Debt Archives

CFPB proposal would put larger debt collectors and credit reporting agencies under the same supervision process as banks

The Consumer Financial Protection Bureau (CFPB) on February 16, 2011 announced a
proposed rule to include debt collectors and consumer reporting agencies under its nonbank
supervision program.

Created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB is
authorized to supervise nonbanks in the specific markets of residential mortgage, payday
lending, and private education lending. For other nonbank markets of consumer financial
products or services, the CFPB must define “larger participants” by rule, which is due on
July 21, 2012.

Three types of debt collection agencies dominate the market: firms that collect debt owned
by another company for a fee, firms that buy debt and collect the proceeds for themselves,
and attorneys and law firms that collect debt through litigation. A single company may be
collecting through any or all of these activities. Under the proposed rule, debt collectors
with more than $10 million in annual receipts from collection activities would be subject to
supervision. The CFPB estimates that the proposed rule would cover approximately 175 debt
collection firms (or 4% of debt collection firms) which account for 63% of annual receipts
from the debt collection market.

The CFPB’s proposal also takes aim at the largest credit bureaus selling comprehensive
consumer reports, consumer report resellers, and specialty consumer reporting agencies.
Defined as companies that make more than $7 million annually from their consumer
business, the rule would affect 30 companies, and firms like Experian, TransUnion and
Equifax, that account for 94% of the industry’s business.

This is the CFPB’s first in a series of rulemakings to define larger participants. The CFPB
chose annual receipts as the criterion for both debt collection and consumer reporting
because it approximates participation in these two markets.

The proposed rule is open for comment for 60 days after the rule is published in the Federal
Register.

February 18th, 2012|Categories: Commercial Transactions Due Diligence|Tags: CFPB, Debt, Dodd-Frank|

Truth is stranger than fiction: fraud came complete with a fake courtroom and costumed employees

Late last year, the Pennsylvania Attorney General (AG) filed a consumer protection lawsuit against an Erie debt collection company accusing it of using deceptive tactics to mislead, confuse or coerce consumers. The AG called the company’s actions “an unconscionable attempt to use fake court proceedings to deceive, mislead or frighten consumers into making payments or surrendering valuables to the company without following lawful procedures for debt collection.”

According to the lawsuit, the company allegedly used fraudulent civil subpoenas – sometimes served by deputy sheriff impersonators – to summon consumers to its office which included an area referred to as the “courtroom” and was the stage for fictitious proceedings to intimidate consumers into providing access to bank accounts, making immediate payments or surrendering vehicle titles and other assets. The bogus courtroom was set up with furniture and decorations similar to those used in actual courts, including a raised judge’s bench, two tables and chairs in front of the bench for attorneys and defendants, a simulated witness stand, seating for spectators, and shelves with legal books. And in some of the fake hearings, an individual dressed in black was seated as the “judge.” After the staged proceedings, the company’s employees allegedly were dispatched to the consumers’ homes in order to retrieve documents or to compel them to sign payment agreements.

In conjunction with the lawsuit, which seeks restitution for all consumers who have been harmed by the company’s unfair trade practices, the AG filed a petition for, among other remedies, a special and preliminary injunction asking the court to freeze the company’s assets, and prohibit it from engaging in any debt collection. Fast forward to November 2011: the company is now defunct, and the AG’s office is resuming its suit against the former president who several months ago filed for personal Chapter 13 bankruptcy which insulated him from creditors, but not from the Attorney General’s Bureau of Consumer Protection, according to Chief U.S. Bankruptcy Judge Thomas P. Agresti’s ruling.

And there is more. According to published reports, an Erie district judge is suing the publisher of the Erie Times-News, its web server and three reporters for defamation in connection with stories, which allegedly made it appear that he was part of the sham perpetrated by this debt collection agency.

Just like this case, many of the attorney general’s complaints read better than fiction, but these scams are real and cause very real damage to individuals and companies. Many consumers do not realize that state attorney general records are searchable and it is imperative that these records are included in all comprehensive background investigations.

December 22nd, 2011|Categories: Criminal Activity|Tags: Debt|

Can a person be denied a job or be terminated because of a bankruptcy filing?

Section 525 of the Bankruptcy Code provides two slightly different standards for government applicants and employees, and for private employers. The bankruptcy discrimination statute for government employees

[s.525(a)] states that:

[The government] may not…deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act.

Section [s.525(b)] applies to private employers, and states that:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt, solely because such debtor or bankrupt (1) is or has been a debtor under this title or a debtor or bankrupt under the Bankruptcy Act; (2) has been insolvent before the commencement of a case under this title or during the case but before the grant or denial of a discharge; or (3) has not paid a debt that is dischargeable in a case under this title or that was discharged under the Bankruptcy Act.

July 13th, 2010|Categories: Employment Decisions|Tags: Bankruptcy, Debt, Employment Decisions, Employment Law|