Consumer Law & Policy Blog

The Hill Reports on the GOP's Continuing Effort to Cripple the CFPB

by Jeff Sovern

Here. Eleven proposed bills this time.  It creates an interesting contrast with the just issued CFPB's Supervisory Highlights report, which reports, for example, that the CFPB found that one collection firm violated debt collection laws approximately 17,000 times and a creditor has been selling debts on which consumers were no longer liable.  And those are only two examples from one law covered in the report; there are plenty of others. If the Republican House members get their way, what would stop those violations of the law from continuing?

Annals of Consumer Law: Stephen Ware Paper on the British Debate on Imprisonment for Debt in the Twentieth Century

Stephen J. Ware of Kansas has written A 20th Century Debate About Imprisonment for Debt.  Here's the abstract:

In the early twentieth century, Parliament debated whether to abolish imprisonment for debt.  Parliament’s Select Committee on Debtors (Imprisonment) of 1909 heard testimony from witnesses and issued a report recommending the continuation of imprisonment for debt.  This testimony and report make for fascinating history.  Although imprisonment is not part of contemporary debates about debt collection and personal insolvency (consumer bankruptcy) law, the competing views expressed in Parliament over a century ago about consumer debtors and those who lend to them will be recognizable to anyone familiar with contemporary debates on either side of the Atlantic.

Peter Holland Study of Debt Buyer Collection Suits Finds Mass Produced Default Judgments

Peter A. Holland of Maryland has written Junk Justice: A Statistical Analysis of 4,400 Lawsuits Filed by Debt Buyers, 26 Loyola Consumer Law Reporter 179 (2014).  Here's the abstract:

Debt buyers have flooded courts nationwide with collection lawsuits against consumers. This article reports the findings from the broadest in-depth study of debt buyer litigation outcomes yet undertaken. The study demonstrates that in debt buyer cases, (1) the vast majority of consumers lose the vast majority of cases by default the vast majority of the time; (2) consumers had no lawyer in ninety-eight percent of the cases; and (3) those who filed a notice that they intended to defend themselves without an attorney fared poorly, both in court and in out of court settlements.

This study challenges the notion that there is an “adversary system” within the context of debt buyer lawsuits. The findings suggest that no such adversary system exists for most defendants in consumer debt cases. Instead, these cases exist in a “shadow system” with little judicial oversight, which results in mass produced default judgments.

The procedural and substantive due process problems which are endemic in debt buyer cases call for heightened awareness and remedial action by the bench, the bar, and the academy. As lawyers who are “public citizens, with a special responsibility for the quality of justice,” the profession can do better.  This article proposes suggestions for further study, and several common sense reforms.

Peter Holland: Debt-Buyer Lawsuits and Inaccurate Data

Here, in the Boston Fed's quarterly newsletter.  Excerpt:

The problems inherent to the  business model are most starkly exposed in the context of lawsuits filed by  debt buyers. On the one hand, the debt buyer acknowledges in the forward-flow  agreement that the data it received from the bank is limited and potentially inaccurate,  with frequent specific disclaimers of warranty of title, validity, accuracy,  and documentation.

On the other hand, despite  explicit knowledge that the specific accounts are highly suspect, debt buyers  argue in court that the allegations about ownership, liability, and amount are  “inherently reliable” because the data came from a highly regulated national  bank, which has a duty to keep accurate records. All the while, the debt buyers  fail to disclose to the courts or to the defendants the terms of the  forward-flow agreements, and typically fight any efforts undertaken by  consumers to obtain them.

PIRG Report: Mistaken Identity Tops Debt Collection Complaints

Here.  Excerpts from PIRG's news release:

Debt collectors trying to collect debt from the wrong person were the top source of complaints to the Consumer Financial Protection Bureau (CFPB), according to a report released today by the U.S. PIRG Education Fund. The report also found that debt collection, the newest category in the database, is already a top source of complaints to the CFPB, outpacing common consumer products such as credit cards and bank accounts.

