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CFPB proposed changes to Debt Collection practices


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The CFPB posted a proposal for changes in the Debt Collection industry.  It can be found here:  http://files.consumerfinance.gov/f/documents/20160727_cfpb_Outline_of_proposals.pdf

Let's come up with some real world rules that would benefit the consumers, like us.

-------  OUR PROPOSED RULES  --------

  1. The original creditor shall not sell charged-off debts, or accounts without first offering the consumer the option to purchase their own debt/account at the rate the creditor would sell it to a 3rd party (i.e. $.03 - $.10 per $1.00 of debt).
  2. Statutory minimum of $1000 per violation, and treble damages if willful or negligent conduct is established.
  3. An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within two years from the date on which the violation occurs.
  4. The capacity to obtain a declaratory judgment that an act or practice violates this subchapter; and
  5. To enjoin, in accordance with the principles of equity, a covered party who has violated, is violating, or is likely to violate this subchapter.
  6.  
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A big help for consumers would be if all the CFPB rules allowed a private right of action for violations.

If debt collectors follow all these rules it would be harder to win a case in court since they'd be bringing quality evidence but if the CFPB orders are any indication for compliance, business won't change much. For those, initiation of a lawsuit requires a certain set of documents which isn't possible for the JDB to provide with older account purchases. Does that stop them from filing lawsuits- No, but does it give consumers a defense, yes. If you're aware of a violation all you can do now is report to the CFPB and enter the CFPB order in court under Judicial Notice hoping that will get a dismissal.

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I haven't read the whole thing, but there is a lot of permissive language as far as 'regulations' on the debt collector. 

"• Review information sufficient to substantiate claims of 
indebtedness
o May obtain list of fundamental information and 
representation of accuracy from debt owner
• Determine whether there are warning signs"

Seems like there's enough room left to let the debt collector not obtain substantiation and/or claim they saw no warming signs. 

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1 hour ago, Harry Seaward said:

Is this something we have a voice in?

Right now, the list is just a proposal and can be revised.  At some point, the public should be invited to offer comments.   Once the CFPB is happy with the proposed rules, they'll issue final rules which will be published in the Federal Register and codified in the Code of Federal Regulations.

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@Coffee_before_tea The CFPB might be surprised at how popular arb is here to take care of lawsuits their consent agreements say should never get filed.

I see separate from the above proposals the CFPB complaint system is going to give consumers the ability to give 1 to 5 star ratings on how companies handle their complaints. http://www.consumerfinance.gov/about-us/blog/proposed-new-information-collection-part-complaint-process/

For anyone not wanting to read the 117 page pdf, the summary is here- http://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-considers-proposal-overhaul-debt-collection-market/

 

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@CCRP626  I agree, I also think the CFPB can do a lot more.  I'm sure the usual suspects are lobbying for changes to the FDCPA.  I hope that we can get someone from the CFPB to insert some of our recommendations (i.e. the consumers in the trenches).  

I also think they need to make it easier for the Consumer to file FDCPA claims.  Currently, with 90%+++ default judgments, there are very few consumers whom defend these cases themselves.  I'd be curious to see what percentage of the remaining 10% are Pro Se, and which are done by a consumer attorney or inexperienced general practice attorney.

For those of us in the small percentage of Pro Se's, it is up to us to determine what constitutes a violation of the FDCPA.  We then have to search out a consumer attorney that is willing to take the case, which most do not want simple cases.  Unless you pay them out of pocket.   I spoke with a dozen consumer attorneys for my lawsuit, and only 1 of the 12 thought it was an exciting, affirmative case.  Although, he didn't want to take it because he couldn't do a class action, due to the Arb agreement in the contract.  

I immersed myself in the law, and researching cases, so I was able to file the case myself.  But, where does that leave the "everyday consumer"?  They are left in the lurch, without knowledge or representation.  The reality is that most JDB's know that they can do shady things, and violate laws with near impunity (as been witnessed over the years).  

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58 minutes ago, Coffee_before_tea said:

Although, he didn't want to take it because he couldn't do a class action, due to the Arb agreement in the contract.  

