Closed Rule

Consumer Debt Collection Practices (ANPRM)

Summary

The Consumer Financial Protection Bureau (CFPB) might propose new federal rules on how creditors and debt collectors can act to get consumers to pay overdue credit card, medical, student loan, auto or other loans. This decision matters to you if you

  • had an experience with debt collection (good or bad)
  • counsel consumers with overdue debts
  • have a business where you do your own account collection or
  • work in the debt collection industry

Here, you can learn what CFPB is thinking and what it needs to know. You can share information and experiences and discuss ideas with others. At the end of the discussion, CFPB will get a detailed summary and your input will help it decide what to do next. (This phase is for gathering information and brainstorming. The next phase would be where CFPB comes up with specific proposals and asks people to comment again before it decides whether to adopt those proposals as new regulations.)

Consumers and business both have a stake in effective, responsible debt collection practices. Don't be a bystander. Help CFPB make the right decisions about new consumer debt collection regulations. Share what you know and encourage family, friends and coworkers to do the same.

Discussion Debt collection litigation - 205

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Subtopics

1|Where the lawsuit can be brought - 46

Agency Proposal

To make debt litigation as convenient as possible for the consumer, federal law (FDCPA § 811) says the suit must be brought in the judicial district:

  • where the consumer signed the credit or other contract that created the debt, or
  • where the consumer lives when the suit is “commenced”, or
  • where real property is located if the property secures payment of the debt.

But some consumer organizations say that there are still problems for consumers who must travel to distant courthouses in states with very large judicial districts.

  • Current practice. Where do most collectors file suit? Does it depend on the type of debt, the amount of the debt, or something else?
  • Size of judicial district. Are there consumer protection problems because of the geographic size of judicial districts? Where do these occur? Are any states trying to reduce the burden on consumers of traveling to courts that are far away from where they live?

In general, are there any unfair, deceptive, or abusive practices about where collectors file suit that CFPB should know about?

Read what CFPB said in the ANPRM about Debt Collection Litigation Practices.

Comments46

Commenting is now closed.

Recently, courts have held that debt collectors can escape 1692i's venue provisions entirely by pursuing debt collection through arbitration instead. As the NAF studies reflect, arbitration has not proven a satisfactory alternative. I urge the CFPB to include in a rule language interpreting 1692i as requiring debt collectors to proceed in court, not through largely-unregulated arbitral forums.

How about allowing arbitrators to not be bound entirely by the law, but also by common sense when it comes credit card defaults? Common sense tells us that if a Colorado flood washes away a community, those in the community are possibly not going to be able to pay their credit card bills for a few months. Common sense tells us that a medical emergency, being the victim of a hit and run accident, destruction of a home, or becoming an unpaid CareGiver for a family member should take precedence over the monthly payment requirement. This is not about debt forgiveness, its about declaring a debt neutral, no more penalties, fees or interest rate charges are applied to the debt, and the debtor agrees to pay off the debt in a reasonable manner, even if it takes 10 years to do so. Please Check out the Debt Neutrality Petition.

Depending on the nature of the suit the closest court location to the debtor's home address.

The court location should be in the city where the account was opened.

County in which it was opened or the county in which the debtor/Defendant resides. If filed in the imporper court a change of venue can be requested and in most cases granted by the court in which the suit was filed.

I am curious to know if the consumer is ever properly notified of the suit? Statistics show that something like 90% of the consumers don’t show up to court. I don’t think the real issue is where the case is held, but more to do with does the consumer even know they are being sued.

Hi blish42, welcome to RegulationRoom. Most lawsuits to collect debts are filed in state and local courts. State rules decide the procedure for bringing and defending lawsuits. With that in mind, do you have ideas for how new federal rules could address these issues without interfering with states' control over state and local courts?

Is there a way I can make a link to my comments? I have a few people that would like to come comment on my thoughts. They would like a direct link if that is possible? Some would prefer to not log in.

Hi blish42, if you go to your profile page and click on “My Comments” to the right, it will bring up your comments and each of them has a permalink at the bottom. You can share this link, but anyone who wants to comment on Regulation Room will need to register. Thank you for sharing the discussion with others, and please let us know if you have other questions.

To my knowledge, the process servicers must deliver or make an extraordinary effort to deliver notification to those being sued.

I knew a man who was sued by a debt collector and he was not served. "Someone" was served, but not at his address and he was denied due process. He learned of the suit when it was a judgment on his credit report. He attempted to have the judgment overturned for lack of due process and the judge would not grant it. Unfortunate, but yes they are allowed to deny due process and get away with it.

I was flat out lied to by the attorney for a credit card company who brought a small claims suit against me. I disputed the debt (and still do even after they garnished my wages) but they intimidated me into a payment arrangement then lied to me and said there was no court date anymore since I "settled". I was skeptical and called the clerk of court's office only to find out they lied and I did need to show up. I showed up for the court date, even as I argued that this court had no jurisdiction over me because I never lived in that county but no-one even the clerk's office would listen to me and I was denied the right to go before a judge. I was only given an opportunity to talk to the attorney for the credit card company and sign papers saying we had a payment arrangement. Long story short, I made 1 of 2 payments then lost my job.I called them immediately to tell them I would make the 2nd and final payment 2-3 weeks late because I had to wait for a final check. They told me okay, but unbeknownst to me,they went back to court without me and got a default judgement for $1600 on what would have been a $709 payment. iI never got notice of the court hearing nor did I ever get a copy of the judgement. I didn't find out about it until I got a wage garnishment notice from my new employer 2 1/2 years later....VERY humiliating! I also might add 2 things. My employer got the wage garnishment notice a week before I did so I couldn't even dispute it before my employer was involved. Second, I called the clerk of court's office in that county (3 hours from my home) and argued that you can't go to court without giving me a chance to defend myself and I shouldn't be forced to drive 3 hours each way to a county I never lived in. I was told by the clerk's office that they can file it wherever they want and I have to show up. I asked "So if they wanted to file this in California to be jerks you're telling me I'd have to get on a plane and fly to California to defend a $709 lawsuit???" She said "Yes." THAT HAS TO CHANGE.

Hello Dazed and Abused. Welcome to RegulationRoom, and thank you for sharing your story. Because it seems like you’ve encountered abusive practices from collectors, you may want to consider filing a complaint with CFPB. Their sample letters to debt collectors may also be helpful.
Rules about debt collection litigation are a complicated mix of state law and federal law, and CFPB doesn't have legal authority over absolutely every aspect of debt collection. But as CFPB moves to the next stage (coming up with specific proposals for new rules), it will carefully consider what commenters say here.

I'm in agreement with that statement. Having worked for a Sheriff's Office where we served many debt collection processes, I found that not much effort is made to locate the proper address for the defendant. When we would find the defendant had moved, we would return it not found. However, the same cannot be said about private process servers who go out and post processes on the door without confirming they live there.

I believe that most Defendants are properly served. I review about 200-300 civil cases a month and very rarely is service done improperly. This does vary a bit from state to state but in my experience the majority of defendants have been properly served.

I have 13 lines of he same debt on the credit bureaus. The first one was bought and passed down

This is a problem that needs to be corrected. In this case, the line of credit is negatively affecting your credit a multiple of times even though it is one line.

This is a violation of the FCRA (Fair Credit Reporting Act) and can be corrected quickly by the credit reporting agency. If the credit reporting agency refuses, there are many Consumer Protection Attorneys that would happily take this case on contingency. This type of violation normally never sees the inside of a court room. A letter from a well known CP Attorney will likely get awards and the prompt correction of the credit report.

One business in particular needs to be investigated...Legal Recovery Law Offices. We sent them a letter asking for a copy of a signed credit card agreement bearing my signature to prove that I owned the credit card accout,
which they failed to do for a credit card they claimed we owed. Instead of following the FDCPA, they filed suit and their complaint included NO DOCUMENTED PROOF that I even own the account. Before any company is allowed to file suit, one document that should be in the complaint before a judge even will accept the filed complaint is a copy of the original credit card agreement bearing the defendants signature. All legal recovery attached with the complaint was pleadings with written accusations and no documented proof of the debt .

Thank you for your comment, FixTheSystem and welcome to RegulationRoom. CFPB provides a page where consumers can submit a debt collection complaint directly to them about problems with companies. It sounds like you believe that filing an unsubstantiated lawsuit is a false or misleading representation made to collect a debt, see Unlawful collection practices subtopic 6 to discuss this more. CFPB could require that collectors have this sort of documentation before filing suit – but enforcing this in the lawsuit itself is the problem of state rules of pleading and practice.

If the account was opened 20 years ago, the bank is going to hold on to this agreement for the 20 years?? That makes no sense. Either you have a dispute meaning you did not charge on the account and you need to file fraud charges or you owe the money and should have been sued for stalling. Sounds like they did the right thing.

IF a bank is trying to pursue something 20 years later, sounds like a statute of limitations violation.

Unless the debt has been "re-aged" by a payment having been made or it is a judgment, it is certainly time Barred from collection.

Innocent until proven guilty is the American Justice System. And the burden of the proof is on the one bringing the suit. Debt collectors need to get their act together before trying to file frivolous lawsuits.

Yes, if the account is still open the bank must hold onto the agreement for 20 years. If the account went delinquent 20 years before litigation then the statute of limitations has long passed and the lawsuit is frivolous; it should be dismissed with sanctions.

I have often wondered why many times a Plaintiff/attorney may handle the hearings telephonically but the same is not available to the Defendant/debtor. This does not appear just. I suggest that most Defendant's choose not to appear because of the loss of wages or choose not to show at at all because they are intimidated by counsel. If given the opportunity to appear telephonically I believe that more cases will be heard.

A debt collector did not litigate a credit card debt, but summarily garnished our joint checking account. It was two weeks later that notification was received from the debt collector. This occurred September-October 2012. Debt Collectors must provide advance notice of their intent to garnish a checking account. It took several weeks including an Order from the Judge to release the funds, only after the Debt Collector took all of a tax refund.

This comment has been removed for violation of our site use guidelines.

Thank you for your comments SJDuPlessis. You may be interested in CFPB’s webpage on can a debt collector garnish my bank account or my wages. It also contains a link to their submit a debt collection complaint page. CFPB is interested in hearing consumer stories, particularly from servicemembers, that will help them improve consumer protections in debt collection. Could you tell us more about your situation? For example, how they garnished your wages without litigating?

I am not a lawyer, but I have noticed that credit card agreements often contain statements advising consumers that if suit is brought, it will occur in a specified jurisdiction or "as provided for by law." At the point where collectors start suing consumers is where many consumers say enough and hire a bankruptcy attorney. That does everyone a lot of good, right? The only winner in that situation is the bankruptcy attorney.

Depends on the type of Bankruptcy. If it is a CH 13 many times the creditors receive more money than if they choose to forgive a portion of the debt and settle direct with the consumer. This is because of the strict "means test" for CH 7.

As a Director for Collections now for Kennedy Space Center Federal Credit Union, which is over 500 Million in asset size I try as I have for prior union to file suit closest to the Consumers current address. One method is to assign over to an attorney within the current residence-venue of the Consumer. In legal terms we attempt to get service when filing a suit out of state, its method is called obtaining if possible a Alien Juddgement outside from the County and or State the contract/note was originally signed. There are states in the Union that do note accept foreighn judgments. So recording a judgement obtained for example in Floirda and rerecorded in another State may not be possible.

Hi dmelendez@kscfcu.org, thanks for telling us about the ways you try to file suit as close to the consumer's current address as possible. Do you find that this is easy to do most of the time, or is it often difficult to file the suit close by? Also, in your experience working with other credit unions, were their practices similar or different from what you do at KSCFCU?

The current rules seem adequate, with the possible exception that debt collectors must be required to follow the rule, or risk a loss of the suit due to jurisdictional issues.

The state in which I practice does not allow jurisdiction based solely on where the contract was signed. As such, we limit our filings to the venues where we reasonably believe the consumer resides. The states typically define what is the proper court thereafter, whether its based on amount, location, etc. so even if there is a large judicial districts we do not have the choice to file elsewhere by local rules.

I recommend that the option to bring a suit in the jurisdiction where the consumer signed the contract should be removed. In many situations, consumers may not actually sign a contract (e.g. credit cards), they may sign an agreement in a distant location (for medical payment at a hospital on vacation), or they may have moved in the years since opening the account. I believe the most consumer-friendly option is to file suit where the consumer resides at time of commencement (unless it concerns real property and then it should be where the property is located). With respect to geographic size concerns, it is important to note that many states are facing budget crises that affect the civil divisions of state courts. In one of our largest districts, our options for filing suit was reduced from 32 courts down to 2. If there is a concern for protecting consumers in this particular area, I recommend a section of the rule that prohibits collections from choosing a court venue with the intention of interfering with the consumer's ability to participate in the action. To prove a violation, the consumer (or regulatory agency) would need to demonstrate that the collector had no reason to file suit in that court other than burdening the consumer (thus demonstrating intent).

I know this is not the proper venue, but I felt you should know that the email address listed on your contact page is not working; I have tried to send you material three times and it keeps getting bounced back to me with an invalid address message. The error message I get says that the mail cannot be sent to ga.regulationroom@cornellprod.onmicrosoft.com; I only used the address provided. Please reply via email with a valid email address. Thanks!

