an email confirmation that there are no disputes on the balance owed and that it is in their payables system, especially if it is for a service provided or a product that the debtor could later complain did not perform properly. This written confirmation can be very valuable down the road if the debtor’s financial struggles continue and they start looking for other excuses to not pay invoices.
As a collection agency, we are working on invoices that are already significantly past due. So if this is a real explanation, it has already been going on for a long time. And if that is the case, it is highly unlikely that the debtor’s customer is just about ready to pay. So, instead of asking “when do you expect to get paid so you can pay this bill,” we ask for background information, such as “please tell me what’s going on with this situation.”
At this point, we are using the additional information being provided to determine if this is a real explanation or just an excuse. We want to know a number of things, including:
The answers to these questions let us know if their explanation:
There may not be much that anyone can do in the first instance, but in the second and third circumstances, this is where debt collection skill can lead to recovery.
For in-house collectors, we recommend that you get as much specific information as possible whenever this explanation is initially given. Send an email to the customer with all the information collected, asking them to confirm you have understood the situation correctly, with the explanation that you want to provide an accurate report to your manager. The sooner you understand what is truly going on with your customer, the less likely you will end up having to turn it over to a collection agency or eventually having to write off the full amount.
In my prior career as a CFO at several companies, I learned to never use the explanation “you’ll get paid when we get paid” unless I knew it would stand up to scrutiny. If I could explain that we had a surge in business from credit worthy customers and we were simply struggling with working capital issues until we got over the hump, the explanation typically got the relief we needed. But it only results in a short-term respite and a damaged relationship with the vendor in most other circumstances.
Deborah is trying to clean up her credit so she can purchase a home. But it's not proving easy. In particular, three collection accounts are causing major headaches. "One has listed a collections agency no longer in service, One collection agency will not return my calls. (left messages) and one has false info on it," she writes on the Credit.com blog.Dealing with collection accounts on your credit reports can sometimes be a long, frustrating process.
But relief is on the way — at least for some consumers. A recent agreement between 31 state attorneys general and the three major credit reporting agencies (CRAs) — Equifax, Experian and TransUnion — will change certain practices related to credit reporting. And when it does, there will be several important changes that may impact consumers who have debt in collections.
The End of Double Jeopardy?
If you don't pay a collection account, it may wind up with a second — or third — collection agency, resulting in multiple negative items on your credit reports. Sometimes referred to as "double jeopardy," two or three collection accounts for the same debt can affect your credit scores.
What will change: When collection agencies sell, transfer or no longer manage accounts they must update or delete the account. The agreement requires the CRAs to update their training materials for these companies that report, and make sure they know and follow this requirement.
Who Is That?
Sometimes consumers have found collection accounts listed on their reports but aren't sure what they are for. Collectors are supposed to report the name of the original creditor but not all do.
What will change: Collection agencies are already supposed to provide the name of the original creditor and a "classification code" that indicates the type of debt (for example, credit card or medical). Under the agreement, the CRAs must make this information mandatory and can reject accounts that don't meet the standards.
Note that you still won't see the names of medical providers because doing so may compromise your right to medical privacy; for example, if your credit report showed the name of a substance abuse rehabilitation clinic or a cancer center. "Privacy is the issue here," says Norm Magnuson vice president of public affairs for the Consumer Data Industry Association. "The collection account is codified so that others who receive the credit report can't identify the medical facility. The consumer can get the medical facility's name from the collection agency and/or the credit bureau if they want to validate the debt or don't know for whom the collection agency is working the debt."
But I Paid That!
We've received complaints from consumers who have paid off, or are making payments toward, collection accounts but their credit reports don't reflect those payments. From the complaints we received about this issue, it doesn't seem to be unusual for collectors to fail to update accounts when payments are being made.
What will change: Under the settlement, credit reporting agencies must require collection agencies that report data to "regularly reconcile" information about accounts that haven't been paid in full. If they don't? The agreement says, "This regular reconciliation will be accomplished, in part, by periodic removal or suppression of all collection accounts that have not been updated by the Collection Furnisher within the last six months." In other words, if a consumer has been making payments but the collection agency fails to update the account for at least six months, the account will either have to be removed or "suppressed," which means it won't be shown to companies that order the report, and won't be used to calculate a credit score.