Arb prohibiting class action is one area the CFPB is looking into. For the FDCPA, a change I think would be nice is if it was more like the TCPA where each violation adds to the bill and a trebled damages bonus if it's really ignoring the law. A longer SOL than one year as well.

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2 hours ago, Coffee_before_tea said:

For those of us in the small percentage of Pro Se's, it is up to us to determine what constitutes a violation of the FDCPA.

What do you mean "it's up to us to determine what constitutes s violation of the FDCPA"?

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Just now, BV80 said:

What do you mean "it's up to us to determine what constitutes s violation of the FDCPA"?

The consumer has to determine if the JDB/Collection agency has possibly violated the FDCPA.  They then have to contact a consumer attorney, where they will ask:  "What have they done that makes you think they've violated the FDCPA?"  The consumer then explains the reasoning behind the claim.

The attorney will then ask for any docs, or other information that can substantiate the claim.  Most attorney's will not get past the phone call stage, where the consumer has to state all the reasons why the jdb/collector has potentially violated the consumer statute.  

The first line of legal determination is on the consumer.  

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1 minute ago, Coffee_before_tea said:

The consumer has to determine if the JDB/Collection agency has possibly violated the FDCPA.  They then have to contact a consumer attorney, where they will ask:  "What have they done that makes you think they've violated the FDCPA?"  The consumer then explains the reasoning behind the claim.

The attorney will then ask for any docs, or other information that can substantiate the claim.  Most attorney's will not get past the phone call stage, where the consumer has to state all the reasons why the jdb/collector has potentially violated the consumer statute.  

The first line of legal determination is on the consumer.  

Okey dokey.  I see what you mean.

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2 hours ago, CCRP626 said:

Arb prohibiting class action is one area the CFPB is looking into. For the FDCPA, a change I think would be nice is if it was more like the TCPA where each violation adds to the bill and a trebled damages bonus if it's really ignoring the law. A longer SOL than one year as well.

The FDCPA does need to be updated.   I agree that it would benefit the consumer.  However, an increase in statutory damages really wouldn't have much, if any, effect on collection agencies.    They would simply deduct any payments to consumers off of their taxes.   Their legal expenses are tax-deductible, as well.   That would include uncollected legal expenses when they file suit against consumers.

Penalties paid to the government are what hurt the companies because most of them are not tax-deductible, although some of them might be.  I think restitution paid to consumers would be deductible.

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1 hour ago, BV80 said:

The FDCPA does need to be updated.   I agree that it would benefit the consumer.  However, an increase in statutory damages really wouldn't have much, if any, effect on collection agencies.    They would simply deduct any payments to consumers off of their taxes.   Their legal expenses are tax-deductible, as well.   That would include uncollected legal expenses when they file suit against consumers.

Penalties paid to the government are what hurt the companies because most of them are not tax-deductible, although some of them might be.  I think restitution paid to consumers would be deductible.

The FDCPA does need to be updated.   Yup.  It's a 1977 act, if I remember.  Back then, the $1000 statute award seemed substantial. 

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21 minutes ago, CCRP626 said:

@BV80 for the consumers trying to do an FDCPA claim Pro Se though, wouldn't something better than up to $1,000 be helpful to them? 

I agree.  That's what I meant when I said it needs to be updated but that any increase in statutory damages wouldn't really affect collection agencies.    It would help consumers but not do much damage to CAs.

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The desired effect would be towards compensating the consumer whom suffered the damage, and took the time to contact an attorney or pursued a case Pro Se. 

For a mere "up to $1000" or actual damages, it is not worth it to most consumers to pursue.  If they could get 5-10K, plus attorneys fees, that would make things more realistic in terms of dollar value from 1977 to 2016.

In my original post, I'm entering proposed FDCPA rules, if anyone wants to contribute.  It can't hurt to submit it to the CFPB (although, it's a pipe dream that they'd listen to everyday consumers and not a lobbying firm)

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4 hours ago, debtzapper said:

The FDCPA does need to be updated.   Yup.  It's a 1977 act, if I remember.  Back then, the $1000 statute award seemed substantial. 

