Apr 17

By ACA International

Data furnishers should take another look at their credit reporting practices to ensure that they measure up to the CFPB’s expectations.

Debt collectors, debt buyers, creditors and others who furnish information to consumer reporting agencies have a variety of obligations under the Fair Credit Reporting Act. The Consumer Financial Protection Bureau has expressed an extreme interest in credit reporting practices and furnishers’ compliance with FCRA requirements. Furnishers of information to consumer reporting agencies are highly advised to review their current credit reporting practices to ensure compliance with FCRA requirements and CFPB expectations.

Evidencing its interest in the credit reporting practices of data furnishers, the CFPB has issued two bulletins concerning the obligations of furnishers to investigate disputed information in a consumer report. The first bulletin in September 2013 reminded data furnishers of the FCRA’s requirement to “review all relevant information” they receive in connection with a dispute from a CRA. This includes reviewing documents forwarded to them by CRAs, as well as the furnisher’s own information with respect to the dispute. The CFPB warned that it expects furnishers have reasonable systems and technology in place to “comply fully” with such requirements.

The second bulletin, released February 2014, voiced the CFPB’s concern that data furnishers may respond to a consumer’s dispute by simply directing the CRA to delete the disputed item, without conducting an investigation of the dispute. The bulletin advised that deleting an item from a credit report does not necessarily constitute a reasonable investigation nor does it relieve the data furnisher of her status as a furnisher with respect to that item. [read more]

Apr 15

By Heather M. Morris – Lexology

For convenience, when collecting a debt, lenders may be tempted to simply add a percentage of the outstanding balance as the collection costs, rather than determining the actual costs of collection. The Eleventh Circuit, in the recent case of Bradley v. Franklin Collection Service, Inc., determined that, even in situations where the debtor has agreed to pay all costs of collection, this practice violates the Fair Debt Collection Practices Act (“FDCPA”).

As you are probably aware, the FDCPA is intended to prevent unfair and abusive practices in connection with the collection of a debt. Under the FDCPA, only amounts expressly provided for in the agreement can be collected. Bradley involved two similar debtors that incurred debts with healthcare providers. The debtors each agreed to pay “all costs of collection.” The healthcare providers referred the collection of the debts to a third party, and in doing so, added a set percentage of the principal balance to the total of the debt for collection costs. The debtors objected to that the percentage was not the actual cost of collection. The Eleventh Circuit agreed with the debtors and held that the agreement to pay “all costs of collection,” is limited to actual costs incurred by the creditor. [read more]

Apr 14

By insideARM

A federal judge this week decided to allow a potential class action lawsuit against a debt collection agency to move forward that claims violations of the FDCPA due to the presentation and positioning of validation notice language on a collection letter.

U.S. District Judge Gene Pratter, in the Eastern District of Pennsylvania, denied the collection agency’s motion to dismiss Tuesday in Harlan v. TransWorld Systems.

In October 2012, TransWorld (d/b/a North Shore Agency) sent Ms. Harlan a debt collection letter with a text box asking her to “PLEASE RESPOND” to its attempt to collect a $46.39 debt on behalf of its client, Disney Movie Club. A second text box contained a mini-Miranda warning under the heading STATEMENT OF RECOVERY, and a third – labelled “STATEMENT OF INTENTIONS” – read:

Without your response, diligent collection of your account may continue. Govern yourself accordingly. Make your check for the full amount owed payable to our client, Disney Movie Club, and mail it in the enclosed reply envelope. If necessary, you may contact our client directly at 1-877-336-2337.

Under the text boxes, the letter states “NOTICE-SEE REVERSE SIDE FOR IMPORTANT INFORMATION.” On the reverse side of the letter was the required validation notice in smaller text, along with notices required in various states (which did not include the consumer’s home state of Pennsylvania).

Pratter’s opinion contains samples of both the front and back of the letter.

Harlan claimed that the letter violated the FDCPA “by placing the validation notice inconspicuously on the reverse side of the collection letter, without spacing or indenting, along with a cadre of other, inapplicable state notices, such that it is difficult for a consumer to notice.” [read more]

Apr 11

By Paul Samakow – Communities Digital News

Do you owe some institution money from a long time ago? “Zombie” debt is debt that has come back from the dead to haunt you. Collection groups find and buy old debt in bulk from credit card companies, gyms, public utilities, cellphone providers and other creditors, and the business is growing steadily. Those collection grounds can be very aggressive.

