CFPB Begins Regulating Debt Collectors Jan. 2, 2013

For the first time, a single federal government agency will oversee the debt collection industry starting next year, marking a monumental victory for the year-old Consumer Financial Protection Bureau.

The agency said Wednesday that starting Jan. 2, 2013, it will begin oversight of the largest debt collectors, making sure they are following the law collecting overdue bills. Most of the nation's debt collectors, though, are small enough to duck the regulator's oversight.

Once the CFPB begins regulating large debt collectors, consumers like Cebilla DeCastro, 48, of Bronx, N.Y., will have the aid of the federal government to help fight illegal debt collection practices. DeCastro was forced to turn her phone off at night to stop the calls from debt collectors, even though she filed for bankruptcy protection months earlier. Though she didn't owe any more money, these kinds of calls are not unusual. The debt collection industry is notorious for breaking the law and harassing consumers who owe or have owed money.

“We want all companies to realize that the better business choice is to follow the law -- not break it," CFPB Director Richard Cordray said in a statement.

Under the new rules, the CFPB will oversee any company with more than $10 million in annual receipts from collections, which make up around 60 percent of the industry's $12.2 billion in revenue. At least 30 million Americans are currently in debt collection, with an average outstanding bill of around $1,500, the bureau said.

The CFPB said it intends to make sure debt collectors properly disclose the amount owed and use the most accurate data to pursue debts. The bureau will also look at how collection agencies handle disputes. Lastly, the CFPB wants to make sure collection agencies communicate in civil ways with consumers, rather than threatening and harassing them.

But for consumers, the victory is only partial. Of the 4,500 collection firms in the U.S., only 175 are big enough to be covered by the new rules. That means smaller firms -- along with collections agencies overseas -- will not be regulated by the CFPB.

The Federal Trade Commission has already picked up some of that slack with recent crackdowns on overseas debt collectors and fraudulent firms scamming people out of money. This spring, the FTCshuttered at least one company that operated from a call center overseas. The FTC has also taken steps to close fake debt collection firms.

An FTC spokesman said the agency receives more complaints about debt collectors than any other single industry -- 180,000 complaints in 2011.

The debt collection industry expands the CFPB's regulatory portfolio of financial companies. In September, the CFPB began oversight of the credit reporting industry. It also keeps tabs on mortgage originators, mortgage servicers and payday lenders.

Under the Fair Debt Collection Act, a collector must send a written statement indicating how much money is owed within five days of first contacting a customer. By law, collection agencies cannot contact a person before 8 a.m. or after 9 p.m. Collectors cannot threaten arrest or harm or pretend to be some kind of legal enforcement officer or agency.

For a full list of guidelines about what is allowed consult the Federal Trade Commission's website.

http://www.huffingtonpost.com/2012/10/24/cfpb ... 4.html#comments

I will not hold my breath as to this being an improvement.

I heard that. I will believe it when I see companies like Portfolio Recovery who have made violations of the FDCPA an art form taken down and broken over the CFPB's knee like a stick.

This has been in the works since Summer 2011, progressing through the launch of CFPB's nonbank supervision program this January. The holdup has been in defining a "larger participant" in each category to be regulated. Credit reporting agencies got their rule this July when CFPB announced the debt collector final rule was delayed.

Consumer Financial Protection Bureau to supervise credit reporting
http://www.consumerfinance.gov/pressreleases/ ... edit-reporting/

The "$10 million in annual receipts" floor in the Larger Participant definition has been on the table for collectors all along. The Bureau's logic was that they would catch the collection agencies with the highest volumes of debt accounts. Naturally the collection industry wanted that figure to be higher, and consumer defenders wanted a lower floor.

I await official-type rule publication before I make any opinions. I would point to a great submission to the rulemaking comments pool by the National Consumer Law Center in April. It wished for a $7-mil floor and "the flexibility to go beyond the largest 4% of debt collectors ... a lower number such as $3.5 million in total receipts might be appropriate."

Cleverly NCLC suggested an "affiliated company" provision so that as debt buyers, collectors, lawyers, info furnishers, skip tracers, letter senders, et al go on outsourcing to each other, the resulting (potential) abuses are not too diffused to be caught in the CFPB dragnet. We have seen diffusion models play out already with the "Corona Cabal" of Rincon and its buddies, LVNV Funding, and other junk debt buyers.

Good point Res, it is really simple and inexpensive to generate YACF (Yet Another Corporate Front). You don't need a lawyer, just the fee for the secretary of state and some boilerplate paperwork. I quit paying lawyers to do routine real estate holding corporations years ago. So simple even a debt collecting caveman could do it.

The offending companies will just have a drawer full of corporate fronts or Canadian/foreign fronts to match their multiplying phone number inventories and split up their revenue stream to well below the enforcement threshold. Hopefully the CFPB's "size" limitations will lifted altogether and it will be able to enforce the rules for ALL companies that are supposed to follow them ....