* * *

Some key findings:

• The CFPB has helped enable more than 2,700 consumers – 22 percent of complainants - to receive relief as a result of their debt collection complaints. The majority of these consumers received non-monetary relief, such as halting harassing phone calls.
• The most common problem was debt collectors trying to collect debt from the wrong person (25 percent), followed by repeated phone calls (13 percent). State and federal laws protect consumers from harassing phone calls from debt collectors.
• Encore Capital Group received the most complaints nationwide.
• The District of Columbia ranks #1 in complaints per 100,000 residents, followed by Nevada, Florida, and Delaware.
• About 16 percent of responses received from debt collectors to complaints filed with the CFPB were deemed unsatisfactory by consumers and were subjected to further dispute.
• Companies varied widely in how frequently they offered relief to complainants. Allied Interstate LLC granted relief to over 97 percent of complainants, while several companies never provided relief.

FTC Announces Top Consumer Complaints for 2013; ID Theft Still Leads the List

Here.  The top 10 complaint categories include:

Category	Number of Complaints	Percentages
Identity Theft	290,056	14%
Debt Collection	204,644	10%
Banks and Lenders	152,707	7%
Imposter Scams	121,720	6%
Telephone and Mobile Services	116,261	6%
Prizes, Sweepstakes, and Lotteries	89,944	4%
Auto Related Complaints	82,701	4%
Shop-at-Home and Catalog Sales	66,024	3%
Television and Electronic Media	53,087	3%
Advance Payment for Credit Services	50,422	2%

NY Law Firm Censured for Debt Collection Abuses

Coverage by the New York Law Journal here and by Inside ARM.com here. 

Debt Collector Doings

The American Banker recently published a story, Courthouse 'Rocket Dockets' Give Debt Collectors Edge Over Debtors, about how consumers feel pressured to settle debt cases after receiving summonses to courthouse settlement conferences with debt collectors. An excerpt:

At first glance these sessions resemble legally mandated mediation: they take place in courtrooms and are administered by clerks and uniformed bailiffs. Attorneys from the Pro Bono Resource Center of Maryland, a local legal aid service, monitor the proceedings and offer some defendants assistance. A court interpreter is often on hand to help non-English-speaking debtors.

What's missing is a judge or other neutral moderator. Whether debtors realize that — and that they have no legal obligation to sit down with their debt collectors — is a hotly debated topic.

Many of the defendants are "just really not prepared at all. Most of them do think they're at trial," says Nicole McConlogue, the Pro Bono Resource Center of Maryland's consumer protection project manager, who regularly advises people summoned to the resolution conferences.

Meanwhile, the ACLU of Washington and Columbia Legal Services have issued a report, Modern-Day Debtors’ Prisons: The Ways Court-Imposed Debts Punish People for Being Poor.  From the key findings:

• Courts impose discretionary LFOs [Legal Financial Obligations] without considering a person’s present or future ability to pay.
• Courts incarcerate people for failure to pay even when they are destitute.
• Courts require individuals to transfer public payments for subsistence to pay off court debts, to the detriment of personal and family welfare.
• While state law says restitution payments to victims should take precedence, county clerks’ offices garner collection fees prior to paying restitution.
• Courts fail to notify debtors of their legal right to be represented by counsel.

(HT: Peter Holland)

 

TV News Confronts Scam Debt Collector

Here.  Lots of FDCPA violations.

Fourth Circuit: FDCPA Gives Consumers the Right to Oral Disputes

Does federal law require debt collectors to give consumers the right to make oral disputes (as the Second and Ninth Circuits have held), or may debt collectors insist that any disputes be made in writing (as the Third Circuit has held)? Today, the Fourth Circuit issued a short published opinion agreeing with the Second and Ninth Circuits. I argued this case back in October and am pleased to see that the court adopted the straightforward plain-meaning analysis urged in our opening and reply briefs.