It would take a change from $1000 to $4000 just to keep up with inflation over that time.

However, I'd  worry that any attempt at legislative amendment to the FDCPA would be far too risky.  Congressional staff in the 70s had in-house staff that did a sizable amount of the actual textual work of legislation.  Now, due to lobbying, complexity, and the expertise gap, it is all contracted out to interest groups.  The sizable power of the CFPB was a fluke in the wake of the financial crisis.  Legislative work on the FDCPA today would be subject to the regulatory capture of interest groups.  The only interest group that might be considered an advocate of the consumer would be consumer attorneys - whose power is dwarfed by the collection industry.

On a slightly related note, the comment period on the CFPB proposed arbitration rule ends August 22.  There probably hasn't been many comments about the value of arbitration to some consumers.

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On 7/29/2016 at 5:46 PM, Coffee_before_tea said:

The original creditor shall not sell charged-off debts, or accounts without first offering the consumer the option to purchase their own debt/account at the rate the creditor would sell it to a 3rd party (i.e. $.03 - $.10 per $1.00 of debt).

What about the creditor then doing a 1099C in the above example of $0.90-$0.97 per dollar? Chase on all those accounts covered by the CFPB order and other regulatory findings was found to have basically uncollectable debts. The consumer still ended up owing taxes on these accounts or other cancelled accounts Chase reported to the IRS at full value. If you could file the insolvency paperwork with the IRS you were covered, otherwise you're paying the IRS for cancelled debts that won't stand up in court.

SOL debts are another 1099C area. Too old to sue on but not to report to the IRS. Arguing against a 1099C from what I've read seems to get the response of you'll have to have the issuer fix that.

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5 hours ago, debtzapper said:

The proposed rules outlined by the CFPB only address third-party debt collectors; a second proposal to address abusive collection by first-party creditors, such as credit card companies and payday lenders, is expected at a later date.

That will be welcome as well. The in-house collectors can be pretty bad, especially knowing they're exempt from the FDCPA.

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2 hours ago, CCRP626 said:

What about the creditor then doing a 1099C in the above example of $0.90-$0.97 per dollar? Chase on all those accounts covered by the CFPB order and other regulatory findings was found to have basically uncollectable debts. The consumer still ended up owing taxes on these accounts or other cancelled accounts Chase reported to the IRS at full value. If you could file the insolvency paperwork with the IRS you were covered, otherwise you're paying the IRS for cancelled debts that won't stand up in court.

SOL debts are another 1099C area. Too old to sue on but not to report to the IRS. Arguing against a 1099C from what I've read seems to get the response of you'll have to have the issuer fix that.

The 1099C's will be difficult to side-step; but technically, the IRS says if you have 5K in charged-off debt, then it counts as income, even if the debt is uncollectable.  Unless it wasn't the consumers debt, I don't know how to get around that, other than the insolvency paperwork.  

This is certainly a murky area, as the OC can file a 1099C and then sell the debt to a JDB, then the JDB can attempt to collect on a debt that has been charged-off, written off, received tax benefits from, and canceled according to the IRS.  From my perspective, this would constitute a waiver of the right to collect the debt, once they file a 1099C.  By definition, to cancel is to abolish or make void.  I believe this has been litigated before, and there is some case law floating around, but I don't know how well is was argued.

 

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@Coffee_before_tea I think add to your list a revision of the reporting requirements and ability of consumers to challenge 1099C. BTW, the SOL allowance to jam a consumer is worse than I remember. This can all come as a final thank you after you've spent time and money in court fighting a case. Above, $5K was mentioned but $600 is the form filing trigger and any amount is considered income even without form filing.

In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired.

 

 

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11 hours ago, CCRP626 said:

@Coffee_before_tea I think add to your list a revision of the reporting requirements and ability of consumers to challenge 1099C. BTW, the SOL allowance to jam a consumer is worse than I remember. This can all come as a final thank you after you've spent time and money in court fighting a case. Above, $5K was mentioned but $600 is the form filing trigger and any amount is considered income even without form filing.

In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired.

 

 

Write it up in the language you want and I'll add it.  

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