The Consumer Financial Protection Bureau sent a questionnaire
with almost 60 questions to randomly selected debt collectors and
service providers as part of its potential rulemaking regarding debt
collection, a process that began almost two years ago.
The CFPB received 23,000 comments in response to its Advance Notice of Proposed Rulemaking
(ANPR) for debt collectors, which included 162 questions. According to
the CFPB, this new “survey is being conducted in order to build the
[CFPB’s] knowledge of the operational costs of collecting debt that is
in default” and the answers provided to the questions are intended to
“help the CFPB better understand the burden of potential regulations
affecting the debt collection industry.”
This questionnaire was sent with a cover letter
from John McNamara, the Debt Collections Program Manager in the CFPB’s
Division of Research Markets & Regulations. In it, the CFPB
explains it “will be gathering information from a variety of debt
collection firms, creditors, and service providers” that will “inform
the Bureaus’ analysis of the benefits and costs of potential new rules
relative to debt collection.”
The questionnaire asks about basic activities and operational costs
of collecting debt, including, for example, questions about vendors used
for activities such as dialers or print mailings, maintaining data
about consumer accounts, and furnishing information to credit bureaus.
The CFPB also stated that it plans to conduct “follow-up phone
interviews” with some of the companies that respond to the survey “to
help us understand their operations in more detail.”
We previously reported
on the remarks made by Consumer Financial Protection Bureau Director
Richard Cordray on May 12 that the CFPB would not voluntarily change the
August 1 effective date for the TILA-RESPA Integrated Disclosure Rule
(TRID). This officially changed on June 24 with the CFPB’s issuance of a
proposed amendment to TRID, postponing its effective date from August 1 to October 3.
The CFPB issued the proposal to correct an administrative error.
Specifically, the CFPB recently discovered that it inadvertently had not
submitted the rule report to Congress as required. Upon discovering
its error, the CFPB submitted the rule report to both Houses of Congress
and the Comptroller General of the Government Accountability Office on
June 16, 2015. However, under the Congressional Review Act, the
TILA-RESPA Final Rule cannot take effect until, at the earliest, August
15, 2015 – two weeks after the currently-scheduled effective date.
In light of the administrative error, as well as the extent of
“unique implementation challenges for industry, requiring major
operational changes” that even the CFPB recognizes, it wisely decided to
propose that TRID’s effective date be delayed to October 3. The
proposal is open for public comment until July 7, and the CFPB expects
to make its final decision shortly thereafter.
posted on 2015-06-26 by Kali Geldis It’s every consumer’s worst nightmare: You’re busy at work,
mired in debt, and your cellphone keeps ringing. You’re doing your best
to pay off that bill, but the unknown number flashing on your phone’s
screen is a dismal reminder you haven’t.
“Most people want to pay their debt, they just run into bad
situations where they can’t,” Gerri Detweiler, director of consumer
education for Credit.com, says. “If a debt collector will work with
them, a lot of times, they’ll resolve the debt.”
But not every debt collector plays by the rules, and luckily there
are protections in place that allow consumers to fight back if a debt
collector has run afoul of the law. Here are 12 times when consumers can
1. Calling Early & Calling Late
A debt collector may not call you before 8 a.m. or after 9 p.m.
The time frame may sound arbitrary, but think about it: This is when
you’re away from work, at home with family, or resting in bed. When a
debt collector calls at a time that is known to be inconvenient, David
Menditto, director of litigation for Lifetime Debt Solutions, a law firm
in Chicago, says, that’s a violation of the federal Fair Debt
Collection Practices Act (FDCPA).
2. Calling at Other Inconvenient Times
If you’ve told the collector not to call at a certain time, even if
it’s when you take a nap, Detweiler says, that’s another violation of
the FDCPA. “If you were to tell the collector, I work nights, so don’t
call me then, they can’t,” she says. Consumers can set the parameters.
3. Discussing Debt With Third Parties
“If a debt collector calls your mother and says, ‘Hi, we’re looking
for John, he owes us money. How do we get in touch?’” that’s yet another
violation of the FDCPA, Menditto tells Credit.com. “They can call, ask
to speak with John, and ask whether this is a good number to reach him
at, but they can’t be discussing the debt,” he says. Collectors are
allowed to contact a debtor’s spouse, however.
If a collector calls even though he or she knows that you’ve hired an
attorney, that’s a violation of the FDCPA, Menditto says. The reason:
The consumer may intend to file for bankruptcy
and they’ve probably told the collector to stop contacting them. “We’ve
had clients who claimed they told the debt collector to stop calling,
and they didn’t,” Menditto says. “Then they got an attorney and said,
‘Talk to him,’ and the collector kept calling and the collection got
5. Making False Threats
Some collectors threaten to take action without really meaning it.
For instance, they might say, “If you don’t pay in the next five days,
we’re going to sue you,” Menditto says. If they keep making threats and
don’t follow through, that’s a sure sign they’ve violated the FDCPA and
you can sue.
6. Calling the Wrong Party
When a collector continues harassing you even though he’s got the
wrong number, that’s grounds for a lawsuit, Menditto says. Typically,
the collector thinks the person is lying about their identity, so they
keep calling in the hopes the debtor will come clean.
7. Using Pre-Recorded or Automated Voice Calls
Robocalls aren’t just annoying, they’re flat-out illegal, Menditto says, citing the Telephone Consumer Protection Act
(TCPA), which regulates what’s known as automated calls. “The TCPA
prohibits any company, not just a debt collector, from calling you on
your cellphone using an automated telephone system or pre-recorded voice
without your express consent,” he says. “We typically, in the majority
of cases, get relief because the debt collector knows they did it.”
8. Using Automatic Phone Dialing Systems
Yes, there are machines that exist to solely crank out numerous phone
calls. Known as a predictive dialer or ATDS, these telephone systems
dial numbers one after another, and may contact consumers up to five
times a day. They’re illegal under the TCPA and can net consumers who
sue anywhere between $500 and $1,500 per call, as part of the damages.
9. Misrepresenting the Nature of the Debt
Though this tactic may work for collectors, it’s illegal to
misrepresent the nature of the debt, Detweiler says, citing the FDCPA. A
collector can’t pressure family members to pay a deceased relative’s
debt because they’re responsible (which they aren’t, unless they were
co-signers or joint account holders on the debt) or because they have a
“moral obligation.” The law has severe penalties for these kinds of
collectors, so those who are being harassed should contact a lawyer.
10. Threatening Violence
Has the collector threatened violence? That’s a violation of the FDCPA.
“It can get pretty ugly if a collector is crossing the line,” Detweiler
says, and “the ones who do create a lot of stress and anxiety that
leads consumers to make a bad financial decision.”
11. Using Profanity
Fortunately, the FDCPA protects debtors from verbal abuse such as the
use of obscene or profane language. If it’s meant to cause harm to the
hearer or reader, it’s grounds for a lawsuit, according to the Federal
12. False Representation
If a collector doesn’t state who they are to the consumer, be it in
writing or over the phone, that’s yet another violation of the FDCPA,
according to the FTC’s website. A collector must disclose to the
consumer that they’re attempting to collect a debt and that any
information obtained will be used for that purpose.
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
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 defunct customers.
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
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.”
What is their history and
relationship with the problem customer(s);
What do they know about
their customer’s business and the likelihood of getting paid;
What is the financial status and viability of the debtor
given their problem customers.
answers to these questions let us know if their explanation:
is still accurate and the only hope for our client to get
was initially legitimate but is no longer a viable path for
paying our client;
is just an excuse.
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.
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
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
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.