By Patrick Lunsford – insideARM
The Consumer Financial Protection Bureau (CFPB) Thursday presented its annual report to Congress on the administration of the Fair Debt Collection Practices Act (FDCPA) in 2013. While 2013 was the most active year of debt collection regulation ever, the report focuses heavily on an analysis of debt collection complaints the agency has received since July 2013.
Under the FDCPA, the executive branch agency charged with primary enforcement of the law must issue an annual report on its activities to Congress. Although the Dodd-Frank Consumer Protection Act, which created the CFPB, does not subject the Bureau to Congressional appropriations, it still must comply with the reporting requirement in the FDCPA.
The 2013 FDCPA report focuses on three key, industry-changing initiatives launched last year: the beginning of supervisory examinations among larger market participants (January), the opening of the CFPB complaints system to debt collection (July), and the beginning of the rulemaking process for debt collection (November).
But an analysis of the 30,300 debt collection complaints the Bureau received from July through the end of the year gets the most space.
The CFPB said that the top three debt collection complaints in 2013 were about:
- Collectors hounding consumers about a debt they do not owe: More than one-third of the complaints the CFPB handled were about a debt collector continually attempting to collect a debt that the consumer does not believe is owed.
- Aggressive communication tactics used by debt collectors: Nearly a quarter of the complaints received by the Bureau were about debt collectors using inappropriate communication tactics.
- Taking or threatening an illegal action: About 14 percent of consumers report that a company is taking or threatening an illegal action. Most of these complaints are about threats to arrest or jail consumers if they do not pay.
The CFPB said it sent approximately 11,000 (36%) of the about debt collection complaints it received to companies for their review and response. The Bureau referred some of the remaining debt collection complaints to other regulatory agencies (35%), while other complaints were found to be incomplete (13%), or are pending review by the consumer or the CFPB (16%). Companies have already responded to approximately 9,000 complaints or 82% of the about 11,000 complaints sent to them for response. Consumers have disputed approximately 1,500 company responses (17%) to their complaints. [read more]
By Christopher Cameron – The Real Deal
The nation’s largest mortgage servicer, Wells Fargo, is being investigated for allegedly setting up detailed internal procedures to fabricate foreclosure papers on demand.
New York Attorney General Eric Schneiderman and three major regulators are handling the investigation into the foreclosure manual, which the lender maintains does not violate any rules.
“Wells Fargo’s foreclosure processes — today and back in 2012 — are appropriate [and] legal. To allege otherwise is simply misrepresenting the facts,” a Wells Fargo spokesperson said. “Wells Fargo’s Foreclosure Attorney Procedures Manual provides guidelines for outside attorneys to be compliant with state and regulatory requirements.” [read more]
By Patrick Lunsford – insideARM
The Consumer Financial Protection Bureau and Federal Trade Commission this week said in a court brief that “actual or threatened litigation is not a necessary predicate for an FDCPA violation in the context of time-barred debt.” The brief argues that under certain circumstances, a settlement offer — and other collection activity — on an out-of-statute account can mislead the consumer and could be a violation of the FDCPA.
The two agencies filed a joint amicus brief with the Sixth Circuit Court of Appeals in a class action case over language in a collection letter that offered a consumer a chance to settle the debt. The case, Buchanan v. Northland Group, had been dismissed by a district court judge and is on appeal to the Sixth Circuit.
The debt collector in this case sent Buchanan a dunning letter with an offer to settle a debt upon which the statute of limitations had expired. Buchanan filed a class-action complaint, contending that the letter violated the FDCPA’s prohibition on the use of “any false, deceptive, or misleading representation or means in connection with the collection of any debt.” (15 U.S.C. § 1692e) On the debt collector’s motion, the district court, in the Western District of Michigan, dismissed the complaint, holding that, as a matter of law, the letter could not have violated the FDCPA.
The FTC and CFPB argue that the dismissal should be overturned, but take no position on the ultimate merits of plaintiff’s claims.
The settlement offer in question represented that the consumer’s balance would continue to accrue “interest” and included a warning that the company was “not obligated to renew” the settlement offer. The brief noted that “Even if those statements are not deemed an implicit threat of litigation—an issue this brief does not address—they could plausibly mislead an unsophisticated consumer into believing that she could be sued for the debt. The district court thus erred in holding that, as a matter of law, the letter could not mislead the least sophisticated consumer, and the court’s dismissal of the complaint should be reversed.” [read more]
By Sanjay Bhatt – The Seattle Times
Big companies financed by Wall Street have acquired thousands of single-family homes to offer as rentals, outmaneuvering ordinary homebuyers at a time of tight inventory.
Last April, amid the region’s tightest housing supply in a decade, a Wall Street-backed company stormed into the Seattle metro area and bought, on average, 10 homes a day.
Invitation Homes, a subsidiary of investment giant The Blackstone Group, purchased the homes from banks, foreclosure auctions or individual sellers, and turned them into rentals. Often buying entry-level homes under $300,000, it almost always paid cash.