Thanks for notifying us, tommc4. I know we've been in contact directly about this, but please let us know if you have any additional problems.

I believe lawsuits should be initiated in the jurisdiction in which the consumer resides, and that the case should be subject to the laws of that jurisdiction, especially concerning the statute of limitations. (Yes, I realize that a SOL defense is an affirmative one).

Filing suit in the state that the consumer lives in is the most practical. If a state has a large district there is nothing that can be done unless judges want to allow tele-conferencing,, or phone conferencing. However, if that is allowed it should be allowed for both sides provided the evidence of the debt is supplied to the court in advance.

The documentation sent to the defendant should include a link or instructions on how to proceed according to the rules of the course if the venue is incorrect.

This question is most interesting with respect to student loans. Unlike most other debts, student loans have the potential to be greater than $75k, which means a consumer can be sued in Federal Court under supplemental jurisdiction provisions. Additionally, should the current creditor be able to achieve complete diversity, the consumer can be sued in an entirely different state.

Thanks for the comment, Steven. What, if anything, do you think should be done specifically to protect those with student loans above $75,000?

I think the cost of education needs to be reduced to a more reasonable amount or repayment plans need to be income based.

As far as consumer protection, legal aid needs to be made available, affordable and effective, and consumers need to take time to really know their rights and stop complaining about harassment because that's a completely different cause of action than restitution.

I've heard multiple stories of summons being dropped off or served to the wrong individual and summons being mailed to old addresses when the new address was clearly available. I don't believe that a summons should ever be served by mail. If the debt collector wants to sue, they should be required to serve the person directly in the city and state in which they currently reside. It's an especially dirty tactic to serve someone by mail. It's unreliable and puts the debtor at a disadvantage.

This is the problem. What account would stay open for 20 years after being delinquent. It seems to me this is just a way to prolong as long as possible the ability to harass people for very old debt. There needs to be time limits. This type of thing, re-filing debt, selling the same debt to someone else, and then adding it back AGAIN to the credit report is just an excuse to harass the heck out of people and do it legally. These are not good business practices. This is harassment. Once a debt is placed on a credit report -- or even sooner -- once the debt letter is sent, time should start running and this agency needs to set time limits that are reasonable. Creditors have a right to try to collect true, accurate debt. But what happens is the debt is wildly inflated, then it runs the gamut of various collection agencies until nobody even remembers its genesis. This is all to harass.

2|Litigation in state and local courts - 138

Agency Proposal

Most lawsuits to collect debts are filed in state and local courts, not federal court. Federal laws like the Fair Debt Collection Practices Act apply to these cases, but it's still true that it's the job of the states, not the federal government, to run the state and local courts. State rules, about the procedure for bringing and defending lawsuits and the kind of evidence needed to prove a case, can affect how easy it is for consumers to defend debt collection lawsuits. The FTC recommended (see 2010 FTC Litigation and Arbitration Report) that states consider adopting rules that would

  • make it more likely that consumers would defend themselves in debt collection cases
  • require collectors to include more information about the debt in their court papers

Some states have adopted, or proposed, rules to make it harder for collectors to get default judgments.

  • How many debt collection actions are filed against consumers each year? Is the number changing, and why?
  • Are default judgments more frequent now?
  • What types of documentation do collectors have to provide in state court to show that the consumer owes the debt in the amount claimed, and that the collector has the right to collect?

Are there new rules CFPB could adopt that would support state efforts? Should there be federal rules about how collectors communicate in formal legal actions?

Some people are concerned that some collectors are making unfair or deceptive claims about debts in their court papers.

  • What type of deceptive claims are being made? How common are they?
  • How big a problem are false claims that collectors have served consumers with notice of the litigation?

How could new federal rules address these issues without interfering with states' control over state and local courts?

Read what CFPB said in the ANPRM about State Debt Collection Litigation.

Comments138

Commenting is now closed.

State and local court rules sometimes make default judgments much more likely. For example, when a person who allegedly owes a debt is told to come to court on a work day, they may be forced to choose between a default judgment and their job. I urge the CFPB to find practices that involve scheduling hearings at inconvenient times unfair, deceptive, and abusive, or inconsistent with 1692i.

Thank you for the comment. In your experience, to what extent is the problem with scheduling an issue of court administration – when the court chooses to have a hearing on a case – rather than something a creditor or debt collector can control? If it is something a creditor or debt collector can control, what do you think should be done about an alleged debtor who works five days per week during normal court hours?

In NYC courts, a lawyer representing a particular party (doesn't have to be collection related) will have a full day of cases lined up which leads me to believe at least some scheduling preference is given.

Telephonic pretrial-hearings can be scheduled in support of a consumer having to work; times set and or scheduled with a court representative could passify this issue.

Are you suggesting the courts to be open on the weekends? Typically, the court schedule follows a normal business schedule.

Many courts don't even have hearing times, and the attorney would not know necessarily what the consumer considers inconvenient.

When alleged debtors are served with state court summonses, they are not always comprehensible to laypersons. I suggest that the CFPB encourage or mandate the use of a standard-form, plain English letter advising defendants in collection lawsuits of the following:
- Any requirements to file papers to avoid default judgment
- The date of any scheduled hearing and procedures for changing the date
- Local and online sources of information for pro se defendants, and possibly local non-profit advice organizations.
- That the debtor may wish to consider bankruptcy if they cannot pay their debts.

What Josephusmeyer said is a great succinct way to call for uniformity for the sake of making everyone who is hit with one of these suits able to stay in the game to defend oneself. All down the line, see the comments that are most often endorsed: they call for some uniformity in the rules across the states and ways to allow people to defending themselves without being intimidated by the court system or letting it be a hardship.

There is currently a split between the Ninth and First Circuits as to whether 1692i and other FDCPA provisions apply in garnishment proceedings. In many states, the nominal defendant is the judgment debtor's employer, but the judgment debtor is the real party in interest. To allow consumers to better assert the defenses to and exemptions from garnishment available under state law, the CFPB should issue a rule applying 1692i to garnishment proceedings.

The law is fine as is.

If it was fine as it is, why is this agency going through this to try to develop a more reasonable and intelligent way to deal with debt collectors?

When an attorney is a 'Debt Collector' (as per their own documents) and not legally considered a 'Collection Agency' the attorney is not held accountable for consumer protection law violations (both local and federal) within civil court.
This loop hole needs to be addressed.
The attorneys/debt collectors are not monitored by the state bar because it is a collection practice (the attorneys buy old debt and then collect upon that debt in civil court) and the state and federal civil courts are not monitoring the attorneys because it is an attorneys office and not considered a collection agency - even though the attorneys buy old debt then take alleged debtors to civil court.
I personally know of a very large attorney agency in Washington State that even gives classes thru the Washington state bar to other attorneys because it is a easy caseload to win.

Welcome to Regulation Room Joules, and thank you for joining the discussion. Can you tell us more about how, specifically, CFPB should address this loophole?

Attorneys are not exempted from the FDCPA, and most State Bars take reports of unethical conduct by attorneys very seriously. There is no need for additional regulation of attorneys.

In CA they are and they should be federally too.

The Fair Debt Collection Practices Act should cover that attorney as is.

In Michigan a company had its Collection Agency Revoked due to unethical practices 2008. But this did not stop them. Now they practice as attorneys and continue the unethical practices. Yes states must figure out how to close this loophole.

This is the PROBLEM over and over Joules thank you so much for stating it.
Why should lawyers get a pass from rules of the Bar Associations or rules of the court because they are now considered "debt collectors" -- even I did not know this, though I have seen advertised quite a bit lawyers in the "collection" business. This is wrong. I hope if anything, this very thing is addressed. Using a lawyer to send a letter is often a way to intimidate. People become too frightened to even respond. The rules are blown off by lawyers who go into this debt collection business because they make a fast easy buck, and they know the debtor has very little recourse, and there is so few rules that protect the consumer/debtor. Being in debt stopped being a crime decades ago, but the lack of rules that protect the debtor are bringing back these draconian practices. Uniformity, is needed, and making lawyers abide by the rules of the Bar. Just two right off. Thank you for doing this. It is bringing to light why this system has become so fraught with abuse.

I do NOT owe any debt but have a COMMON FIRST and LAST NAME. My Constitutional rights are violated every time a lawyer fails to perform due diligence, per rule 137, BEFORE SIGNING and FILING COURT PAPER against me. The clerks are helpless, the judges & attorney disciplinary do nothing favoring “lawyer zealousness.” I then have to spend time & money, going to court to prove I am NOT the person who owes the debt. I urge the CFPB to create mechanisms for clerks & citizens that make it 1) easier to fix these messes &, 2) to bring sanctions against lawyers & judges for MISUSE OF LEGAL PROCEDURE, ABUSE OF PROCESS, WRONGFUL CIVIL PROCEEDINGS, & MALICIOUS PROSECUTION.

Welcome, From_ill_annoy, and thank you for sharing your story. CFPB is considering rules that would require lenders to give more information about the debt to debt collectors. Do you think that providing more information to the debt collector would have helped keep your case of mistaken identity out of court in the first place? You can read more about what CFPB is considering and comment here.

First, I have learned there is a significant legal difference between 1) identify theft, 2) mistaken identity (see contract law) and 3) wrong person (mistake) and their related remedies. Furthermore, that these three words need to be separated, clarified and their legal handling completely examined. There is almost zero legal remedy for wrong person found. More information would NOT have helped. The lawyer had plenty information but he did not validate any of it after he found my address. The clerk told me these lawyers and their agents are "just going through the phone book/internet" hauling people with the same first and last name into court thinking they will eventually find the debtor. A complete waste of court resources, an enormous expense to the innocent citizen, and the unlawful detainment and threatening of an innocent citizen and their assets. The debtor, it has since been discovered has left the county. The lawyer could have easily validated his information using online public property records from both the Clerk of courts and the County Clerk and found out the middle initial was not a match along with over 7 other pieces of identifying information that were not a match. The lawyer did not even do the simplest checking. I filed with the IARDC and nothing happened.

The solution to this problem is a mandate that account numbers and names on them not change during their life, no matter how many times transferred. This goes for credit reporting agencies as well.

How does this help in any way?

I am in the same situation as From_ill_annoy. I have been denied credit and loans as a result of these adverse actions which have impacted both my personal and professional life.

I got hit with a notice from a doctor's office and his collection agency that I owed and -- get this -- never responded to their notices. First, I never got any notices and second, I called the doctor's office and validated that I have never been a patient there. The office manager even wrote a letter to the collection agency.
It was clearly THEIR mistake, and you know what? The collection agency got all hot and bothered and rude to me because then they had to pay to remove the notice of me "owing" a debt from the three credit reporting agencies -- boy I hope you go after these cowboys next -- and yet it was removed.
But while waiting for the letter, I managed to actually get someone on the phone from Equifax, I was so angry, and their attitude was, "we just report this" blah blah blah.
I say there ought to be sanctions, monetary sanctions, against these credit reporting agencies for making these mistakes and their cavalier attitude. They have this attitude of, so what? So what? This has been more than two years ago and still seethe because of the cavalier and rude attitude when it was clearly their mistake. I even called MY eye doctor and had him write a letter that I was HIS patient.
You think things don't get out of hand? Oh my. YOu don't know how this kind of thing hurts people's ratings, scores whatever and then add insult to injury when you deal with rude inept people. Sanctions. Hit them in the pocketbook and you will see how fast they will make sure they do not make any mistakes.

Allow the States and/or local courts administer lawsuits. Regardless of any added rules, documents, etc. none will help increase debtors attending hearings. Since 1964 I have seen no significant increase of consumers attending hearings. I have, however, seen the major reason being attributed to not understanding due process by consumers.

I would suggest that debtors who INVOLUNTARILY defaulted on a debt don't have the money to hire an attorney, so they don't see the point to going to court without an attorney. Why doesn't the court give access to free legal counsel to debt defaulters the way they do to those who are accused of committing a crime?

Good idea debt neutrality. But the sad thing is, being in debt is NOT considered a crime -- however, the way the laws are now, and the abuses these collection agencies engage in, you might as well be considered a criminal. I agree. Set up a system where the consumer is on equal footing with the debt collectors.

GMT512. I agree with you that being in debt is not a crime, however, if a debtor defaults on a debt they basically have no rights if they cannot afford an attorney as one will not be provided for them by the state. (Pro Se can easily become a mess as no one will actually help with the paperwork, even state funded pro se agencies are simply paid to show where to get the right papers, not to fill them out.

You are not living in the real world if you think it is just so easy, RBell. No, most consumers are not lawyers. The people using these debt collection practices are deliberately abusing the law because they know most who are harassed and in debt and working people who probably can't afford a lawyer. And I'll just bet it is worst in the states with the least amount of consumer protection.
Take care. You will sing a different tune when it is you on the meat hook.

CA has already made great strides as to debt buyers. This should be the rule for all collectors: that when they file, they must produce properly authenticated backing for the debt sued upon.