It's worth noting, though, that unlike other types of credit accounts, making regular payments on a collection account typically doesn't help your credit scores. Under the most widely used credit scoring models, a collection account is considered negative, regardless of the size of the balance or payments that are being made. Still, there are some credit scoring models that ignore collection accounts where the balance is zero (VantageScore 3 and FICO 9) so it's helpful to make sure the information that is reported is accurate.
I Had No Idea
A reader recently told us he was contacted by a collection agency out of the blue, trying to collect on a court citation. "I have never received a citation and have contacted the court since I was not the driver of vehicle and live out of state." Whether is was a toll charged to you via your license plate number, or a parking ticket your son or daughter "forgot" to tell you about, tickets and other bills can sometimes wind up in collections without your knowledge. A survey by Credit.com found that one in 10 consumers who reviewed their credit reports said they found a collection account they weren't aware of on their reports.
What will change: The agreement prohibits collection agencies from "reporting debt that did not arise from any contract or agreement to pay (including, but not limited to, certain fines, tickets, and other assessments)." Even better, this prohibition is retroactive: the CRAs are supposed to find a way to identify previously reported accounts of these types and remove them.
Like any change of this scale, this won't happen overnight. Magnuson says these initiatives must be implemented within 6 – 36 months from the effective date of May 20, 2015. In the meantime you still have the right under the federal Fair Credit Reporting Act to dispute information on your credit reports that you believe is incorrect or incomplete. That won't change.
And neither will the need to review your credit reports and monitor your credit scores on a regular basis for changes. You can get your free annual credit reports from AnnualCreditReport.com, and you can get a free credit report summary including two scores every month on Credit.com. After all, you can't fix a problem you aren't aware of in the first place.
|Brian J. Wise
Last month, the Consumer Financial Protection Bureau issued a “framework” for a rule that seeks to make it more difficult for consumers to obtain short-term or “payday loans.”
At first glance, it defies
explanation that the financial regulator would act so aggressively
against a product that has high customer satisfaction rates and accounts
for less than
5 percent of consumer complaints to the CFPB. It defies explanation
until you understand who benefits the most; and it’s not the consumer.
Put simply, the rule is designed to increase profits for Self-Help Enterprises (and Eakes) by making the CFPB, DOJ, and FDIC effectively serve as a front for Eakes’ network of “financial reform” organizations. Ultimately, taxpayers will foot the bill for the windfall.
The products that Eakes offers are not unlike those of your typical storefront payday lender. The biggest difference comes in the form of Self-Help’s genius marketing and branding, and the unique business model that allows them to be profitable. While simultaneously vilifying the payday loan industry, Eakes offers his own subprime consumer loan products and charges overdraft fees - often at significantly higher rates than your standard payday loan.
Eakes can offer these loans at a lower cost than free-market payday lenders because businesses connected with Eakes are the largest recipients of taxpayer funds through the Community Development Financial Institutions (CDFI) Fund - over $300 million in the last 10 years. This taxpayer money subsidizes these types of loans to low-income families.
Over the years, Eakes has relied on a front group he co-founded, the Center for Responsible Lending (CRL), as well as government agencies, to ensure that his pockets stay full and his companies stay successful. Between 2008 and 2010, CRL spent at least $2.1 million on Washington lobbyists. Of course, plenty of private companies invest in government outreach and lobbying. However, most aren’t so influential that they can orchestrate near complete control of government agencies like the CFPB and FDIC; and use those agencies to destroy their competition.
Eakes makes no secret of the interconnected web of his non-profit and for-profit service providers including Self-Help Ventures, the Center for Community Self-Help, Self Help Credit Union, Self-Help Federal Credit Union, Self-Help Enterprises, his preferred front group, the Center for Responsible Lending, and his most powerful asset yet, the CFPB.
For example, the first president of CRL, Mark Pearce, was appointed by President Obama to head the consumer protection division at the FDIC. Pearce has since been implicated as one of the masterminds behind Operation Choke Point, the Obama administration program that targets legal businesses by intimidating banks into cutting off their banking relationships with certain industries (including payday lenders and gun dealers).
