Nov 13

By Bob Sullivan –

Debt collectors have been known to use dirty tricks to get consumers to pay, but those collecting student loans have an especially powerful tool on their side. Unlike most other debt, student loan debt cannot be routinely discharged in bankruptcy. And depending on the type of loan, the debts can be collected through wage garnishments or even as deductions from Social Security checks. Student loan borrowers suffer from a decided lack of leverage when dealing with lenders and collectors.

This position of power emboldens student loan debt collectors. Perhaps that’s why, when the Consumer Financial Protection Bureau examined student loan servicing recently, it found a company that routinely called debtors at odd hours, violating federal law. In fact, one borrower received 48 such calls.

The massive student loan problem (there’s now more outstanding student loan debt than credit card debt) is an anchor that is severely hampering some young Americans from starting their adult lives. Roughly one-third of adults aged 18-31 live with their parents. Of course, it’s not the amount of the debt that’s the problem, it’s the number of former students who can’t pay the debt. Earlier this year, the Government Accountability Office said that about $94 billion — more than 11% of the federal student loan volume in repayment — was in default.

Most of those in-default consumers will end up in the hands of a debt collector. In fact, The Department of Education contracts with private debt collectors in an attempt to recover the debts. The agency estimates that in 2014, taxpayers and student loan borrowers will pay over $1 billion in commissions to student loan debt collectors, growing to over $2 billion by 2016.

For years, advocacy groups like the National Consumer Law Center having been trying to get student debt collectors, particularly those working for the Department of Education, to clean up their act. Advocates say that many do a poor job of explaining options to borrowers who fall behind, for example. A report issued by NCLC in September was heavily critical.

“The government’s use of debt collection agencies is short sighted in that promoting paths to success for struggling borrowers, especially those who are low income, is ultimately less costly for taxpayers than hammering them … the rest of their lives with draconian collection tools,” said National Consumer Law Center attorney and co-author Persis Yu. [read more]

Nov 12

By Elizabeth Weise – USA Today

In classified briefings Oct. 22 and Nov. 7, the U.S. Postal Service told members of Congress that it had been hacked.

The service made the information public Monday.

The Washington Post reported China may have been involved in the cyberattack, citing anonymous sources. USA TODAY was unable to confirm the report.

Postal Service spokeswoman Sue Brennan told USA TODAY the “issue is still under investigation.”

In its statement, the post office said some USPS computers were hacked and some employee information was compromised.

Information about people who called in to the post office’s Customer Care center was also compromised.

The service’s customer website,, was not affected, the statement said.

“The intrusion is limited in scope, and all operations of the Postal Service are functioning normally,” said David Partenheimer, media relations manager for the U.S. Postal Service.

In a letter sent Monday, Rep. Elijah Cummings, D-Md., cited the classified briefings, which were made to the House Committee on Oversight and Government Reform. He asked for more information from Postmaster General Patrick Donahoe.

Cummings asked for a description of the cyberattack and how it was first discovered, as well as what actions Donahoe took after learning about it. [read more]

Nov 12

By Steven R. Arnold, Sandra R. King, Craig D. Miller, Barbara S. Polsky, Harold P. Reichwald and Marc Roth – Lexology

Why it matters

Seeking an exemption from Telephone Consumer Protection Act (TCPA) liability, the American Bankers Association (ABA) filed a petition with the Federal Communications Commission (FCC) to allow financial institutions to call or text customers on their mobile phones in the event of a data breach or fraudulent activity. The ABA’s two-pronged argument – the need to fulfill legal requirements as well as protect customers – could prove persuasive to the FCC, particularly in light of the Commission’s approval of an exemption for package delivery notifications earlier this year. If the Commission were to grant the group’s request, financial institutions could certainly breathe easier when sending fraud or breach notification messages without worrying about facing a potential TCPA consumer class action.

Detailed discussion

On behalf of its member banks, the ABA filed a petition with the FCC seeking an exemption under the TCPA for four categories of messages. Why the need for the request? The popularity of TCPA class action lawsuits, which offer plaintiffs uncapped statutory damages and often lead to multimillion-dollar settlements (like the $77 million deal Capital One Bank agreed to earlier this year).

While the ABA explained that research and experience have revealed that automated communications are best suited to the bank’s fraud alert and breach notification needs, the TCPA requires prior express consent for such messages sent to mobile phones. At least one court has agreed with a bank customer that although he provided his number to the bank for a particular reason, he did not specifically consent to receive fraud and identity theft alerts. Such rulings have left banks fearful of potential liability under the statute, the petition explained.

To alleviate concerns for its members, the ABA asked for an order pursuant to the Commission’s powers to grant exemptions under Section 227(b)(2)(C) that would permit financial institutions to send messages in four specific categories using an automatic telephone dialing system or an artificial or prerecorded voice without prior express consent by the recipient subject to any conditions the Commission might deem necessary.

The first category: messages required to protect consumers from fraud and identity theft, a huge – and growing – area of loss. Financial institutions monitor account activity and risk factors and use algorithms to detect potential fraud, the ABA explained. But “effective fraud prevention requires the earliest possible contact with the customer,” the group wrote. “The volume of these notifications, which average 300,000 to 400,000 messages per month for one ABA member alone, cannot be accomplished with acceptable speed and accuracy unless the process is automated.” [read more]

Nov 11

By Jason Oliva – Reverse Mortgage Daily

Though debt collection is an issue that plagues millions of Americans each year, for seniors it’s at the top of their complaints when it comes to financial products and services, according to a recent report from the Consumer Financial Protection Bureau (CFPB).

Since September 2013, older Americans have submitted more complaints to the CFPB about debt collection than any other financial product or service—representing one of every three (34%) complaints the agency has received from this demographic between July 2013 and September 2014.

Reverse mortgages only represented 1% of complaints during that time, while broader mortgage complaints constituted a 23% share of complaints.

Specifically, complaints regarding collectors hounding about medical debt, attempting to collect on debts of deceased family members and illegally threatening to garnish federal benefits have risen to the top of older consumers’ concerns, according to the CFPB analysis. [read more]

Nov 10

By Matt Taibbi – Rolling Stone

Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking

he tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn’t take it anymore.

“It was like watching an old lady get mugged on the street,” she says. “I thought, ‘I can’t sit by any longer.'”

Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She’s had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.

Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.

Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as “massive criminal securities fraud” in the bank’s mortgage operations.

Thanks to a confidentiality agreement, she’s kept her mouth shut since then. “My closest family and friends don’t know what I’ve been living with,” she says. “Even my brother will only find out for the first time when he sees this interview.”

Six years after the crisis that cratered the global economy, it’s not exactly news that the country’s biggest banks stole on a grand scale. That’s why the more important part of Fleischmann’s story is in the pains Chase and the Justice Department took to silence her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. “Every time I had a chance to talk, something always got in the way,” Fleischmann says. [read more]

Nov 10

By Patrick Lunsford – insideARM

Expert Global Solutions (EGS), parent company of ARM giant NCO Group, announced Monday the closing of a deal that saw it sell Transworld Systems and many other debt collection units to a private equity firm. The transaction was initially announced in July.

The deal, the financial terms of which were not disclosed, also involved NCO collection units focused on education, healthcare, and government, as well as its attorney network. All U.S.-based third party collection business have also been divested.

EGS will focus its BPO efforts on customer relationship management (CRM), first-party accounts receivable management, and international debt collection. [read more]