RE CA... how does this help prevent Joe Smith the innocent from being served for Joe Smith the debtor? Perhaps full and complete name, birthdate, race, gender, etc. should be required on every document submitted. Also, any changes of address post-default judgment should require accompanying paperwork that demonstrates that the lawyer/agent actually certified and validated the change to be true with actual automatic sanctions to the lawyer when it is not.

and if accused of a false service or subservice, they bring the process server to court with them on the court date, or, if asked, produce errors and omissions insurance policy so those false served or subserved can file a claim.

Current validation guidelines do nothing to prevent wrong people from being dragged into court (common first and last name etc.). Debt validation ought to be a continual process, enacted: 1) any time the debt is sold, transferred, reassigned etc. 2) any time the creditor or its agents "lose track of" the debtor 3) any time new information is found and ASSUMED to be the debtors such as a new address, 4) any time a person presents legitimate ID to the clerk that proves they are not the right person (wrong middle initial, wrong birthdate, wrong race, wrong gender, etc.), 5) at each phase of the court process particularly after time lapse, transfer, reassignment 6) any time the debt records or court files concerning the debt records are destroyed (fire, flood etc.), 7) any time a clerk loses or accidently destroys all the court records, 8) any time a discrepancy is known or should have been known, 9) any time an ambiguity exists or (when viewed by a reasonable person would have been found to have existed) in the identity (i.e. common first and last name without middle initial etc.)

Debt collectors are very experienced at what they do. Consumers and defendants often have little or no experience with fighting a debt collector. They have no idea what their rights and defenses are. I strongly recommend the CFPB to require all debt collectors to provide consumers with their basic rights. The rights could be state-specific or federal. For example, New York collectors should be required to advise that there is a statute of limitations that may be based on where the defendant is located or where the original creditor is located, whichever one is less. They should also be required to advise what the statute of limitations means. Plaintiffs or their counsel should be required to inform the defendant that he or she has the right to deny the allegations in the complaint and then require the plaintiff to prove its case. Defendant's should also be advised that he or she may demand documents from the plaintiff and require the plaintiff to answer questions about the account (i.e. is it owned by the original creditor or debt buyer? How much interest was charged? When was the last payment? Etc.) Other important rights and defenses could be related to FDCPA rights or, in the subject state, how they may have the right to vacate a default judgment if they have a reasonable excuse and meritorious defense. Other requirements that the CFPB should consider: Require collectors and collection law firms to provide copies of pleadings, judgments and affidavits of service within seven days of a demand by an individual or an attorney when a judgment creditor attempts to enforce a default judgment. Require lawsuits to include the original contract and documents showing a valid chain of title. At the very least, help consumers understand the law, their rights and their defenses. Thank you for your hard work.

Welcome to Regulation Room Mr. Shepro and thank you for your thoughtful comments. The CFPB is concerned about costs being passed onto consumers because of new regulations. Do you have suggestions on how to give consumers this information in the most cost-effective way? Do any other commenters have suggestions to add? Does anybody agree or disagree?

I knew my rights and yet, the debt lawyer stated 1) he did not have to show me the original debt and 2) he could not and would not talk to me because I was pro se.

Debt collectors are very knowledgable in what they do. We are professionals. But debtors are not stupid and should be expected to do their own research and educate themselves to participate in their defense. Why should a creditor have to explain to a debtor how to avoid paying their debt. By the time it's reached litigation, those conversations should have already occured and the debtor should be ready to offer his defense without being "taught" by the person to whom he owes money.

In other words, remove any liability the consumer may have for resoloving a debt? We live in the Information Age. All the information this individual is requesting is readily available with a few keystrokes.

This is solid foundational advice, however, as I have heard a judge state in court (not to me), "a debt is a debt", and "a default is a default", and, "you probably owe the money". Until INVOLUNTARY defaulters have a way to freeze their debt at the time of the default, with no more interest rate charges, penalties or fees accruing, in my opinion nothing substantive will really change and the global economy creeps closer to the brink. see link. Global Debt Elephant in the Room.

It sounds like you believe the creditor/debt collector's attorney should be responsible for giving legal advice to the consumer (i.e. the opposing party). This is a serious conflict of interest and a violation of his duties to his client. Even worse, it sounds like you also want debt collectors who are NOT attorneys or employed by attorneys to also give legal advice to consumers. This is a violation of the prohibition on the unauthorized practice of law. I understand that the ignorance and lack of sophistication exhibited by defendant debtors is a concern. I recommend that the CFPB develop a model notice of rights under the FDCPA. If it so chooses, it can also maintain on its website an area for state-specific resources related to State laws, and reference this website on the form notice.

Why is it that debt collection agencies feel like litigation is needed? I have helped over 4.5 million people settle their accounts without ever using litigation. What the debt buying and collection industry needs to realize, is that most people want to pay their debts – and will if given an opportunity. When a customer is threatened with litigation they begin to panic, often times leading to bankruptcy. Once a bankruptcy occurs the customer ends up in FICO hell and all of the customer’s other creditors suffer the consequence caused by one litigation happy debt buyer.
The empirical data now conclusively proves the non-litigation collection model is more profitable than the litigation collection model. It is also safer and more profitable for the banks who sell loans. It is safer because it creates no bank exposure or risk for improper litigation by the purchaser of their debt and it is more profitable because non-litigation debt buyers can afford to pay the bank a higher price for the same distressed loans.
What is the true way to help someone who is deep in debt? It isn’t to sue them into oblivion but rather to offer them a way out of their predicament. This way out can be accomplished by helping them resolve their other obligations; helping them find new/better employment or providing them needed social services. Sometimes it is simple as just listening to their plight and offering them patient understanding.
The entire robo-suing; inadequate documentation, sewer service, mistaken identity problem involving 10 million lawsuits a year could be avoided simply and easily. If debt selling banks were persuaded not to sell loans to debt buyers who utilized a litigation collection model, these ills would be stopped overnight. This simple solution would end the living nightmare now suffered by more than 30 million American families.

BillBartmann, thank you for your comment. You make a good argument that the non-litigation collection model is more better for consumers and more profitable than the litigation collection model. Do you have suggestions for CFPB on how they can craft rules that will encourage the debt collection industry to use non-litigation techniques or banks not to sell to those who utilize a litigation collection model?

banks can simply add this provision to their Loan Sale Agreements. All buyers executing a Loan Sale Agreement containing such a provision would be contractually obligated to refrain from litigating or threatening litigation.

some current buyer would refuse to purchase with such a provision and other current buyers would expect a price discount because they woudl not be able to sue. In both instances, any inventory not acquired by current buyers would be quicly snapped up by other purchasors who would be willing to comply with these contractual provisions.

Such a resolution would obviate the necessity of legislation or regulation as the matter woudl have been taken care of under the contract between a willing seller and a willing buyer. there would be no constitutional question regarding the restricting of law suits nor would there be any delay in implementation. All that would be required is the cooperation of the selling banks which could be induced readily with some Safe-Harbor language for banks that follow this protocol.

This is a reply to Mr. Bartmann's follow up comment, (I could not find a reply button for the follow up comment). I think your idea is an excellent one. My concern is that it might force interest rates even higher. Ideally, there would probably be less overall defaults if consumers, when first getting credit were required to pay at least 5% of the total due each and every month.

I don't understand, Mr. Bartmann - you believe creditors should just wait until consumers feel like they can afford to pay? What if that takes years? Litigation preserves the creditor's right to recover the money owed and allows it to be collected later, when the consumer is able to do so. If litigation cannot be used to enforce creditors' rights, the debt could become uncollectable in as little as three years. As noted by another commentator, this will most certainly have a negative impact on the economy and the cost of credit because it will drive up prices to cover that risk. It will also make obtaining credit next to impossible for high-risk individuals.

I would like to comment On Mr. Bartman's following quote..."their way out can be accomplished by helping them resolve their other obligations; helping them find new/better employment or providing them needed social services. " end quote.

I can state from personal experience that when our savings ran out I became eligible for in home support services in which I as an unpaid caregiver could be paid a very modest amount (at minimum wage payment) because I was a caregiver. By being an in home CareGiver, I was saving the state a lot more money than it would cost to pay me a small amount every month via in home support services.

I told this to all of my creditors, none of them cared. Then reality hit, my state agency that was supposed to help me obtain in home support services instead cast fear into both me and my parent by stating to me on the phone that whatever they paid me, they would file a lien on the home to get back if I outlived my parent. It turns out this application of the law did not apply to me. However the damage was done. I lost 1.75 years of eligibility and probably enough money to pay all of my vendors, and, I would have never had to prolong the default for more than a couple of months if any of my vendors had cared enough to just help me get through the process of applying for in home support services. But because judges have become so vindictive in their approach to credit card defaulters, judges have allowed the credit card companies to become LAZY at solving their own problems internally.

Nobody helps, everybody simply self protects their own interests first and foremost.

Default judgements should not be allowed. In Arapahoe county (littleton, CO) it is well known that a landlord can get a judgement and evict a tenant even if their is no justification. Republican judges always side with the property owners at the tenants expense.

I think it would be better to focus on avoiding the law suits rather than avoiding defaults. The validation of debt process is unfair to the consumer. A debt collector should not be able to file a law suit prior to validating the debt. A proper validation should include the following:
A) A signed statement from the original creditor, on their letter head, establishing who is the assignee and what specific acts they have been authorized to perform on behalf of the creditor.******* Debtors are required to provide Letters of Representation or Specific POA to the creditor/debt collector. Why should the Creditor not have to perform in the same manner.
B) This validation letter should state the amount of the alleged debt, at the time it was assigned to the law office (collection office) or the amount of debt at the time it was "charged off" by the original creditor.
C) It should give a deadline to cure the alleged debt.
D) It should include several options to settle prior to the deadline.
E) It should include a “sample” debt validation notice for the debtor to mail in.

These are all excellent suggestions but they don't address people who are incapable of paying down the interest bearing debt in a timely manner but could pay it down in a longer manner and if no more interest rate charges were accruing.

Unfortunately, a few of the suggestions you made would actually violate the FDCPA. Debt collectors are not permitted to "overshadow" the validation notice by giving consumers deadlines, making demands for payments, or giving settlement offers. Further, I don't believe consumers need a "sample" dispute notice. If the consumer truly has a disagreement or dispute with the debt being collected, he or she should be able to articulate that dispute.

Your point about the overshadowing is well taken. My comments are based upon suggested changes to the debt collection process. You are correct, if the FDCPA remained the way it is currently it may be considered a violation. The FDCPA allegedly is geared to the "least sophisticated individual". However, I currently speak to many people that are not able to properly respond to a debt validation (even when they have a credible dispute). I am currently dealing with a 72-year old woman whose son "stole" her identity. He was convicted of fraud and deported for other credit cards that he took out in her name. She received a dunning notice and now is being sued on another card that she was not even aware of. Our experiences are just different. I once felt the same way as you when I was in commercial debt collection. I truly appreciate your response but you and I will have to disagree that "he or she should be able to articulate that dispute". I enjoyed reading your well thought out response and look forward to the continued debate.

As a creditor collecting my own debt, I assert that by the time I move to litgation, I've exhausted all other forms of collection. I've talked to, emailed, and snail mailed the debtor. I've tried to negotiate a payment plan or settlement offer all to no avail. Litigation is our last attempt. Once we are litigation, we present our best case and let the debtor present their defense. My experience is that debtors don't participate in their defense out of either fear or lack of knowledge about the legal process. But the burden of educating the debtor shouldn't be put on the creditor's shoulders. If debtor's prefer to ignore the issue, then a default judgment is justified. There should be consequences to the inaction of the debtor.

I disagree with the above assessment. As an alleged defaulter I have asked over and over and over again to have the debt set where it was at the time of alleged default and that no more penalties fees or interest rate charges be tacked on, and that I will commit to a monthly autopay. People who INVOLUNTARILY defaulted because of a life changing event in their lives (such as becoming caregivers for their parents) may want to consider all of their defaults together, so if five defaults occurred, the alleged defaulter has to divide whatever money they may be able to apportion every month, by five. Debt collectors refuse to see this as a reasonable solution and only acknowledge their own debt with the alleged defaulter, making it impossible for the alleged defaulter to do the right thing and begin paying back everybody.

I also find the assertion that INVOLUNTARY DEFAULTERS don't put up a legal defense because they are afraid or have a lack of knowledge about the legal system to be outrageous. Strategic Defaulters save part of the money that could have gone to pay down their debts so they can give it to an attorney who may be able to get them a sweet pay off deal. INVOLUNTARY DEFAULTERS keep trying to make their monthly payments until the monthly accrual of interest rate charges and/or a life changing event forces then into an INVOLUNTARY DEFAULT. INVOLUNTARY DEFAULTS are not recognized by the courts. I had a SPOTLESS payment record for 15 years prior to a life changing event that caused me to become an unpaid CareGiver. If I could have been allowed to start with very small monthly payments to all of my creditors in exchange for having my phone lines left alone, I probably could have started making some income again. Instead, the constant debt collection phone calls forced me to convert my land lines to 20 cent a minute cell phones that I could not even afford to answer. I LOST work and contacts because debt collectors would not accept small monthly payments as a beginning pathway towards paying off my alleged debt. Probably the ongoing interest rate charges on default debt makes it unrealistic for debt collectors to accept small payments. Until alleged defaults are truly frozen so that those who want to pay them off have the best chance to do so, more and more debt will accrue.

and if you remain skeptical, please check out this article by a completely independent source about global debt. Global Debt Elephant in the Room.

