Many consumers don’t realize that the money they owe a merchant or some other creditor is an asset that might be sold to another company. And this company might then sell their debt to yet a third company, either by itself or as part of a large package of debts. Now, no one involved in the sale has to tell consumers when their debts are sold or resold. So, a consumer who has fallen behind in payments could be contacted by a debt collector working for a debt owner the consumer has never heard of. The consumer might be confused about where the debt is from and who he/she must pay.
CFPB wonders if there should be a new rule that consumers must be told when their debts are sold. (If the debt is a home mortgage, federal law already requires this. The notice must tell the consumer when to start sending payments to the new company and how to contact someone there.)
- Current practice: Do sellers or buyers of debts typically tell consumers when their debt is sold? If so, what information do consumers get and how do they get it?
- Benefits: How would getting notice help consumers? (Be as specific as possible).
- Costs: What expense or problems would debt sellers or buyers have with giving notice? Would these be different for different kinds of debt (credit card, automobile, medical, etc.) or different kinds of debt buyers or sellers? (Be as specific as possible).
- New rule: What information should be in such a notice? Should the notice have to be sent by the seller, or the buyer of the debt?
Comments65
Commenting is now closed.
josephusmyer
November 6, 2013 - 10:10am
Assignments without notice could lead to consumers paying the wrong person. The CFPB should encourage proper notice by ruling that a payment made to either of the assignee or the assignor reduces the debt.
RBell
November 6, 2013 - 11:59am
Maybe I missed something but I never received any notice from my original mortgage lender that my mortgage was sold. Maybe that is better since the new "owner" may be a pool of investors.
As to notification my experience was the buyer sent the notice listing the original creditor name. Requiring the seller and buyer to send a notice would cause consumer confusion.
Moderator
November 6, 2013 - 12:32pm
Thanks for sharing your experience, RBell, and welcome. What do you think of josephusmyer's comment above? Could a lack of notice lead to consumers paying the wrong person?
RBell
November 6, 2013 - 12:43pm
If the present mortgage repayment debacle is any indication of noticing or added noticing I think it is much simpler to notify the consumer whom to pay and list the original creditor name. Also, I think it would be a good idea for CFPB and the industry to combine this with FCRA issues. For example, if a consumer today reviews their credit reports the normal term is "sold to another lender" but no name. I have heard similar stories from attorneys who try to match what a consumer lists as a creditor versus what is listed in a credit report. Seems to me that everyone is trying to close the back door but leaving the front door open.
rb
November 6, 2013 - 12:11pm
Yes, but also that upon transfer, any failure to previously verify debt per consumer request goes with the debt sold.
Moderator
November 6, 2013 - 1:16pm
Welcome to RegulationRoom, rb. You can tell us more about what types of information should be transferred between sellers and buyers of debt here.
alf1052
November 6, 2013 - 5:29pm
find the most egregious and cavalier user of collection agencies is the "medical professional". To wit: I received a collection agency call for a small amount due on a pathology test taken at Cedars Sinai Hospital in Los Angeles. We had moved and all notices were sent back to Cedars. No one else and there were dozens, had this problem. The amount due was the amount Medicare did not pay. I have a supplement with a large deductible. To my knowledge it was never billed. Anyway, I was forced to deal with this obnoxious credit agency which threatened to ruin my credit which is almost an 800 FICO score. Calls to the collection agency and Cedars solved the problem but not without creating anxiety and aggravation for me. A person from the collection agency working at Cedars apologized. It took 3 or 4 letters to get the Administrator, Mr. Prisilac, to respond. His response implies that Cedars had no responsibility in this matter. For him it was all the collection agencies problem. That is not true. Cedars hires these people and like all professionals in my experience has no further responsibility. The entire responsibility, in my view, lies with Cedars etc. There is little downside for them. Their lack of interest in their patients and complete interest in collecting dollars whether due them or not is mind boggling. Unless we deal with the base of the problem, the doctors and hospitals, who are too dignified to deal with money, but will take 50% from a distance even if it is not due, this problem will persist and the public will continue to be subjected to the riffraff that is most collection agencies. These people are worse than indifferent. They attack and steal from the most vulnerable of people; the sick and poor.