“Cash is king,” said Bob Papke, a RE/MAX real-estate agent in Sammamish. “Your first-time buyer who’s scrambling to get their down payment together is going to get trumped by the investor.”
By year’s end, Blackstone’s Invitation Homes had hoovered up at least 1,585 single-family homes here, according to market researcher RealtyTrac . Nationwide, Blackstone says it has spent $8 billion amassing a portfolio of 43,000 single-family homes.
Big companies such as Blackstone are a new force in the single-family home market, offering more ready cash than ordinary buyers and helping push up prices.
As homeowners from coast to coast wake up to learn they have a Wall Street fund as their neighbor, some are happy to see the houses spruced up and occupied. Others complain it’s hard to get the landlord to address problems that surface.
When Invitation Homes’ for-rent sign was posted in front of a house two doors down from hers in Seattle’s Broadview neighborhood, homeowner Alex Alexander groaned. [read more]
By Scott Sandlin – Albuquerque Journal
Christopher Dollens was still grieving his father’s death from a workplace accident in 2010 when he found himself also having to fend off notices from Wells Fargo, the company servicing the home loan his father had taken out seven years earlier.
Wells Fargo foreclosed on the family home despite the accidental death insurance policy the bank sold his father along with the mortgage – conduct an Albuquerque judge said was so “highly reprehensible” she slapped the company with a judgment awarding the Dollens estate $2.7 million in punitive damages.
Judge Beatrice Brickhouse, who also awarded damages of $15,633 under the New Mexico Unfair Trade Practices Act, used words like “shocking” to describe conduct by Wells Fargo, summing up evidence from a bench trial in December 2012 and March 2013.
She also awarded $390,000 in fees to the law firm that has been litigating the case on behalf of the estate, along with almost $50,000 in costs, though attorney Katy Duhigg-Kennedy says it may be years before they see any of it since Wells Fargo has said it will appeal.
“We are disappointed by and respectfully disagree with several aspects of the court’s ruling, including the award of punitive damages,” Jim Hines, assistant vice president for Consumer Lending Communications at Wells Fargo, said in a statement. “We are seeking review of the decision through the appeal process.”
James Dollens had purchased an accidental death mortgage insurance policy issued by Minnesota Life and marketed by Wells Fargo for the home he purchased in Rio Rancho.
At the time of his death he owed $125,000.
On the day of his death, Aug. 18, 2010, James Dollens worked at the General Mills cereal plant on a 6 p.m. to 6 a.m. shift. In the last hour and a half of his shift, he apparently fell from a catwalk while cleaning cereal dust with an air pressure hose; police surmised that in the heat near the oven he might have been overcome by his exertions, leading to the fall over a safety railing.
His death was reported immediately to Minnesota Life and to Wells Fargo to make a claim under the mortgage accidental death policy.
The mortgage and note specified that any payments would be applied first to interest and principal due before fees and other costs were taken out.
Brickhouse found that instead of making a claim for benefits, Wells Fargo sent form letters and notices to Christopher Dollens about the loan being in default – despite the fact that he had asked for forbearance when he notified Wells Fargo of his father’s death.
Wells Fargo referred the loan for foreclosure in December 2010.
The Dollens family hired a law firm to provide documentation, including the death certificate, to Wells Fargo, and the attorneys asked Wells Fargo not to pursue foreclosure while the insurance claim was pending. Minnesota Life also asked Wells Fargo to hold.
The bank went ahead anyway. [read more]
By Patrick Lunsford – insideARM
The Federal Trade Commission (FTC) Wednesday issued its annual report on enforcement of the Fair Debt Collection Practices Act (FDCPA) in a letter to the Consumer Financial Protection Bureau (CFPB). The letter noted that the FTC has stepped up its law enforcement actions under the FDCPA as the CFPB takes over most other responsibilities.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is required to submit annual reports to Congress on the FDCPA, a task previously assigned to the FTC. To assist the CFPB in preparing its report, the FTC issues a letter summarizing its own recent work on debt collection issues.
In Wednesday’s letter, the FTC noted that it brought or resolved nine debt collection cases in 2013, the highest total in a single year.
“When it comes to debt collection, the FTC has many tools in its arsenal, including research, enforcement, and consumer education,” said Jessica Rich, Director of the agency’s Bureau of Consumer Protection. “But in the years since the financial crisis hit, we have increased our emphasis on law enforcement.”
In 2013, the FTC obtained court orders stopping illegal debt collection activities in seven cases, and referred two other debt collection cases to the Department of Justice for civil penalties. In several of the cases, the FTC obtained temporary restraining orders halting the unlawful conduct, freezing the defendants’ assets, and appointing receivers to take over operations while court proceedings progressed (Asset & Capital Management Group and Goldman Schwartz Inc.). For the most egregious violators, the FTC obtained orders banning the responsible parties from ever participating in debt collection again (Forensic Case Management Services, Inc.). [read more]