@Debt Neutrality Petition, you have made a lot of arguments in this thread about "involuntary" defaulters. However, the law doesn't make that distinction. Financial hardship is not a defense to someone's failure to repay a debt that he or she promised to pay. Therefore, the court cannot consider that factor in determining liability. Since this thread is specific to litigation in state courts, I think that should be the focus here.

In response to the moderator.

Just what does "the promise to pay" actually mean? Where in the adhesion contract does it state that the credit card agreement, an allegedly "unsecured" form of debt, takes priority over every single other occurrence that might happen in a person's life? Are the Philippine hurricane victims or even more recent Tornado victims in the midwest who lost their homes and their streets soon to become "defaulters" who are then subject to ongoing penalties, fees and interest rate charges while also having their credit scores damaged? The point of involuntary default is that an event occurred beyond one's control that has prevented them from making monthly payments of the amount they are required to make. Involuntary Default simply means the defaulter promises to pay back what they owed at the time of the default, and nothing more.

I would suggest that the "promise to pay" tenet is constitutional violation of cruel and inhuman punishment because credit card companies literally lord over their customers without clearly mentioning their Godlike status at the time of the agreement.

The correlation between cigarettes and credit cards are astounding. Isn't it time for a clear warning on credit card products that state the truth?

Warning: Your promise to pay your credit card bill on a monthly basis is more important than any natural disaster or personal tragedy that may occur in your life.

By allowing credit card companies to not place the warning from above in a viewable context to all sign-ups, they gain monetarily while not revealing a basic contract tenet that should be revealed.

Therefore the "promise to pay" has been arranged under a false pretense.

RHN91362
Because credit card contracts are adhesion contracts, it is up to educated third party observers to make sure the adhesion contract is fair. If a person experiences a dramatic event beyond their control that reduces their income, it seems questionable to not allow the debtor the right to suspend the interest rate charges, penalties and fees until they have regained their income. They are still promising to pay, but since their life has been turned upside down by an event beyond their control, that should have standing in some cases. It just doesn't seem ethical to punish a consumer because their home washes down the river one day, or is burned to the ground by a wild fire, destroyed in an earthquake, and so on. It especially does not seem ethical that the credit card companies are allowed to hide how they will punish a consumer if the consumer's intent was always to make their payments and it took an act of God to prevent that from happening. Insurance policies do not cover acts of war, yet our own government allowed the owner of the twin towers to collect on their insurance policy even though 911 was clearly an act of war. I believe there have been polls that show a majority of americans are upset because the 2008 bailouts did not give them any respite of any kind. The "Promise to Pay" says nothing about making that payment every month above and beyond all other situations and scenarios. I believe judges have misinterpreted Promise to Pay and that lawyers like the way it is set up now so they don't want to challenge the obvious holes in credit card adhesion contracts because it could quash their own future income stream.

When you say that you have "exhausted all options", I am curious as to over how long of a period have you attempted to collect when you choose to file a suit? Hardships are not all the same and some hardships can last for a year or longer. As a consumer advocate I see very few creditors that are willing to do anything more than refer to CCC or reduce rates for a short period of time.

Response to US Marine: while this isn't the best forum for me to go into my company's entire collection process, we work a debt for at least 120 days with letters, live agent calls, robo calls, emails, mailed invoices, and by suspending subscription service (where allowed) as part of our collection campaign. Even then, we only go to litigation after the debtor has been unresponsive to our attempts to contact them. I've found that if a debtor talks to their creditors, many times creditors will take their situation into account. I've offered lengthy repayment plans, reduced or waived interest or late fees, or partial settlement for those explain their hardship. But if a debtor is uncooperative or doesn't respond to our attempts to work out a balance, what other alternatives do creditors have?

Reply to Aturk. What other options? Patience is the number one option. Agree to contact the credit card company and have the debt reduced to what it was at the time of default. Agree to even a 5 dollar monthly autopay with the promise that eventually it will be increased. Then report the account in good standing to the credit bureaus as long as those five dollar payments come in.

I do not believe that it is "just" to allow a third party to buy a past due debt and sue for the entire balance, plus attorney fees, court costs, and other fees associated with "mediators or arbitrators". I believe that a third party debt buyer should be limited as to how much they can sue for above their initial investment. Too many times the original creditor is a publically traded company and the loss has already been taken by the share holders. Then some debt buyer buys a portfolio of un-performing debt and pays a dime on a dollar for it. Sends all of it to a "law office" to collect 100% or more of the original alleged obligation. The debt buyer should not be able to sue for 900% of their investment. They should be limited to a percentage of true damage. I know of no other civil process where this would be considered ethical.

But private arrangement between these entities doesn't change the fact that the money is still owed. Just because the original creditor took a loss on it, doesn't change what is really due. Is it ethical for someone to rack up tens of thousands of dollars of debt and never pay it back?

Though I do not agree with "someone to rack up tens of thousands of dollars of debt and never pay it back". My current standing is that the laws of each and every state allow for higher interest rates to be charged for non-secured debt. This is because the lenders take more losses "the risk should be in alignment with the award".
In many cases the principal has been paid back in full or the majority of the debt has been paid back. To allow a "third party" to buy it at a significantly reduced price, after the debt has been charged off by the original “lender/creditor” AND allow the third party to collect the full alleged balance and interest is not just.
This is the way I am leaning at this time. Explain to me why you or I feel differently?

I believe that many default judgments are because the Defendant/debtor does not know what to do. They cannot afford to retain an attorney and they do not know how to answer a complaint. I believe that if every "debt collection law firm" is required by the CFPB to provide a answer form with check boxes. Example to include check box 1 if you admit to the allegations in paragraph 1 of Plaintiff’s complaint. Check box 2 if you deny the allegations in paragraph 1 of Plaintiff’s complaint. Check box 3 if after reasonable investigation the defendant does not have sufficient information to form a belief as to the allegations in paragraph 1 of plaintiff’s complaint. Something so that the least sophisticated consumer has a chance at avoiding a default. It should also delineate of any filing fees necessary to be paid (varies by state) in order for the Defendant’s Answer to be accepted by the court.

and on that page, how about the following option, I agree to pay down the debt as it stood at the time of the default, not a penny more. I agree to start making at least a _______ payment per month that will over time increase. I understand that if I make those monthly payments the account will be declared in good standing by the credit bureaus.

In most states all that a debt collection law office needs to provide is a complaint. The average consumer has no idea what the difference is between a balance and a sum. they do not know how to calculate the interest and certainly do not know what is "legal" pursuant to state or Federal Credit Card Act limitations. The name of the Plaintiff may not even be recognizable to them. They just know that they owed some money and fell behind on bills. More times than not, they do not respond at all.

There should be a monetary "floor" required before debt collectors can pursue uncollected debts in court. The idea that corporations that already charge puninshing interest rates and fees can clog the court systems trying to collect a few hundred bucks from someone who is unemployed, ill, or otherwise unable to pay is counter-productive. There should be a minimum amount of consumer debt owed before creditors can sue debtors. Another issue with using state and local courts to settle debt collection suits is that it burdens jurisdictions already heavily burdened with cases and strapped for cash.

Bonzarel. while I think your idea is a good one, it could open the floodgates to interest rate padding the debt until it reaches one of the "floors" that you are suggesting. 30% interest rate charges, penalties and fees (which in turn also get hit with a 30% interest rate charge), can accelerate even a 500 dollar debt into the thousands in less than 24 months time.

I have personally witnessed how judges perceive credit card debt cases, and I believe they have strayed too far towards the debt collectors. Judges simply decide whether a default has occurred, and once a judge declares a debtor in default, the adjudicated debtor has no pleading rights.
Alleged credit card and student loan defaulters should have the right to declare their default an Involuntary Default and be allowed to pay back the debt with no more penalties, fees or interest rate charges, called Debt Neutrality. Debt Neutrality is making of a debt neutral so that it does not continue to indenture a defaulter in a never ending cycle of ongoing interest rate charges, penalties and fees. Involuntary defaults should allow the debtor to have the debt reset to where it was at the time of the default minus any payments made. As it stands now, Strategic Defaulters are given much better treatment than Involuntary Defaulters, in large part due to Involuntary Defaulters not being able to plead their default as being Involuntary.

Most debt collection litigation actions that collectors file to recover on debts are filed in State and local courts. CFPB is interested in receiving information about the nature and extent of State debt collection litigation reforms relating to rules of procedure and evidence and the process of entering a default judgment. Do you know of any State litigation reform efforts related to your involuntary default suggestion?

Probably won't find any legislation since people who have allegedly defaulted on a debt aren't necessarily going to tell the world, or create a lobby for their cause. Debt Defaults and Debt Collections are a one sided issue in which judges have been constrained to simply determine if a default has occurred, or not. The lawyers primarily work with strategic defaulters because S.D.'s have some source of money or income available to pay both the attorney and a partial portion of the debt. Involuntary Defaulters are left to fend for themselves because they don't have money to pay a lawyer. Debt Neutrality, in which an involuntary defaulter agrees they owe the debt and simply want's to be able to pay it down based on the amount the debt was at the time of the default, with no more penalties, interest rate charges, or fees, even if it takes 10 years to pay off the debt, would possibly alleviate a large amount of unnecessary court cases. And of course, once the very modest initial payments were set up, the account would no longer register as a negative on a debtor's credit score or credit rating. And to safeguard fraud, the debtor would not be able to keep borrowing larger and larger amounts of money until after their defaults were paid in full. It's a very logical solution in my opinion. Judges should be able to use logic to solve the growing backlog of credit card default cases.

Debt Collection companies get a very unfair debt negotiation advantage against an alleged defaulter when they hire an unscrupulous service company that has lied about giving a proper service or subservice to the alleged debtor's residence. Judges do not seem to understand that if a service company will fraudulently state in court documents that they served a defaulter or subserved someone at the residence when in fact they did not, that the debt collector can become very arrogant and cocky as to how they negotiate with the alleged defaulter. In a nutshell, if the debt collector's one sided terms are not met, they will simply hire the service company who will provide service even if it is a false service. Judges rationalize that the mail service is an adequate notification without realizing that what a false service does is embolden the debt collection company to not properly negotiate a debt with an alleged defaulter because they have total control over the service aspect, even if fraudulently obtained. This need to be fixed and false servers need to be fined along with the debt collection companies who hire them and keep hiring them even after they receive complaints of false service.

If I have been falsely served or subserved, (the making up of a person who does not exist to claim a service, or simply stating "Jane Doe" received the service) and the judges don't care, and the debt collection companies don't care, I should have the right to file an errors and omissions insurance claim against the debt collection company for false service that resulted in a verdict against me. I have already tried asking for an errors and omissions insurance policy from the debt collection company so that I could file a claim and the debt collection company simply ignored my request. I find this both egregious and outrageous.

There is a bait and switch approach towards unsecured credit card debt that I find disconcerting. If an unsecured debt can be converted to a secured debt, than was it ever really an unsecured debt? This seems like bait and switch. A consumer signs up for unsecured line of credit, but then the debt becomes secured by the courts. What motivation does a credit card company have to resolve a default situation if the courts will do the enforcement so easily and so one sidedly for them? The courts and the judges are actually using public tax money to give private business (credit card companies) a free ride when it comes to enforcement. Show me in the original adhesion contract where the credit card company states that their unsecured agreement is in fact more important than any life changing event that may occur in the alleged defaulter's life. Omission of obvious warts in the adhesion contract should not be tolerated by the courts. If I had been properly notified at the time I began acquiring debt that providing life affirming CareGiving services to another human being, aka my parents, was no excuse to default, I would have reconsidered how much debt I accrued. What about victims of hurricanes, floods, identity theft, hit and run, medical emergencies, is it fair that credit card companies HIDE THE FACT that they consider their debt more important? How much less business would credit card companies do if they did not conceal their underbelly at the time the agreement is signed. Who decided that the original agreement could be casually made over the phone or via a mail in signature, but enforcement would then happen in a courtroom? If the credit card companies truly believe that their debt is more important than any other aspect of a debtor's life, LET THEM STATE SO IN BOLD, VIVID FONT just above where a person signs the agreement.

I think the issue you have identified here in this post is key - lack of financial literacy. So many people borrow money without reading contracts, without understanding the law, without considering the risks. We live in a society centered on immediate gratification, where people who can't afford things just charge them, thinking they'll pay it back later. But then something happens - a job loss, medical issues, unexpected expenses. So few people even maintain sufficient savings accounts these days, or put money away for retirement. If we really want to get to the heart of this issue, it has to start with education, and financial literacy. Now, I'm not saying the banks and lenders are innocent participants -- they have certainly taken advantage of the "instant gratification" mindset by extending credit with high interest rates and fees, knowing that someone somewhere will sign up for it. But they can't bear the brunt of the blame for societal ignorance.