Moderator
November 20, 2013 - 10:48am
Welcome to RegulationRoom, alf1052, and thank you for your comment. It sounds like you had a bad experience with Cedars Sinai. Depending on what the collector said to you about ruining your credit score, it may be the kind of statement CFPB is trying to regulate. Please see the topic page, Unlawful collection practices, Substantiating claims about the debt and the effects of payment on credit, to learn more and comment.
gmt512
February 28, 2014 - 7:38pm
Response to Alf -- and I wish I knew how to link these -- I agree the medical profession has the worse abuses because they have the money to hire a full time agency. Yes they make mistakes. I just wrote up how one eye doc got me confused with another person with the same name.
The crux of this, I think, is make them be responsible. They do always want to blame someone else. It's the credit reporting agency. Not it's the doctor's office. It's this or that. That roulette wheel needs to stop, and if not, create sanctions that hit them in the pocket book. And the onus should NOT be on the consumer. How to do that is a matter of drafting up details, but it can be done. When you start to hold people responsible for their actions, then they suddenly stop making mistakes.
dkossenko
November 6, 2013 - 5:45pm
I recently helped out a friend whose Los Angeles business certificate/tax debt was turned over to Alliance One only after 4 years (!) of delinquency, and with no correspondence or notices whatsoever being sent to him prior or during the collection. He found out about its existence when he pulled his Trans Union credit report. Turns out, the city of Los Angeles had a wrong address for him, and never once during the 4 years bothered to check with DMV or otherwise what the correct address was; they just sent it to a collection agency after 4 years. I think creditors and government entities alike should be required to first verify the correct current address of the debtor and send the debtor a letter, certified mail return receipt requested, before they go ahead and just turn it over to collectors. Please help draft legislation to that effect!!!
Moderator
November 17, 2013 - 5:29pm
Welcome to RegulationRoom, dkossenk, and thank you for sharing your friend’s experience and your suggestions for verifying the debt. At this stage, CFPB is looking for information on problems consumers and responsible debt collectors are having. As CFPB moves to the next stage (coming up with specific proposals for new rules), it will be carefully considering what commenters, like you, say here. Please see When consumers dispute a debt to talk more about how collectors should investigate and verify a debt.
RHN91362
November 24, 2013 - 1:27pm
From a collection standpoint, I can tell you that many creditors would LOVE to check with the DMV to get current address information. Unfortunately, many privacy laws make that impossible. It's also extremely common for people to fail to update their addresses either with their creditors or with the post office. Any legitimate collector wants to find the right person.
jfearon
November 6, 2013 - 5:58pm
The problem is that this often leads to duplicate reports on credit files and each time the debt is sold the date is updated so it looks like a new collection is on the credit report and this impacts the FICO.
ATT has me owing a fee for terminating my cellular contract early (due to problems with their poor service). This $300 fee has been sold so many times (I have never been notified) but it appears several times on my credit report and has been made to look like a recent debt when it is from 2008.
Moderator
November 6, 2013 - 10:52pm
Hi jfearon, thank you for joining the discussion. Would it have been helpful for you if you were notified each time the $300 debt you mentioned was sold? Was there information you didn’t get that would have helped you deal with the problem?
jfearon
November 6, 2013 - 11:27pm
Yes, it would be helpful to be informed instead of later seeing the multiple collections on my credit report.
Carowis
November 6, 2013 - 8:19pm
Off topic comment: Would like to see regulators approve email as a method of delivery for notifications. Most people keep their email even when they change physical addresses. Harder on the post office but probably much more effective, with no-cost proof of attempted contact.
Moderator
November 6, 2013 - 11:41pm
Thank you for your suggestion, Carowis. CFPB is actually asking a number of questions about whether collectors should contact consumers through email and what the privacy concerns could be. You can read more about CFPB’s ideas and comment on them here.
bonzarel
November 6, 2013 - 10:35pm
Consumers should be made aware of sale or transfer of their debts. From whom to whom along with effective dates and contact info for the creditor and the new owner of the debt.
bonzarel
November 6, 2013 - 10:36pm
Notifying consumers of the sale of their debts and related details would help consumers with identifying who is contacting them about a debt; there are robo calls about lowering your credit card interest rate and such that are solicitations. Consumers have a right to know who they are dealing with in relation to their financial affairs.