The downturn in the economy in the recent past expanded what was once primarily an industry seeking to collect credit card debt to one that now targets delinquent mortgages, auto loans and medical debts.

Despite that the organization you owed “wrote off” your indebtedness, there is a good chance another organization will purchase the debt and try to collect from you. Typically a collection agency will pay the original creditor a few cents on the dollar for millions, or billions of dollars in bad debts, hoping to cash in on just more than it paid. At some point, if the collection effort is unsuccessful, the collection company may give up and sell the debt to another collection company, recouping the original investment, making it a “no loss” endeavor that has an accompanying lack of financial incentive to play by the rules.

“Very old debt can haunt consumers for a long time,” says Ira Rheingold, the executive director of the National Association of Consumer Advocates, an organization containing more than 1,500 consumer attorneys. “It’s a debt that never dies — it just keeps coming back in many different forms with different owners, and you can’t kill it.”

Zombie debt can even strike the wrong person. With the advent of identity theft and the similarity of many names, often collection companies’ efforts are misdirected.

Many collection companies go beyond sending letters and making telephone calls demanding payment. They are actually filing lawsuits. These lawsuits pose troubling issues for both attorneys and judges because documentation issues abound.

A collection lawsuit requires proper documentation. Many of the collection lawsuits brought by second or third generation buyers of these debts lack this documentation.Typically the original loan agreement is missing; it contains important and required details about the loan, including term, interest rates, and possible attorney’s fees. Ethically, how can an attorney file a lawsuit knowing that this type of vital information, or proof is lacking? [read more]

Apr 8

By Laura H. Phillips – National Law Review

As previously covered in other TCPA blog posts, the FCC maintains a range of TCPA rules addressing certain key elements of telemarketing and even non-telemarketing call activities that can implicate routine interactions between companies and their customers or prospective customers. The proper scope and interpretation of some of these rules continue to be the subject of newly filed petitions for clarification, declaratory ruling or even requests for outright waiver of certain FCC rules. We highlight here several of the more recent additions to the FCC’s already large compliment of pending TCPA petitions.

ACA International filed a petition for rulemaking in late January seeking FCC rule updates or clarifications to dispel the possibility that all predictive dialing technology, regardless of its actual use and configuration, could be deemed to be an automatic telephone dialing system (ATDS). ACA is a trade organization of debt collection companies. (See ACA International Petition.) ACA seeks to have the FCC apply “common sense” interpretations of what constitutes “capability” to function as an ATDS, among other things. The petition asserts that ACA member companies contact consumers exclusively for non-telemarketing purposes. The telephone communications at issue are to facilitate recovery of payment for services rendered that ACA characterizes as informational calls. ACA notes that modern calling technology makes these types of debt collection calls more efficient. However, the ability to utilize technology efficiently is being frustrated with the specter of legal damages by members of the plaintiffs’ bar attempting to invoke broadly worded FCC rule interpretations in situations where a predictive dialer may well not be functioning as an ATDS. ACA argues that for a predictive dialer to be considered an ATDS it must in fact demonstrate that it has the statutory elements of an ATDS to be considered an ATDS. Specifically, ACA argues that present ability to function as an ATDS at the time a call is made should be a limiting factor in any capability analysis and ACA asks the FCC to confirm that interpretation of the statute in its rules. [read more]

Apr 4

By Patrick Lunsford – insideARM

A bill that would offer a technical fix to the Fair Debt Collection Practices Act (FDCPA) aimed at collection attorneys has picked up three additional co-sponsors this month in the U.S. House of Representatives, including two in the past week alone.

The Fair Debt Collection Practices Technical Clarification Act of 2013 (H.R. 2892) was introduced last summer by Rep. Ed Perlmutter (D-Colo.) with a bipartisan co-sponsor in Rep. Spencer Bachus (R-Ala.). After being referred to the House Financial Services Committee, the bill was slow to gain support.

But there has been a flurry of activity lately, as three new Congressmen attached their names to the proposal. Just this week, two Republican representatives from North Carolina, George Holding and Robert Pittenger, co-sponsored the legislation. Earlier in March, Rep. Tim Griffin (R-Ark.) signed on. [read more]