I agree that this is about Financial Literacy, and I'll give a couple of examples at the bottom of this comment.

However, this is also about the court's enforcing completely one sided credit card adhesion agreements that don't give the debtor/defaulter, rights of any kind, even in the most humanitarian of situations, thereby calling into question the legality of these one sided credit card adhesion agreements.

Lets not forget that it was the comptroller of the currency back in 2002 that prevented the Insurance industry from competing in the credit card debt suspension insurance arena with the credit card companies.

This allowed the credit card companies to then have an obscene monopoly on overpriced credit card debt suspension insurance premiums they charged their own customers who otherwise could have carried insurance policies that would have frozen interest rate charges for a certain period of time when a life changing emergency occurred.

Financial literacy is in play when it comes to the 2% monthly minimum payment addiction scam perpetrated on first time credit card borrowers. 2% monthly minimum payments are literally no different than a crack dealer giving out a few free hits of crack to get people hooked on their product.

A person can be buy a $1,000 top of the line television set and only have a 20 or 25 dollar payment due the next month. That's credit card crack in my opinion.

Financial Literacy could be a warning printed in bold letters on every credit card agreement warning how credit cards purposely have low monthly minimum payments to lure one into more and more debt, how credit card companies have no compassion for life changing events, and that credit card companies are overcharging for credit card debt suspension insurance by a factor of up to 2,000%.

Put those three warnings on every agreement in bold letters, and two things happen, customers have a better chance of becoming financially literate, and it also is an admission of fraud by the credit card companies for all the prior agreements already in place.

So the irony is the credit card companies can't change even if they wanted to.

But where is the outside force to come from to make the obvious happen in regards to those three credit card wanrings? Apparently it can't come from the CFPB, which is unfortunate because it turn this ties the courts hands that much more.

RHN91362, I have already answered your comment but it still bothers me that "financial literacy" may be the escape clause that the CFPB uses to avoid the real issue. How about rewarding those of us who have tirelessly blogged about exposing the financial traps set up by the credit card companies, especially those of us who did it all on our own dime and time.

Credit Cards are THE BIGGEST PROFIT MAKING scheme in the U.S., much bigger than the mortgage industry. And as the CFPB knows, any type of money making machine gets protected through lobbying.

That is exactly why the CFPB was able to fine the credit card companies well over 1/2 billion dollars for aggressively marketing the credit-protector Insurance program. When something makes so much money so easily, people just can't help themselves to try and keep expanding the money making venture.

I personally warned about the credit card credit protector programs almost FIVE YEARS BEFORE the CFPB made their over half billion in fines. Credit-Protector

I created my site on my own time and with no funding, and I think my warning almost five years before should matter.

I also don't understand why someone like myself who created my warning so early on, with no funding, can't be compensated on any level simply as a way to energize future generations that if they take the time and show they care for something that matters, they may someday be publicly rewarded/acknowledged.

I also created blogs about Chase Bank and their credit card shenanigans back in 2009. Once again, the class action lawyers swooped in and took 25 million dollars in legal fees. I didn't see a dime for my blogging even though my 2009 protest blogs probably helped fuel the justified anger by some consumers who then went on a mission to get a class action lawyer involved. Once again, I got nothing.

If Government Consumer Organizations are not willing to acknowledge those who care and show it, the system may never truly improve. Daily-Protest Bloggers Against Chase Bank Parallel Foreclosure Swarm The Banks Wall Street Change

I have gone out of my way to offer financial literacy through the exposure of unfair credit card and banking policies for several years now.
The tree fell, people heard it, but no one made a sound.

I just want to add that I am not advocating getting out of the debt because of a life changing event. I am advocating that the debt be frozen at the amount it was at the time of the involuntary default and then paid back even if it takes ten years.

Possibly the most egregious action of all regarding credit card debt occurred in 2002, suspiciously close to the 911 aftermath. While insurance companies were paying out tens of millions of dollars to building owners who suffered damage because of 911 (which technically they should not have done since this was an act of war which is NOT covered by most insurance plans), the comptroller of the currency was DENYING insurance companies from competing with credit card companies in the credit card debt suspension insurance arena.

The result was a credit card debt suspension insurance monopoly for the credit card companies with premiums that were overpriced by a factor of 1000% to 2000%

The profit margin was so high for credit card debt suspension insurance that the CFPB actually had to fine the credit card companies OVER 500 MILLION DOLLARS in the summer of 2012 for overly aggressive credit card debt suspension insurance sales and marketing practices.
I had warned about overpriced credit card debt suspension insurance back in 2008 with the creation of www.credit-protector.com but was never compensated for my efforts.

So what did 1000% to 2000% overpriced credit card debt suspension premiums do for the consumer? It meant that MOST credit card defaults in the United States over the last 10 to 15 years were based on a fraudulent foundation of obscenely over priced credit card debt suspension insurance that consumers could not afford to keep purchasing. Consumers were literally paying for 5 years worth of credit card debt suspension insurance but only receiving 3-5 months worth of coverage!

Most of the times that a judge was declaring a credit card default, they were propping up the overpricing of a monopolistic credit card debt suspension insurance policy that did not fairly give consumers the most obvious way to protect themselves from a default that was caused by life changing event

We could literally fix the U.S. economy almost overnight by doing the right thing. First acknowledge credit card debt suspension insurance fraud that the credit card companies have perpetrated on the american people over the past 10 to 15 years and as retribution reduce all consumer credit card debt by approximately 65%. Then raise the monthly minimum payment on the remaining 35% from 2% to 5% so the monthly payment remains roughly the same but consumers feel their debt more easily going forward. The comptroller of the currency tried to get credit card companies to raise their monthly minimum payment requirements from 2% to 4 or 5% back around 2005 but relented when it became obvious too many people would default.

By reducing consumer credit card debt by 65% as a form of reparations for debt suspension insurance fraud consumers suddenly have a lot less debt BUT still have to make a similar monthly payments. However MORE of that monthly payment goes towards paying down the actual debt rather than the cesspool known as ever expanding interest rate charges.

If you would like to learn more about the Debt Neutrality Petition on Change dot org, please click the link below.Debt Neutrality Petition.Debt Neutrality BlogDebt Suspension Rights BlogCredit Protector Warning issued in 2007Credit Card Debt policy changes website also created in 2007
You can also find Debt Suspension Rights and Debt Neutrality Petition on facebook.

The agency needs to be careful of new rules that will, though unintended, be harmful to the free market. However, it is important that litigation is monitored to ensure that the system does not allow reward with no risk. A plaintiff in a lawsuit cannot be placed in a situation where it is rewarding to sue with insufficient cause and minimal risk.

Creditors and those following in the process of recovery do not need additional regulation in this area since their efforts are monitored by the CFPB. The CFPB does not need to set standards for the industry, but make it clear that only those documents provided to the court in the original filing will be considered in a CFPB review. If in the course of a CFPB review, it is found that litigation was filed without a successful verification of the facts, the CFPB could award the amount sought by the filing to the defendant of the case and a fine to the CFPB of no less than $2,000 but no more than the amount sought.

This position would motivate the litigant to ensure their facts were correct before any filing took place. This position would allow CFPB to review cases filed no matter how they were adjudicated by the involved court. This review could be conducted at CFPB offices since it only requires the original filings. This review could be initiated simply based on a complaint to the agency's offices. The penalty could be adjustable based on a variety of agency standards.

I would have to take more time to consider when the plaintiff was not the original creditor or a member of the recovery industry, but, again, there must be a risk associated with the reward to stop nuisance suits.

Larry S, your quote..."A plaintiff in a lawsuit cannot be placed in a situation where it is rewarding to sue with insufficient cause and minimal risk" is a very powerful statement and one that I entirely agree with. It is this scenario that emboldens debt collectors to hire riff raff service companies who will lie about doing a legal service or sub service, and apparently get away with it. I have been victimized by two false subservices. I think both were done by the same service company.

Thank you for your comments LarryS. CFPB’s objective is to protect consumers, yet not impose undue or unnecessary burdens on the industry. CFPB doesn’t have legal authority over absolutely every aspect of debt collection and rules about collection litigation are a complicated mix of state law and federal law. But as CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what you and other commenters say here.

There needs to be something in place to stop the frivilous law suits that agencies have to spend thousands of dollars to defend even though they have tried to explain to the consumers / attorneys that there was no wrong doing and no case - a lot of these consumers file the suits Pro Se and continue pushing for a settlement or trial - in these cases the agencies spend monies to prove there was no cause for action to begin with and to have a judge agree with the agency. Please look at putting some kind of penalty on consumers or their attorneys when they send settlement demands or file law suits when they have been shown that there is / was no case

Compliance 2013 demonstrates the type of arrogance that I have been addressing in my prior comments. The belief that a default is a default by courts along with the practice of REWARDING Strategic Defaulters while sentencing INVOLUNTARY DEFAULTERS to never ending escalating debt because of the ongoing interest rate charges needs to be addressed. Don't believe me? I have been researching consumer debt for the past few years and Consumer Debt is ON THE RISE GLOBALLY, and that is not a good thing. Canadian finance expert warns about rising consumer debt.
I can replace Canada in the title with England, Australia, South Africa, China, Russia, Ireland and on and on and on. The consumer debt escalation is being caused by a ridiculously low 2% monthly minimum payment, the gateway drug to higher and higher debt, and because consumers who have legitimate life Changing events that cause them to default cannot plead INVOLUNTARY DEFAULT in court. Where does it say in the rigged credit card adhesion contract that consumers cannot plead Involuntary Default? We let criminals plead involuntary to many crimes, but not law abiding citizens when it comes to their credit cards and student loans!

My apologies, I should not have said criminals, I should have said we let those charged with crimes plead Involuntary, but we don't let consumers do the same.

This just in, another article warning about global debt. I believe that this increase is being caused by debt defaults that continue to accrue interest rate charges, penalties and fees. Global Debt Elephant in the room.

First parties should still have the right to sue if they deem it necessary. I have no problem with this rule if it is directed to third party debt buyers.

Is it possible for the CFPB be given proxy, POA, or other authority in individual cases, or groups of cases, to pursue debt collectors for violations of the FDCPA?

The enforcement mechanism of the FDCPA is laughable from the point of view of the debtor.

For example, a debt collector said that since they are out of the country they are not required to adhere to the FDCPA. Luckily, I knew better, but most folk don't.

The CFPB's voluntary reporting combined with proxy enforcement power may curb the industry's activities, and may be cheaper and faster than class action lawsuits.

A neighbor who has since moved away has had her debts turned over to collection agencies. We receive repeated calls trying to get contact information, even though we request to be taken off their list. An unfortunate situation but we don't know the whereabouts of the individual and shouldn't be subjected to this sort of harassment.

Thank you for sharing, chaz24479. That sounds like a frustrating situation. CFPB wants to find out more about people's experiences, so that it will know what it should do to fix problems with debt collection. How many collectors called you? Was it the same ones who kept calling back? Were any of them helpful about taking your name off their calling lists?

I am a clerk at a local city court. I am the civil clerk and I feel that debtors are treated extremely unfairly by debt collection laws. The Court cannot give legal advice so it is saddening to have to try and explain and console upset litigants who have no idea what they are in for. I think there should be more avenues for pro se litigants who cannot afford to retain a private attorney (which is 95 % of the litigants in my city). I can say that most people do not answer summonses because they either were not properly served or they just straight up do not care, or most often, do not understand the legalese. BUT, I do have to say that I get many litigants who call and ask what they do now that they are served. On the occasions that people do file answers, most of them are in letter form, not a "legal" verified answer. Most debt collection attorneys jump right on that and request a summary judgment. Our Court does not turn away letters, and we send a copy to the attorney and set the matter up for a pre trial conference with a judge or court attorney to help try to get both parties together to come to some sort of resolution. The Court does have to adhere to a scheduling policy for these conferences, but we are very flexible if a defendant has a scheduling conflict we try to accommodate them as best we can. When summonses are filed with the court, half of them have tons of information about the debt, others only have the amount due! I find that sometimes it's hard for litigants to obtain further proving documents from attorneys, even with the court telling them they have to. When entering default judgments, I take my time and examine the whole file, like comparing the contents of the summons/complaint and the default judgment submitted, re-checking the affidavit of service of the summons (to make sure the defendant had the legal time to answer the summons), and ensuring that attached to the default judgment is the proper documentation as to purchasing the debt, a non-military affidavit, etc. I also make sure that they are being charged the proper interest rate and court costs. The bottom line is that the debtors still do not have enough and/or sufficient laws to protect them, and the Court's hands are tied based on these laws, even if they wanted to help, they couldn't. I know the Court is to remain impartial, but in a small city, everybody knows everybody and sometimes it's hard to see these practices occurring.

Thank you for sharing your experience lovem2013. We know you can’t give legal advice to litigants, but CFPB has a lot of information for consumers needing help with debt collectors on their web site that you could refer people to. Because of your experience at a local city court, other information you can share in response to CFPB’s questions on our litigation in state and local courts post would be helpful. You mentioned that most debtors in your city do not know how to proceed after being summoned, mostly because of the legalese. Is there any standard plain language that you could help getting over the legalese? You also said that some summonses filed with the court only have the amount due. Aren’t collectors required to provide a minimal amount of information in court to show that consumers owe the debt, and that the collector has the right to collect the debt? What kind of information is often missing from collectors’ filing?