Gevian
November 6, 2013 - 10:43pm
A notice should go out that the debt has been sold because it definitely informs the consumer in how they should go about negotiating repayment of the debt.
When the debt is sold, it is sold for significantly less than what is owed, and the lender gets to write it off, and the borrower takes a 7-year negative hit in their credit profile.
Sometimes when you are dealing with debt collectors, the "debt collector" is often a wholly-owned subsidiary of the "original" lender, which means they get a tax write-off; you get a hit in your credit; and they still try to collect on the entire amount.
If a debt is sold, then it should actually be sold to a third-party, and not a subsidiary of the original lender. And consumers should get full disclosure on who their debt has been "sold" to.
OneFrustratedConsumer
November 6, 2013 - 11:01pm
Just like mortgage servicers are required to send "goodbye letters" (a notification of when loan has been sold) and "hello letters" (a notification of when another company is buying a debt), so also should debt collectors. Also, they should be required to disclose the amount for which they bought the debt... the discounted price. Also, there needs to be full disclosure as to who is buying the debt along with the disclosure of the owners of the debt collection company and the street address of the company so face-to-face meetings can be arranged. Full transparency and full disclosure should be required related to any company trying to collect debt.
jweb1510
November 7, 2013 - 8:48am
When mortgage holders transfer servicing of a mortgage loan to another creditor, they have rules in place as to informing the consumer that their loan has been sold. Apply the same standards to any debt. Period.
Moderator
November 7, 2013 - 10:06pm
Hi, jweb1510. Can you tell us which mortgage standards or rules would be most helpful to consumers? Should the kinds of information in the notices vary based on the kind of debt (medical, credit cards, etc.)?
Johnston
November 7, 2013 - 10:29am
Very confusing if I can pay my student loans directly to DOE or to one of the many private companies who have owned my loan over the years. They continue to try to entice me to restructure the student loan debt - very misleading - without disclosure of their fees - at this point I cannot even trace a $30000 fee that was double billed to my total. It is a web of confusion that I cannot escape. I intend to take my student loans to my death as I have no other way of making the monthly payments.
Moderator
November 19, 2013 - 1:56pm
Welcome to RegulationRoom and thank you for your comment, Johnston. CFPB provides help for consumers with student loans on their website, including a Repay Student Debt tool. Could you tell us more about your experience? Was your student debt sold to another company or did your restructure with your current creditor?
anthonysd
November 7, 2013 - 12:56pm
I was never informed by Bank of America that they sold my credit card and closed the card. When I realized it, I paid it off immediately. During that quarter, after long illnesses, my Father and Mother both passed (within 31 days of each other) and frankly, credit card payments were not in the forefront of my thinking. ALSO, just because a bank or credit card company has been exempted from Usury laws does not mean they do not commit the violation! THAT needs to be stopped!
Moderator
November 19, 2013 - 2:39pm
Welcome to RegulationRoom, anthonysd. Under the Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act), CFPB can review the consumer protections in the credit card market. You can learn more on their website Know before you owe: credit cards, which also allows you to file a credit card complaint. For our discussion, CFPB is looking for information on problems consumers and responsible debt collectors are having. Did Bank of America sell your credit card to a debt collector? If so, please take a look at the topic page, The “validation notice” sent to consumers, and let us know what information you would want to have received when your card was sold.
RHN91362
November 24, 2013 - 1:13pm
Quote: "just because a bank or credit card company has been exempted from Usury laws does not mean they do not commit the violation!" Actually, that's exactly what it means. You can't violate a law that doesn't apply to you. If you don't like the interest rates that credit card companies charge, don't use them.
hjsthomas
November 7, 2013 - 1:17pm
If a consumer is notified that their debt has been sold, there should be a way to contact the original creditor to verify. (i.e. there should be a paper trail)
I see an opportunity for scam artists to claim that (as they are now) the consumer owes money to them and to pay off their debt immediately to the scam artist.
With a clear paper/electronic trail, the path a debt takes from creditor to collector to collector can be verified and authenticated for the consumer's peace of mind, and so the right party gets paid.