It probebly won't stop Capital One from their harassment on the phone.

Regulation is fine, but reforming an industry that has such a long history of wide-spread unethical and even illegal conduct seems an impossible task.  The first instinct of the DC's will be  to circumvent regulation, not  comply with it.   I wish the CFPB well, but trying to teach foxes not to steal chickens isn't going to be easy.

There should be regulation. Without regulation, frauds can take part in illegal activity and get away with it.

"For the first time, a single federal government agency will oversee the debt collection industry..."

I can understand the visceral response to this - relief.  But as long as there's a dollar to be made on 'other money' (read 'usuary'), we're not out of the woods.  

Don't assume that this will take care of the problem.  Think of nothing less than a complete abolition of third party collections.  This is the only way to get these goons out of the picture.

"Think of nothing less than a complete abolition of third party collections."

That isn't a bad idea, at least on the surface of it.  I have always found that in-house collections, properly managed, was a better approach.  Sometimes a customer can work their way back out of the hole, and become a valued customer again.  However, it does require that the customer be proactive in managing the problem, even if it is only to speak with you and tell you why they haven't paid.

But there are some issues with eliminating it.  The company the money is owed to may be in trouble themselves.  This may require selling the receivables in order to pay their own bills (like making the next payroll, for instance).  A company may have gone bankrupt, and the receivables may be the only asset against which the creditors can recover.  And if you are owed money by someone who does not intend to pay, factoring does allow some mitigation of your loss.

So, I don't know if we can eliminate it, but we sure need to tighten up the rules, and add criminal sanctions for the scofflaws in the business.

Watch its mouth carefully as the paper tiger roars and snarls --- all gums, no teeth. The best regulation money can buy!

"Regulation is fine, but reforming an industry that has such a long history of wide-spread unethical and even illegal conduct seems an impossible task."

I'm with you here - the only real, lasting solution I see is to eliminate the industry.  Let the original creditor handle their own collections.  This will force them to 'negotiate in good faith' with one/some of their customers fall short.  It will also do a lot to reduce organized crime activity.

Good points. The industry is riddled with organized crime, as evidenced by this article:

Surviving debt collection for the next few decades

Political Gateway - April 1st, 2009 - This article’s mission is to prepare you for possible nightmare debt collection problems in the next decade or two. It is important for you to read this whether you are having problems now or not.

What kind of debt am I talking about?
Your debt, for the purposes of this article, is mainly centered around car loans, mortgages, and unsecured credit. These are the items most likely to be involved in future issues for your family. This also concerns people who are not late and actually paid off debt or sold a house.

Debt process
2 things happen, you pay something off or you go into default. Paying off a debt is good, but it is not always recorded properly and can still go into a debt pool. A defaulted debt will go to a ‘normal’ collections process. Either way, eventually this non paid or mistakenly not recorded debt will end up in a debt pool.

Debt Pool
It is kind of like the internet, a big vast mysterious cloud full of old debt. Your old debts languish here until someone decides to buy them and attempt to collect the money owed.

Organized Criminal debt collectors
It is the debt pool that is the target of this article and the people who dwell there. These people may or may not be ‘mafia’ but you will find that they are very organized, attempt criminal acts in collections, and thus are ‘organized criminals.’

Bankruptcy
Even bankrupted debt goes into that pool. On purpose or accident, who is to say, but you will get calls on it 10 to 20 years later. Especially if a judgment was ordered by the courts.

The ‘Process’ of your demise
The debt thrown into the debt pool is sketchy at best. Usually it is a photocopy of the original contract and some contact information. Usually the data will never include your payment history, any modifications, or even payoffs. Once it gets in the pool an attempt will be made to collect the debt sometime in the future.

This debt is never ending. It could be 15 to 20 years later and you will get a call from these ‘guys’ looking for the cash. Few of us keep records of payoffs or deals made with debtors for more than a year or so, and they use this against you as you can no longer prove you paid it or had a deal.

During this time, many lenders of secured and non secured debt are going bankrupt, selling your accounts to someone else, or being bought out by another company. In all that mess, your payoff will go missing, your written deal to pay less or be forgiven will disappear, and even your payment history will go missing.

All those messed up boxes and files get thrown into the debt pool. When they come a calling, do you have proof of all that happened to stop them from coming after you?

May sound easy
It may sound easy to have it all cleared up. A few phone calls, a fax or two of info. Or maybe you went bankrupt and can just send them the data? You could not be more wrong.

The best protection is to get everything in writing and keep copies of everything. Get a storage bin or a safety deposit box, or even store at a relatives. Keep at least two sets of EVERYTHING that you pay off or default on and any communications or payments.