I have been falsely subserved twice. Both times resulted in verdicts against me. Thank you for taking the time to express your viewpoint, which should carry a LOT OF WEIGHT since you are in it at the ground level. If I had not been falsely subserved, it is possible that the debt collector would have been more humbled and more amenable to my extremely generous offer of agreeing to the pay the debt in full based on what it was at the time of the default, as long as I could start with a very low monthly payment and build it up over time. And as along as I was honoring my word, the debt would no longer be reported negatively on my credit report. But I never got that far because the debt collection companies simply hired someone who would deliver a service, no questions asked as to its legality.

Thank you for sharing your story. Could you elaborate on your two experiences in which you were subserved by a collection agency?

My Subservice stories. I found an unsealed envelope in my mail box that had court documents in them. I contacted the debt collection company and asked what was going on since I had not been served.

They claimed a subservice had already been done to someone at my residence. I explained that was probably not likely because I am a Caregiver and I would have been the only one to answer the door and I did not get any service. I had to pay to file a response and was late by one day, andthen had to challenge the default because of the non service. The judge agreed that there had been no valid subservice based on the fact that the service company used the most generic "guess" they could come up with, a women in her mid 30's to late 40's, around 5 foot 4 inches, weight around 130 pounds to 150 pounds. That is about as generic of a description as one could give, and it was completely wrong. because that person did not exist. They even made up a name of someone I had never heard of and when I googled the name, could not find it anywhere on the internet. The second time a false subservice happened, a very similar description was given as the first time, and the alleged subservice recipient was identified as "Jane Doe".

I would like to point how dangerous these lies are on another level. I exclusively have been providing CareGiving services for my parents, no one else has. By lying and introducing these lies into a court document, anytime in the future I could be accused of exposing my parents to a person at our residence who never even existed.

I was also somewhat frozen by this level of dishonesty because on the rare occasion when I had to sue someone, I followed the law and had the service performed legally and properly. I just expected the same in return and by not getting it weakens one's ability to respond.

In the end, the entire issue boils down to 1.) Who owes what to whom? 2.) Can that debt be resolved? 3.) Are both parties working in good faith.
To the first question, due diligence is a must. Even if collectors are allowed to continue litigation (which I do not see going away,) there must be a penalty for the collector if false claim is made. If a collector starts litigation and it is found to be against the wrong person, compensation and additional penalty should be paid by the entity initiating the litigation in the form of a reasonable fee to the victim and an additional (and substantial) fee to the governing authority to help cover oversight expenses.
To the second question, I believe an overwhelmingly large portion of consumer debt can be repaid. However, there are always going to be exceptions to this. In cases where debt can not be collected for whatever reason, it should be written off as truly not collectable and no not be allow to be sold again as debt to be collected. Fine tuning and definitions of “Not Collectable” will have to be worked out by the appropriate oversight bureau or agency.
To the third question, both party's must be measured. There are currently established credit reporting agencies to monitor the consumer side of this issue and an additional, numerical evaluation score can be added to the consumer's already established credit report. That would be a starting point that can be expanded on as the system is fine tuned. The collector, on the other hand, would require a new measuring system that would not only score the company as a whole, but the individuals taking part in any debt resolution activities. For successful examples of such a system I would direct you to the Department of Transportation, Federal Motor Carrier Safety Administration and their Compliance-Safety-Accountability system. Admittedly, their system is much more complex and dives much deeper than would be required for the debt industry. However, their point system is valid and flexible for future change. It would also allow for measurement of the initial creditor. Such measurement would give the government and investors a better idea of a given business' risk level.
Add to this mix, the recommendations from Mr. Bartmann and you have a system whereby collectors and financial institutions will better regulate themselves to achieve an ethical and responsible outcome and not hide behind the “what I did was legal” defense. It would be a Win-Win for both sides and bring many consumers out of the debt death spiral.
Lastly, the federal government could implement this system with a minimal impact on state autonomy. It would reduce the number of litigation in state and local courts, thereby motivating the states to take part.

Thank you for your comments RoyceSharp. CFPB wants to know more details about what is happening in debt collection litigation at state and local level, so it can better understand how debt collection actions are filed against consumers, and what documents are used to show the collectors’ right to collect the debt. Sharing your experience will help the agency know what it should do. It seems that you believe that collectors should start litigating only if they are sure about the debt, otherwise they should be held responsible for false claims against consumers. What documents do you think should collectors be required to show consumers when claiming a debt? Do you have experience with what documents are currently given by collectors to state and local courts to prove their right to collect? If so, could you share with us your experience and help CFPB understand what documents state law requires to be given that often are not?

Thank you for the welcome. Regarding my experience, I did file bankruptcy about eighteen years ago and have regretted it every since. About two years after the bankruptcy, I started working on the operations side of a collections company. It was an eye opening experience to say the least. Had I known two years earlier what I learned in that company, I would never have done the bankruptcy. The company I worked for kept detailed hard copy files on every single case. Even though I saw all these documents, I was not aware at the time of the exact impact each document had on the case it was connected to. As a result, I feel the documents required would be an escalating burden of proof for the collector as would be the case for any other litigation. Start with the loan/credit/service/purchase contract with signatures and progress from there. Include payment documentation in the form of checks or ACH records used to pay said debt including dates, locations and account numbers to confirm said debt was historically paid by an account owned by the defendant. Each step of the process would be utilized only to the degree of the court asking the defendant “Is this your debt?” To this end, what documents would be needed would only be limited by the degree to which the collector wishes to actually prove their case.
Even so, the more I study Mr. Bartmann's proposal, the more I am convinced litigation should not even be allowed until all other avenues of resolution have been exhausted including, but not limited to arbitration, consolidation and counseling. We are working on the basis of “the least sophisticated consumer.” Should an individual with a 9th grade education, who is issued a credit card with a credit line of $500, be held responsible in a court of law for failing to properly manage his finances? Should this same person have his financial weakness used to prevent him from advancing his quality of life? As I said before, this only puts the debtor in a “debt death spiral” initiated by a credit issuing entity and exasperated by an over zealous, cold and non-empathetic group of legalized bounty hunters.
I saw another post where someone mentioned the “check box” options. I interpret that to mean, “have you, as a collector, taken the steps needed to identify the debtor, contact the debtor and offer solutions to said debt?” What solutions are being offered other than “pay up or I'll sue you?” Has the debtor been offered job counseling, financial counseling and assistance from other organizations who would assist the debtor, but just don't know he exists yet?
While I don't believe in a free ride, I also don't believe in kicking a person when they are down. This is what the current legal framework not only allows, but encourages. If you are going to encourage something, encourage the creditors to limit how a third party collects on the initial creditor's decision to issue a person credit. Once a reasonable effort is made to collect, don't allow credit to be sold off from one Bounty Hunter to another. This “tag team” allowance is part of the problem. Limiting the sale of debt to one collector will encourage the collector to work WITH the debtor. Will this cut into the profits for the collectors? I believe a strong case has already been made showing the opposite to be the case.

The courts should also mandate that if a debtor has reached out to the creditor in an attempt to negotiate the creditor must continue to try to reach a settlement rather than seeking judgment against the debtor. Also, the collection agency should not be able to add interest on top of debt that seek judgment for if the debtor agrees to pay since they will make a profit over what they paid the original creditor. Basically these so called "attorneys" (just another form of ambulance chaser in my book) are just forcing bankruptcies upon people who would be willing to work a deal and then they and the courts and the government are whining about what the bankruptcies do to the economy and the bottom line. Last time I checked even in a court of law you can't play both sides.

Welcome MLegz13. Thanks for your comment. Can you think of a way how new federal rules could encourage more settlements without interfering with states' control over state and local courts?

Since states laws have most likely been influenced by wall street banking and financial lobbyists, why is it imperative that all of the states rules be "honored"? Political Gridlock is everywhere, common sense overriding political gridlock, nowhere near as visible.

A lot of excellent points made by MLegz13. My elderly parents needed help with day to day activities even if they were too proud to say anything. I stopped my award winning video business to be their CareGiver. Once the savings ran out, I had to default after 15 years of having a perfect credit card payment history. The debt collectors were constantly accusing me of being a "refuse to pay" even though I said I acknowledge the debt but had no income at the moment. It is this type of scenario that requires debts be frozen where they were at the time of default and in exchange the debtor agrees to pay off the debt, even if the initial monthly payments are just for a couple of dollars. What this does is free the debtor's phone lines so they can completely focus on moving forward rather than engage in pointless rat a tat with repetitive debt collection callers. It's why I started the Debt Neutrality Petition as well. If you click on the link PLEASE read the comments left by some of the 500 plus people who have signed the petition. Even a debt collector signed the petition, their comment speaks volumes of truth, as did all the others as well.Debt Neutrality Petition.

Debt collectors file a large number of default judgments because quite simply consumers do not take action, not because they are unaware of the issue. Usually at the time a lawsuit is filed, a debt collector has attempted to resolve the issue via telephone calls and/or letters. This doesn't even include the efforts the original creditor may have made. A lawsuit is never a first response. It is usually done after numerous and repeated failed efforts to work with a consumer to resolve an outstanding debt. A default judgment is just a further extension of that. Even after we file suit, we may attempt to reach the consumer to resolve the lawsuit prior to judgment being taken. I have seen numerous files where we have spoken to the consumer and told them they can file an answer, and they still don't. In my opinion, default judgments are largely the result of consumer's deliberate uninvolvement with the process, rather than a collector taking deceptive steps. I will state that many states have local rules that if there is no response to a summons and the consumer has defaulted, they do not need to be noticed on a motion for a default judgment. Therefore, the actual entry of the judgment may in fact come as a surprise, despite the summons stating if you don't answer a judgment may be taken. However, an attorney who follows the local rules is not acting deceptively. In order to curb this shock for the consumer who doesn't answer, it wouldn't be bad to require all motions for judgment be served upon the consumer, despite local rules which may require otherwise. I would point out, many default judgment motions are not noticed for motion hour. They may simply be submitted for a ruling without a court hearing. As to the inquiry as to what is required to support a default judgment, this varies court to court and judge to judge. The courts that I have seen require more documentation are largely looking for affidavits of debt, charge off statements and statement showing payments or charges, and the assignment (if the plaintiff is a debt buyer).

I believe most default judgments occur for one reason: the consumers know they owe the debt and see no reason to prolong the situation. Many consumers will
call us and make payment arrangements after being served. We advise them they have the opportunity to be heard in court but most decline. They simply want to resolve the debt.

Jeffreyjon, it sounds like you are identifying how a strategic defaulter acts. However, Involuntary Defaulters don't have the income available to pay down a debt if the interest rate charges are going to keep accruing.

Please READ this article about global debt. Enforcing the existing debt collection paradigm simply legitimizes and illegitimate system. PLEASE DO MORE than that, Please LEVEL THE DEBT PLAYING FIELD. GLOBAL DEBT ELEPHANT IN THE ROOM.

The CFPB doesn't need to craft rules to encourage non-litigation alternatives or not to sell to those who utilize litigation models. BillBartmann's data is suspect as to 10M lawsuits filed yearly and likely his models comparing litigation and non litigation data has not been published. The facts are consumers need to reach out and communicate to a lender, agency, or debt buyer rather than not communicating at all. Debts not repaid usually result in the debt being charged off so the consumer had a minimum of 180 days to seek alternative repayment options. Lenders, collection agencies and debt buyers have a right to sue a legal debt just like the IRS. Keep in mind that judgments last longer than open credit accounts looking at statute of limitations. To BillBatram's comment that filing bankruptcy creates hell as far as FICO scores, consumers face that issue with non payment of debt and bankruptcy is an alternative for a consumer to have a fresh start. That was the intent of the bankruptcy law and still is. Consumers with little or no hope to repay debts care more about moving forward with their lives instead of worrying about FICO SCORES.

Thank you for your comment, Rbell. CFPB is interested in how many debt collection actions are filed against consumers yearly, and whether that number is changing. Do you have any personal insights into this, or any data which might help CFPB gain a better understanding of debt collection actions as they stand?

By the time a file reaches litigation, the debtor has already received at least one prior opportunity to resolve the debt with the collector (the initial demand letter, which by law must inform the debtor of his/her right to challenge the veracity of the debt being pursued). By making default judgment more difficult, the CFPB would only be rewarding the debtors who choose to take no action to resolve their complaints. Furthermore, the CFPB arguably has no authority to impose new, more burdensome requirements upon litigants in state court fora. Doing so would constitute an admission that state court rules of civil procedure deny due process in other types of proceedings that are not granted the "benefit" of Federal oversight.

Thank you for that site. Well, I get at least one call per week from a litigant saying "I was served with a summons today, and it says I must appear within 10 (or 30) days to answer this complaint, but there is no court date on the papers for me to appear", and I have to tell them the procedure (and point out to them the blurb about you not physically having to come to court to answer). I'm not sure how much clearer the wording in the summons has to be, I understand them fully, and not just because I'm familiar with the forms, I'm just smarter than the average litigant I have to deal with I guess. The complaints do state that they have the rights to the debt, under verification that is notarized, at first... but they cannot enter the default judgment unless they provide the affidavit signed by both parties who owned and now owns the debt, which is generally attached to their judgments.