Eakes’ connections to the CFPB extend at least as high as Steve Antonakes, deputy director of the CFPB, whose personal relationships with both Mike Calhoun, president of CRL, and Eakes, extend back to his time as Massachusetts’s Banking Commissioner. Antonakes’ work in Massachusetts also centered around limiting or destroying the ability for consumers to access credit.
Between the CFPB’s forthcoming rule on payday lending and Operation Choke Point (at the direction of Mark Pearce), Eakes’ network of operatives in the government’s most powerful agencies are poised to realize his objective – taking down the short-term loan industry and replacing it with products from his own network of service providers.
If the free-market short-term lending industry is eliminated through regulatory action, the consumer need for such products will still exist. Eakes is poised to fill that need with taxpayer subsidized consumer loans, offered through his vast network of organizations throughout the country.
The Center for Responsible Lending is widely credited with advocating for, and developing the CFPB alongside one of its most closely aligned advocates, Sen. Elizabeth Warren (D-Mass.). It isn’t hard to see why Eakes, and CRL’s funders Herb and Marion Sandler, invested so much time and money into the inclusion of the consumer bureau in the Dodd-Frank legislation.
There is no better way to manipulate the market for a product than to control the competition. And there is no better way to control the competition than through the heavy hand of an “independent” and unaccountable regulatory agency like the CFPB.
In an interview about CRL, Martin Eakes said, “It’s an affiliated research and policy organization that started because we got really angry at the financial services sector, and in 2002 started this organization that has hired fifty lawyers, PhDs, and MBAs to basically terrorize the financial services industry.” There is no doubt that Martin Eakes has not only terrorized the financial services industry, but American consumers as well, threatening to deprive them of the ability to access the products and services that they want and need.
Debt collectors reportedly have a new strategy to get consumers’ attention: text messages.
“YOUR PAYMENT DECLINED WITH CARD ****-****-****-5463 . . . CALL 866.256.2117 IMMEDIATELY,” reads one such text, according to the Federal Trade Commission.
The agency has temporarily halted three debt collection operations that allegedly misused texts and is attempting to permanently ban the activity as part of its “Messaging for Money” enforcement sweep.
New York-based Unified Global Group sent the text above, and others like it, the FTC says. Some consumers who received such texts hadn’t set up any card payment with the firm; and the firm failed to identify itself as a debt collector in the message, a violation of the Fair Debt Collections Practices Act, according to the FTC.
“Legitimate debt collectors know the rules,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “They can’t harass or lie to you, whether they send a text, email, or call you.”
The FTC also obtained restraining orders against New York-based Premier Debt Acquisitions and Georgia-based Primary Group, accusing each of sending texts and making phone calls that violated federal law.The FTC alleges that Premier impersonated state or law enforcement officials, falsely threatened consumers with a lawsuit or arrest, and falsely threatened to charge some consumers with criminal fraud, garnish their wages, or seize their property. The FTC says the firm claimed in text messages that it would sue the consumers and threatened to seize their possessions unless they paid.
Primary Group was also accused of sending illegal texts. One example provided by the FTC: “I’m a process server w/ Primary Solutions, appointed to serve you papers for case [eight digit number]. Would you like delivery at [consumer’s home address]?”
Premier did not immediately respond to an email request for comment. A website listed for Primary Group was no longer in operation, and contact information for the firm was not immediately available. The same was true for Unified Group.
According to the FTC, Premier Debt Acquisitions also sent deceptive emails claiming that making a payment would help a consumer’s credit report, but the defendants had no ability to make good on that claim.
“They also kept trying to collect after consumers challenged the debt or its amount, without investigating the dispute,” the FTC said. “In one instance, they persisted despite written evidence that the debt was a result of identity theft and a prior debt collector had marked it fully paid. In other instances, the defendants tried to collect a payment even after they had received it, and hounded one person for two years about someone else’s debt.”
When a debt collector – or a party claiming to be one – contacts you, it’s important to do your research before you pay them. Ask the party to provide written verification of the debt they’re attempting to collect on. It’s also a good idea to get your credit reports to see if there are any collection accounts listed, and if there are any errors. You can get your free credit reports every year from AnnualCreditReports.com, and you can get a free credit report summary every month from Credit.com to watch for changes that could signal a problem that needs your attention.