In come the 'alleged' criminal debt collectors
Your first contact with them may be many years from now, but it will come. It will be a phone call or a letter. Once they contact you they will come after you fully armed with procedures to financially ruin you if need be to get the money. Even money you no longer owe.

To illustrate, look up on a search engine the term “Daniel Cadle” (in quotes) or “Jan Schlichtmann” with it. The Cadle company and its thousands of front companies are all over America going after people like you and me. You will find information that is quite scary. Texas has an arrest warrant out for Cadle if he steps into the state. These people are bad. Just mention them to a bankruptcy lawyer and you will see fear cross their face.

This is just one of many companies that you cannot stop. Even if you fight them in court and win they will just bring another front company up and come after you again. Win a judgment against them? Sure, but the company you have the judgment in has no assets. Their lawyers will bury you fast and furious and it will cost you a fortune to stop them.

They will file a judgment against you. I suggest going to that courtroom with a lawyer. If there already is a judgment or if they win one in your case, you are now in real trouble. They will come after your wages, cars, bank accounts, any and all assets. You can bet your life on it. Bankruptcy? Unless you are going chapter 7 and have nothing in assets, you are gonna find it near impossible to stop them.

Remember that movie with John Travolta, ‘A Civil Action’? His character Schlichtmann went bankrupt in the end. Years later, he received a payout from some later work he did on that same issue the movie was about. Cadle came after him. A ten year battle ensued. Word has it he got help from some Harvard lawyers. For ten years these lawyers battled this company. Eventually they went behind Cadle and bought the debt from the debt pool. Then Cadle still came after them.

Do you think you have a chance against them? This company is one of many, maybe all connected, that will do some bad things to get your debt. The old victims of Cadle website had horrible stories from people who were harassed and intimidated, all against the law, to get debt. In many cases debt that was not owed.

I do not owe anyone anything
You wish. You never know if something is not recorded properly or the final payment is registered correctly. An old debt you paid off from a collection agency may still be active. In ten years you will get a call or letter asking for the whole amount of the original loan.

Pay attention
Not paying attention to your mail can cause you to have some debt collectors with a court order at your door, with a tow truck, to take your cars for an old credit card debt from 15 years ago, that you paid off!

Protection
You can only protect yourself by keeping complete records and backups. Bankruptcy records too. Keep them all for as long as you live.

Why now?
Why bring this up now? This stuff has been going on for a while and the state attorney’s do little to stop it. Each is a nightmare, but it is a personal nightmare. Well, right now about 10 million people have issues with home mortgages. Millions laid off. It is getting bad for huge amounts of people right now.

This means, the future for these 'alleged' criminal debt collectors (Cadle is just one) is very bright. You can expect some job openings as they have about 20 million people’s records to go through for the next few decades. And just like Arnold’s character the ‘Terminator’ they will not stop until they get you. Ever. And with so many people in trouble, it looks to be a good decade or two for them.

Some thoughts
Always open mail. You will only receive one piece of paper that needs to be signed, that is usually the summons to go to court for the judgment against you. After that, they only have to send you a copy of any legal attempts they are doing (like going after wages or bank accounts or other assets).

A common thread seems to be a huge increase in letters from them that are junk, just ‘pay us’ stuff. Then slipped in that blizzard will be a letter saying you have 10 days to come before the judge or they can garnish your bank accounts. If you do not see that one letter, then you will first find out when your bank does a courtesy call to tell you 12,000 has been garnished. Good luck with that.

Always open the mail. If you see a collection company, look them up online right away. Or if you get a phone call from one, look them up online. The search results will usually be very helpful in finding out whether the collector is a regular and legit company. If you see a lot of bad stuff about the company, and lots of victims, you should probably think about a lawyer right away.

If you cannot go bankrupt to stop them (assuming they are really coming after you), then you should realize your assets may be taken from you. No bank account is safe. It would be wise to use a spouse’s accounts and make sure your name is not on them. This includes other assets too. They will not go away. If you have money, you can decide to fight them or pay them (even if you do not really owe anything). However, you will never see any money from them at court and agreeing to pay them usually gets you in more trouble as they will start going crazy with interest.

The judgment is the key, prevent that from happening and all they can do is illegal things to come after you. This is the best thing you can do. Most assets will be safe then, but you will still deal with intimidation and nightmare collections for a long time.

Write your state attorney general as soon as you hear from these people and they break any laws, or if they are going after debt you do not owe. Immediately. This will not really help, but if enough do it, it can cause the State Attorney to get off his or her fat a** and actually do something to help consumers from these scumbags. My guess is the SA will do nothing though.

Pray you never get a call or letter from Cadle. That is an omen of doom for you. You can win every battle, but you will lose the war unless you can afford 10s of thousands of dollars for litigation.

http://www.politicalgateway.com/news/read/173349

They can start cavalry portfolio services llc,.