The data is difficult to obtain and likely not attainable considering lawsuits can be filed in magistrate, county, state, and federal courts. Also the data could be inaccurate since a case can be postponed and renewed later. I do not know if there is any central data base for either court. Also, lawsuits are filed in bankruptcy proceedings as well so these would need to be considered as well. This is why I am concerned when numbers just get tossed out without and substance verification.

Based on my experiences I would estimate about 1.5% of delinquent accounts were forwarded to filing a lawsuit.

With increased and onerous liability for making calls and sending letters to debtors, creditors and debt buyers have had little option but to file suit rather than repeatedly attempt to contact an uncooperative or uncommunicative debtor. Most complaints provide adequate and identifying information about the debt. In my experience, most debtors don't feel taken advantage of by lawsuits, they simply understand they owe the debt so there is little point in filing an answer or taking time to appear in court. In fact, the vast majority never respond to a Federal Law letter inviting them to dispute the debt. Filing suits and appearing in court is expensive and time consuming for creditors and debt buyer, but there is little alternative, nor should there be as these matters have always been governed appropriately by State law and State judges. As more credit is granted (and the US is a credit ecomony - over 70% of our economy is based on consumer spending which comes mainly from credit extensions and not consumers pay increases), there are simply more defaults, particularly in a Great Recession. Any heavy handed Federal regulation will hamper and restrict credit granting and debt buying, both of which are needed by the economy and the credit industry. While credit grantors should should make their documentation retention systems more accessible and share more documents upon a sale of accounts, a lack of documentation should not hamper State court lawsuits when a debtor offers no dispute so long as the account is adequately identified in a complaint. In Michigan, efforts to "make it more likely that consumers would defend themselves" have fell very flat for the reasons mentioned above. As it has always been, the protections are in place and are used by those debtors that wish to avail themselves of them. Judges are there to listen. However, most debtors (bless them) understand they simply owe the debt.

Thank you for joining us at RegulationRoom, WLF. What do you think about BillBartmann's comment ? Both of you seem to agree that consumers generally know that they owe the debt, but BillBartmann suggests that litigation should be discouraged since most consumers are willing to settle their accounts. What can CFPB do to address the problems you raised, and make it easier for debt collectors and consumers to settle accounts before litigation?

I appreciate Mr. Bartmann's comments but they appear to be grounded in a collection agency perspective (there is always business and market share tension between collection agencies and law firms). The reality is that (and this was voiced by other participants) many (not all but many) debtors simply won't/can't pay until they have to. To get to the Moderator's question as to what the CFPB can do to make it easier for debt collectors and consumers to settle accounts before litigation, I make these comments: The FDCPA and TCPA have truly made communications with debtor both difficult and hazardous for the collector. For instance, the fact that you can't safely leave a voice message for a debtor should be very troubling. At what point are privacy concerns (real and imagined) driven roughshod over basic communications with people in the 21st century? Over the years, our firm has stopped initial outbound calling (responding only to inbound calls) and also limited our pre-suit letters to just two. We send the required disclosure letter and (there being no response and the account reviewed for suit) then send a discounted payment offer that says we are going to file suit but would rather settle. We offer reasonable terms to the debtors to avoid a costly suit but the response rate is absolutely miserable, probably in the single digits percentage wise. Believe me, suits are time consuming and expensive, but they are often simply the only option. Even when the debtors are served, few contact us, and even fewer when the court sends them the judgment. Worse, a judgment doesn't guarantee payment on the account. So, what can be done? Clarification via Regulations as to what we can say and do in communications would at least promote more communication between the parties. With that, perhaps more points of contact could resolve debts before suit. I strongly disagree that litigation should be "discouraged" as it is not only a simple reality in much of debt collection but a fundamental right of a creditor. However, I think Regulations making it clear what can and cannot be done in communications that can shield the industry from the wild west of FDCPA and TCPA lawsuits would greatly encourage more communication. I also think a reasonable, good faith attempt to resolve the case (offering a payment plan and/or lump sum) before suit is filed is still a good idea as well even though our own response rate has not been great. Anything more will infringe on a creditor's rights and interfere with state law. Perhaps the CFPB Portal could have a debt resolution aspect to it where a debtor could try to resolve an account in a "safer" more disarming manner. Thank you for allowing me to make these comments.

A contractor who did work unlicensed was able to file bogus claims against both me and my wife amounting to double the original bid price. there was no court action. I managed to get rid of the debt collector but there seems nothing I could do to stop another contractor doing the same thing. There should be a penalty for the people filing the false debt. The amount in question was almost $10,000

Thanks for your comment, mrken30, and welcome to RegulationRoom. CFPB is interested in learning more about consumers’ experiences. Could you share more details about your story? If the contractor had to give more or different kinds of information to the collector, do you think that would that have helped prevent this from happening? You may be interested in CFPB's questions and ideas about what information creditors and collectors should keep track of in subtopic four of the section on making sure debt collectors and buyers have information about the debt.

The contractor was just able to make up an invoice and send it to the collection agency. At the time legal action was being pursued against the contractor and we then had to deal with collection agencies aswell as a unlicensed contractor. So in answer to your question , I dont think it would have made much difference as it appears that an invoice is sufficient grounds to file a claim

While not specifically addressed in this website, the current punishment for violations of the FDCPA are practically teethless. $100 is of little consequence to most companies. The law show be changed to all ow a 7 year statute of limitations (it is currently one year) and a maximum penalty, payable to the plaintiff, of either $10,000 or $100,000 for each violation.

That should be $1000 not $100. Sorry I missed that!

I have one debt in the court. Here is my issue, I never received any paperwork saying there was a court date. I did receive a letter from my bank a month after the court hearing saying they received a garnishment notice. They could've saved the court costs since I already had told them I was unemployed. Secondly, after I received the bank letter, I then received three (that's right three) garnishment hearing notices from three different companies for the same debt. Since I was unemployed I could not afford to get an attorney. It would've been nice if I could have provided the court (telephonically or by pre-trial documents) with documentation to explain why I was unable to pay the debt, but the paperwork said to only respond if you did not owe the debt. I believe court documents and debt companies should have easier and clearer paperwork for the lay person to understand their rights. And yes, debt collectors should have to provide documentation that the debt is owed and they have the right to collect.

In order to get a default judgment through a State Court, a collector's pleadings have to spell out the theory of their case (usually contract) with sufficient specificity that a reasonable person can understand the basis for the claim. Without some form of affidavit from the actual creditor, very few courts will award a default judgment. Also, most state court approved forms are already written for the "least sophisticated debtor."

I don't see any reason to impose a more stringent standard on collection lawsuits than are imposed on any other lawsuit.

Let's remember that most debtors have had the original creditor from 2 to 4 collection agencies and the creditors attorneys office before a suit is ever filed. That process usually takes as much a 2 years or more. So it is difficult to think that the courts should make special accommodations for these individuals. Every person called into court has had many opportunities to have the debt validated or payment arrangements made prior to a default judgment. I do believe basic evidence should be supplied. This would be a statement or bill copy with a matching name of the consumer and proof of address at the time the debt was incurred. This proof of address could be provided by other confirming data available through skip tracing companies. There were significant problems with how debt buyers were allowed to file suit and receive default judgments with virtually no evidence. So improvements and consistency is needed in evidence but it should also not be expected to show every single bill copy.

If this is an area that the CFPB is interested in regulating, I believe it will be necessary to initiate cooperative actions with local State judiciaries. Because the CFPB is a federal agency, it doesn't have authority to tell State governments (including the judicial branch) how to operate or how to interpret its own law. Since some states are already taking steps in this direction ( like New York), it is likely that the CFPB would find positive reception toward this effort. But trying to accomplish change through federal rulemaking is not an option in this particular area.

What about when it's the other way around? The agency I work for is small and follows FDCPA to the letter of the law. And yet we are still sued constantly by attorneys representing debtors. These attorneys count on the fact that it's less costly to settle than to go to court to prove that we have not violated the law. Our retail division is in trouble because we've recently lost our two largest clients -- for this reason. They're now getting slapped with bogus lawsuits as well. People don't even have to pay their bills any more; they just send a "cease and desist" letter, hire an attorney, and wait for a settlement to roll in. All this will lead to are more stringent rules around extending credit, which is not a good thing for the economy. If we keep going down this slope, the only people who will be able to get credit will be those who don't need it.

Welcome to RegulationRoom NancyH and thanks for your comment. How do you think CFPB can help address this problem?

The agency also values information on good debt collection practices. Do you have suggestions on ways to promote these practices and provide a safe harbor for responsible debt collectors, while protecting consumers from bad practices?

How are other frivolous lawsuits regulated? There's nothing in place for any of them, unless (often several years down the road) a judge decides to throw them out. This is yet another consequence of the litigious society in which we currently live. I don't have the answers, but it seems that someone in government or law should be able to do something about unscrupulous attorneys who create a claim out of thin air just to make a buck.

I also wanted to add that because debt collectors know they can hire robo service companies to false service, they aren't going to negotiate in good faith. Just as appalling for me was the judge agreeing that the one service I challenged was a false service, but allowing the case to go forward anyways. Sure, people can lie and say they were not served when they were served, but the very day I was in court contesting the service, a person who spoke before me made the comment that they found their service document on their door step when they got home. This means the servicers are lying in court documents, and nobody seems to care. So does rule of law only apply to the consumer? I still want redress on these two cases, and I want to be able to file an errors and omissions claim with both debt collectors insurance company for lying on court documents. And if it is not a law, then isn't it time that debt collection companies carry errors and omissions insurance?

Many if not all banks have been involved and lost class action lawsuits for improperly imposing interest rate changes and fees as well as conducting deceptive and abusive practices especially 1999 through 2008....

I have no legal background but what I don't understand is why there is no simple avenue for consumers to prove improperly imposed fees dating back to early 2000's and to establish the true amount owed if money is still owed. In addition there is no recourse for consumers if ironically the bank after imposing these abusive practices owes the consumer a refund of over-payments? Law or no law it is simply the right thing to do.

Why are banks, debt collection agencies and JDB's not forced to recalculate the amount owed after removing the improper and illegal practices? I don't understand why nobody is stopping this horrid abuse. In Michigan alone today, one JDB is getting over 3000 judgments even after a collection license has been revoked. I hope I am wrong but all I see is another unfair mafia-type racket allowed to continue in the good old USA. I wish I knew 10 years ago it would have been this easy to "get rich quick" if I went to law school. There is no hard work involved for these JDB's to buy debt and then file thousands of lawsuits thereby getting rich quickly. What kind of message is our country trying to send? At the minimum this country should force them to recalculate what is actually owed based on some rate derived by reviewing the many lawsuits the banks have lost already on the abusive practices. Law or no law it is just the logical thing to do.

I have spreadsheet that can recalculate daily interest to show how much I should owe after the improper and illegal practices. But because I have no legal background, live in a rural area and don't have an extra $5000 to retain an attorney how am I as a defendant to prove what is truly owed against these "mafia-like" attorney collection agencies? Do judges really have the time to go through 20 years of spreadsheets and recalculations even if the defendant can make them available? Does our country want judges to spend countless hours reviewing statements so the JDB's with little work can get rich quickly and then spend their free time in Aspen at their 20 million dollar chalet?

If you can afford an attorney good luck finding one that will dig deep into the statements to see how much a person should really owe. Most attorneys only want to defend based on "account stated" if you can even find an attorney in a rural area. Many folks like myself have not only paid off all transactions but have over-paid above reasonable interest rate yet I find myself with horrible a credit report and now trying to get law degree in one week to defend against these JDB's trying to squeeze more money out of me. Money they clearly don't deserve. In my case it is a travesty of justice if I end up having to pay more above what I have already paid to the bank.

All I want is my good name back and I deserve it. I never received free money and have paid back every penny to these banks and more.

We need laws to prevent these abusive practices. If a person owes money after the recalculations then force the original bank even after a 6 month "charge-off" (where did the 6 months come from?) to work out a payment plan. Why are these unprofessional JDB's and collection agencies in the middle? It simply is not logical even if it is the law. Change the law.

Thanks for listening...
"A Mad and Frustrated American in Michigan"

Welcome to RegulationRoom, CCC, I am sorry to hear about your difficult experiences. If you would like to report the issues you've had, you can submit a complaint on CFPB's website. CFPB is very interested in hearing about individual experiences, such as yours, including whether new federal rules are needed for the application of payments while a debt is being disputed (see Payment methods, post-dated checks, and how payments are applied in the Unlawful collection practices discussion and what information would have to be provided about the amount owed in the Validation notice sent to consumers discussion.

I live in Florida where proof of the debt is getting difficult for debt buyers to prove without them falsifying documents. I currently have a case where the Debt bill of sale was whited out in three places, sadly these documents were filed by an attorney at law registered with the Florida Bar Association. Debt buyers have no scruples

Welcome to RegulationRoom, Corrections130 and thank you for your comments. Can you share with us why it is becoming more difficult in the state of Florida for debt buyers to provide proof? Also, CFPB is interested in what types of deceptive claims are being made. You mentioned the whited out debt bill of sale, do you think this is a common deceptive practice?