Finding fraudulent purchases on your credit-card account is bad enough. Having a thief gain access to your bank balance is much worse.
Criminals are stealing card data from U.S. automated teller machines at the highest rate in two decades, preying on ATMs while merchants crack down on fraud at the checkout counter.
Meanwhile, the risk of unauthorized bank withdrawals is weighing on consumers deciding whether to make purchases with debit cards, which are connected to a bank account, versus credit cards, for which accountholders get a bill to pay later.
If fraudulent transactions are made on your credit-card account, there is no immediate financial hit while you straighten things out, notes Greg McBride, chief financial analyst at website Bankrate.com.
By contrast, if a thief is able to withdraw dollars from your bank account, “the horse is out of the barn,” he says. The money is gone from your account until you are able to get it restored.
Mr. McBride says he generally recommends credit cards over debit cards, but principally for benefits such as more-generous rewards programs.
Website CardHub.com says fraud concerns are one reason it suggests consumers use a credit card as their “primary spending vehicle.”
CardHub Chief Executive Odysseas Papadimitriou says he has personally experienced credit-card fraud and a fraudulent $3,000 withdrawal from his bank account. The credit-card problem was annoying but when money disappeared from his bank account, he says, “I got really, really stressed out. It was very painful to see that.”
Here’s a look at your fraud-related liability on credit and debit cards:
The Consumer Financial Protection Bureau says that if your credit-card number—not your physical credit card—is stolen, “you are not responsible for unauthorized charges under federal law.”
If the actual credit card is stolen, you are liable for no more than $50 in unauthorized charges as long as you report it to the card issuer. But “most card issuers don’t even hold you to the $50,” Mr. McBride says.
The Visa V -0.38% and MasterCard MA -0.25% networks and big issuers Discover Financial Services DFS -0.45% and American Express AXP -0.10% all have a zero-liability policy on fraudulent credit-card transactions, according to a recent study by CardHub.
Many banks have instituted a zero-liability policy on their debit cards, says Mr. McBride, because “they want people to use their debit cards.”
But issuing banks usually have some discretion to determine if the customer promptly reported the theft. And different types of debit-card transactions may be treated differently.
Federal rules allow significant liability for fraudulent debit-card transactions that aren’t reported in a timely manner.
With debit cards, the CFPB says that “if an unauthorized transaction appears on your statement (but your card or PIN has not been lost or stolen), under federal law you will not be liable for the debit if you report it within 60 days after your account statement is sent to you.”
The rules are different if the card or PIN has been lost or stolen: Report the problem within two business days and liability is limited to $50 of unauthorized charges. Then the maximum liability rises to $500.
“If any unauthorized charges go unreported for more than 60 days,” the CFPB says, “your money, and future charges by the same person, could be lost.”
While financial-industry policies can be more generous than the U.S. requires, that can also vary with the type of debit-card transactions involved, the CardHub report says.
For instance, CardHub says Visa and MasterCard both provide for zero liability on signature-based transactions on their debit cards. Also, there’s no liability on a PIN-based Visa debit-card transaction processed through the Visa network—and the same for MasterCard transactions on that network. (But a consumer “has no way of knowing what network transactions are processed on and therefore how much coverage they have,” the CardHub report says.)
Meanwhile, on ATM withdrawals, CardHub says coverage is at the discretion of the individual bank that issued the card.
The Federal Trade Commission has a handy summary of the rules and advice on how to report card fraud on its website.
|Overview | RFP / RFI | CCNEWS.TV | Training|
|Conference 14 | Conference 13 | Conference 12 | The CFPB and The Debt Collection Industry - What You Need to Know | Conference 1 Highlights | Conference 4 Highlights | Conference 2 Highlights | Conference 5 Highlights | Conference 3 Highlights | Conference 7 Highlights | Conference 6 Highlights | Conference 8 | Conference 9 | Conference 10 ||
|Look for Jobs or Post a Job | Classifieds | Business Listings|
|Attorney | Collection | Consultant|
|Site Blog | Chat | Editorial | Contact Us|