I am currently going through a miserable experience with a creditor and debt collector. In 2004 I completed my college education and consolidated all of my student loans through Nelnet. In 2005 (or so) I started to get calls from debt collectors stating that I was delinquent on my loan repayment. I explained the situation, that I had made all of my timely payments through Nelnet and, before I would pay anything else, I would need to see some proof of the debt. I never received any proof of the debt and this conversation reoccurred several times for the next five years.

In 2011 I wanted to buy my (wife’s) dream home. It was a significant purchase and the bankers I talked with indicated I needed to clear up the student loan issue to be approved. I reached out to the original creditor and the debt collector and begged for some proof of the loan. They then provided me with a loan application (nothing to indicate that the application was approved or that any funds were ever dispersed to me). While I was not comfortable with the proof, I knew that fighting it out in court would take longer than I was willing to take. So, I was very purposeful in my conversations with the original creditor and the debt collector to make sure that the issue would be cleared on my credit report if I paid the full value of the (alleged) loan. I also recorded the conversations I had with the original creditor and the debt collector.

I paid the original loan amount and (if you didn’t see this coming) the original creditor refused to update my credit report. And, even after providing the credit reporting agencies with proof that the debt was paid, they also refused to update my credit report.

I was originally applying for a “jumbo” loan for my home purchase and I was told that I did not qualify (based on the student loan entry on my credit report). So, I was forced to cash in my life savings in order to come up with a huge down payment. I bought the home in June of 2012 and the stock options/restricted stock that I was force to sell would be worth twice what I realized on the sale.

The impact is that I missed out on the home I really wanted (it was in foreclosure and sold for pennies on the dollar); it would be worth at least $100k more today than the sales price. And, I was forced to take a huge loss on my stock options/restricted stock due to the inaccurate reporting. In my opinion, my actual damages are around $200k.

Things like this should not happen to anyone. I do not come from money (the family farm went under two years after I left for college). I busted my butt to get ahead, always working 2-3 jobs to get through college and I acquired significant student loan debt. But, after working that hard for so many years (four years of undergrad and seven years of post-secondary (part time)), it is inexcusable that anyone should have to go through this kind of abuse.

Based on my experiences, here are a few changes that need to be made to bring some sort of balance to the power inequity between creditors/debt collectors and debtors:

1. We need greater accountability for creditors and debt collectors. At a minimum, creditors and debt collectors need to be accountable for all actual damages and attorney’s fees. Better yet, creditors and debt collectors should be accountable for punitive damages (or some hefty, minimum penalty as well).
2. When an account is in dispute, there should be some minimally invasive/expensive process that a debtor can use to try and remedy the situation. There should be an easy to use form that a debtor could use to dispute a debt. Once filed correctly, it should be against the law for any creditor/debt collector to attempt to collect on the debt.
3. When an account is in dispute, the creditor should not be allowed to pass it off to debt collector after debt collector for year-after-year harassment.
4. The credit reporting agencies should also be liable for incorrect information reported on a credit report.
5. There should be a national registry of attorneys that are competent to handle credit dispute issues. I’m not sure of the evaluation criteria or who would perform the evaluation, but there should be a way to guide a debtor involved in one of these disputes.

Anything you can do to help would be appreciated. I continue to be turned down for load applications due to this inaccurate reporting.

Thanks,

Jason

Welcome to RegulationRoom Jason, and thank you for sharing your story. I’m sorry to hear about the difficult experiences you had. If you haven’t done so already, you may want to file a complaint with CFPB.
Because you mentioned trying to get proof of the debt, you may be interested in CFPB’s questions and ideas about how to deal with disputed debts on the topic page When consumers dispute a debt. Do you think the suggestions there would have been helpful in your situation?

After a court verdict in favor of a debt collector, Banks assess a significant fee against a customer when a customer's account is levied by the debt collector , even if there are scant funds in the account on the day the levy is imposed. Explain how assessing a 125 dollar bank levy fee when an account has 50 dollars in it helps resolve the ongoing debt resolution. The Debt collector gets nothing and the customer is hit with a 125 dollar bank levy fee. Is it ethical to levy every last dollar when none of it goes to the debt? Why isn't there a 100 dollar float that is impervious to a bank levy fee and protected from the debt collector's clutches as well? Is it wise to force people to lose their bank accounts based on a credit card default that may have had extenuating reasons beyond the debtor's control? Once again, we get back to the same underpinning, Judges who simply decide on whether a default has occurred without caring why the default occurred are basically rubber stamping minions of a system corrupted by a lack of fairness. People can lose income based on circumstances beyond their control, yet the system doesn't even blanche an eye. A debtor who purposely runs up debt quickly and defaults is treated identically to someone who
had a perfect payment history but had to stop working to become a CareGiver for a family member. A debtor who purposely runs up debt quickly and hires a lawyer can strategically default and possibly get a better resolution than an honest person with an impeccable payment history who has lost income because of an event beyond their control. What kind of educated monsters are you for leaving the playing field so uneven, for so long?

There are a few states that have the barbaric practice of actually arresting people for their debts by using a legal loophole. Some of the most egregious examples are in Minnesota, Illinois, and Missouri. The creditor sues the debtor in court. If the person fails to show, a warrant can be issued for their arrest. The police can actually arrest and jail the debtor until a court hearing, or until they pay the bond (which is usually the amount of the debt). This is a downright abuse of the legal system. These loopholes need to be closed in all states.

3|State exemptions and bad-debt diversion programs - 21

Agency Proposal

The Fair Debt Collection Practices Act allows states to get an exemption from the FDCPA for a class of debt collection practices within the state if CFPB decides that these practices are covered by state law "requirements substantially similar" to those of the FDCPA (FDCPA § 817). CFPB has published a rule (12 CFR 1006.1 to 1006.8) for how states can apply for such an exemption.

Are there any changes that should be made to this rule?

The FDCPA also allows exemption of certain bad check enforcement programs operated by private companies under contracts with a State or district attorney (15 USC 1692p). Some consumer groups are concerned that these entities are not living up to their responsibilities under federal law, which include having an "administrative support contract" with, and direct supervision and control by, the state or district attorney.

  • how many bad check pretrial diversion programs are there?
  • are the contracts of these programs available publicly?
  • what kind of administrative support services are usually provided?
  • what do state and district attorneys typically do to be sure they are supervising and controlling these programs?

Should there be federal rules about what kinds of provisions must be in contracts for administrative support services? Should they spell out what state or district attorneys have to do to supervise and control the companies operating the programs?

Another federal requirement is that consumers agree to participate voluntarily to avoid prosecution and that they get a "clear and conspicuous" statement of their rights in the initial communication with the program. How are these programs doing this now? Should there be a federal rule about what a clear and conspicuous statement must be?

Are there any other problems with these programs that harm consumers? How frequent are they? How could a new federal rule solve them?

Read what CFPB said in the ANPRM about State and Local Debt Collection Systems.

Comments21

Commenting is now closed.

In many districts where bad check diversion programs exist, there is anecdotal evidence that the companies administering the programs threaten with prosecution individuals who do not come within the state's bad check law - for example, checks that bounce due to printing errors, checks for which there were funds available when written but not when presented, and individuals who pay the amount due by other means within grace periods permitted by state law. The CFPB should ensure that bad check diversion programs have a realistic means of ensuring that only individuals realistically subject to prosecution are targeted, and should also require that, in order to qualify for the 1692p safe harbor, diversion programs prohibit misleading communications and misstatements of state bad check law.

No federal rules. Allow States continued enforcement of their state laws.

I disagree. Judges at the local level have become too biased in favor of the debt collectors who appear in their courtrooms. Judges live the very definition of insanity in terms of saying and doing the same thing over and over and over, and expecting the same result. That is not what a courtroom should be about. Judges should be allowed to consider the following evidence in a default case...Did the debtor have an excellent payment history, or not and for how long. Has the debtor paid in interest rate charges an amount that was actually more than the amount still owed. If either or both of these scenarios were true, the judge should have latitude to allow the debt to be paid back with no more interest rate charges, penalties or fees tacked on from the time of the default. A judge should also be able to use the FACT that credit card debt suspension insurance is OVER PRICED by a factor of 1000% to 2000% which is possibly the number one reason there has been an amplified amount of credit card defaults, as a reason to deny ongoing interest rate charges, penalties and fees after the default has occurred.Please sign the Debt Neutrality Petition if you agree with the above comment.

That might work if each state had reasonable, intelligent and realistic collection rules. But just the fact that the cost of getting a report varies wildly shows such disparities from state to state. My opinion is that there desperately needs to be some uniformity. This would help people to know what is expected of them, and what to expect.

Who do you work for?

I can't comment on any of this, but it would seem appropriate for Federal law to establish a framework of requirements for states to meet. This would level the playing field for debtors and creditors in all states. and would provide an equal basis for states to proceed with adding or amending their own laws affecting debt collection lawsuits.

Excellent.

Maybe a definition of "bad check". If a consumer sends a post dated check(s) and it bounces then it may not fall under the bad check enforcement. Also, consumers use ACH capability to repay a debt, so if the amount is not available, then this may also not fall under bad check enforcement. My experience is more consumers use ACH rather than personal check distribution. there are numerous reasons why checks bounce so I suggest a look see as to determining the reason or cause why the check bounced.

State rules should apply.

There needs to be some federal protections for the consumer and a clear appeals process. The state run by private company programs seem to see the alleged debtor as already guilty. For example, some consumer groups have suggested that entities may not be including a “clear and conspicuous statement” that the consumer may dispute the validity of the alleged bad check violation.

What kind of financial incentives are there for these companies to meet certain benchmarks that may not be in the consumer's best interest?

It kind of sounds like those arbitration programs for credit card debt where everything was stacked in the favor of the creditor.

Thanks for your input CG. What kind of wording do you think would help consumers understand their rights in situations like bad check violations? Also, you mention reports by consumer groups. Could you give us a link to those reports so that other users can see and comment on it? You might also be interested in visiting the validation notice subsection

CG I endorse and want to add again at the risk of sounding like a broken record, it is the wild fluctuation in rules across the country. This is not a "state's rights" issue as someone wants to make it, but a way to bring some fairness and intelligence to this process.

I contacted the debt collection company and tried to make arrangements for payment of debt, the reason I could not pay my bills is my husband was laid off work and he had started a new job. I wanted to make payments of $100. a month, debt collectors said NO, so I said the most I could afford was $200 a month the said NO they wanted $1,000. a month. Now we have 4 children, a mortgage and utility payment, debt collection said $500 a month my husband brought home after taxes $1,100 twice a month. My mortgage is $1,300 per month not including utilizes so I told debt company that I couldn't pay. I always thought something was better than nothing and that a debt company would try to work with you. I learned that they won't work with you.

Hi Bootsy, I'm sorry to hear about the difficulties you've had. While Regulation Room itself is not a help website, you may be able to get help from CFPB's complaint center.

Not every debt collection agency is like that. The one I work for certainly isn't.

What Nancy H said exemplifies the problem: no standards across the board. Best of luck to you. What happens to you in this situation depends on the collection agency, the creditor (in the first place) and where you live. Where you live should not be a factor.

The FDCPA should be above ALL state and local law. Period.

Either State or Federal law should provide some penalty for passing an NSF or "closed account" check that includes a presumption of guilt. The check either bounced or it did not. There's not a lot of grey area here. That said, either State or Federal law should also allow the drafter of the check a "safe harbor" wherein they can pay the face value of the check and some nominal compensation for the hardship suffered by the recipient of that check in order to avoid this penalty. Michigan has such a procedure and it seems relatively equitable.

Thanks for your comment, Tfleeman. Do you know if any other states have a "safe harbor" system like Michigan does? And how does Michigan's program work? Is it operated by private companies under contracts with the State or district attorney?

The Michigan program for handling NSF checks is outlined in Michigan statute (MCL 600.2952). The statute provides the exact language to be used in the demand notice to the debtor but does not include the FDCPA Miranda language- which we add to the notice. We also send a copy of the dishonored check with the notice. The statute allows the debtor to pay the value of the check plus $25 is paid within 30 days of the notice, or $35 if paid thereafter. IF the creditor brings suit (after the first 30 days) they can sue for the value of the check, PLUS damages of 2 times the amount of the dishonored check PLUS $250 in costs. This may even be used in small claims court. It seems that the idea is to penalize those who pass bad checks such that merchants will be willing to accept checks from customers.

Oh My. There is just not enough space to comment on these debt diversion programs etc. I've read about good outcomes. I've read about horrifying outcomes in which little was done but fleece the consumer who in all goodwill thought they could work out debt repayment without going into bankruptcy court.
With this, I say 1) clear out the scammers 2) require some uniformity in the rules. If these agencies are honest who could object to a standard set of rules and regulations that make the process transparent (no, not violation privacy) and make it understandable to all. Good luck on this one. You could make a whole other topic just on the debt agencies.

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