Sertas
November 7, 2013 - 1:26pm
The CFPB should require debt sellers to contact the debtor and inform them the debt has been sold. Additionally, ALL pertinent information must be given to the debtor to eliminate any confusion. Furthermore, the seller of the debt must be required and enforced to annotate the debtors credit report with the sale to help eliminate confusion and in a way to not increase the bad debt. Essentially, debts that are sold sometimes appear as two seperate debts on a consumers report which increases the penalty of having bad debt. A consumer should not be penalized twice for 1 debt.
Sertas
November 7, 2013 - 1:27pm
The CFPB should require debt sellers to contact the debtor and inform them the debt has been sold. Additionally, ALL pertinent information must be given to the debtor to eliminate any confusion. Furthermore, the seller of the debt must be required and enforced to annotate the debtors credit report with the sale to help eliminate confusion and in a way to not increase the bad debt. Essentially, debts that are sold sometimes appear as two seperate debts on a consumers report which increases the penalty of having bad debt. A consumer should not be penalized twice for 1 debt.
Moderator
November 7, 2013 - 5:32pm
Hi Sertas, thanks for commenting. CFPB wants to make sure consumers have the information they need without being overwhelmed. You mentioned consumers should have all pertinent information, but what information exactly do consumers need most? For example, would using the original creditor's name be enough to avoid customer confusion, and would this be enough to make it clear on a credit report that only one debt is involved?
RHN91362
November 24, 2013 - 1:30pm
The FICO impact on sold debts appearing twice needs to be addressed with the credit reporting agencies and the companies that create credit scores. Creditors have a right to report the status of a debt, and shouldn't be precluded just because it already appears by the previous creditor. However, the double penalty against the consumer is certainly unfair. But it's not the collectors' fault. It should be addressed in enforcement of the FCRA.
brendandavis
November 7, 2013 - 5:18pm
All creditors should be required to in writing inform the debtor who the debt has been sold to, what the debt collectors contact information is, and what number they can expect to receive calls from regarding the debt.
erisgrrrl
November 8, 2013 - 5:00am
I have been in situations where I had no idea what a firm was actually trying to collect on because it had been passed along (presumably sold) so many times. Each time a debt is going to change hands the current debt-holder should be required to give full disclosure in writing and a clearly stated phone call as to where it's going, why and how the change will effect the debt - will there be a change in interest? In due date? In collection fees? In the way payments are applied or minimum payment amounts? This should be done with ample time for the consumer to understand the change and take any actions. There should also be the opportunity to refuse this process if it entails negative financial changes.
Moderator
November 10, 2013 - 11:15am
Hi erisgrrrl, welcome to Regulation Room. Thanks for your suggestion about how debt collectors could let a consumer know information like when their debt is sold. CFPB is concerned about balancing costs and benefits, especially because costs are likely to be passed on to the consumer. To reduce costs, what do you think of putting a phone number in the letter that the debt holder could call for more information? This might be a less costly solution than having the CFPB require both a letter and a phone call.
Bonita Kale
November 10, 2013 - 2:49pm
If a debt is to be sold, the owner of the debt should be required to send an itemized statement to the debtor. The statement should have a large-type header, something like, "[NAME OF CREDITOR] IS SELLING THIS DEBT TO [NAME OF DEBT BUYER]."
This would give the debtor another chance to pay in the simplest way, before getting tangled up in idiot phone calls, and it would help the debtor identify the debt.
Roseybike
November 11, 2013 - 6:08pm
I believe if a debt is being sold the consumer should be offered that debt at the amount the original entity is willing to sell it for.
RHN91362
November 24, 2013 - 1:16pm
The reason they can sell it for a fraction of what is owed is because the debt buyer is purchasing entire portfolios of bad debt. It spreads out the risk. If you can get a million other delinquent consumers to go in with you on a 10% offer, you could probably get them to take it. But it doesn't make financial sense for them to offer the same transaction to you as the debt buyer.
gmt512
November 13, 2013 - 3:44pm
I had the same situation with another cellular carrier. It seems it's a ploy to keep making the debt seem fresh. It was another early termination fee, and I wrote many letters before it was finally removed from my credit report. I think that the tactic of selling the same debt to keep it on a credit report definitely should stop. It is one debt, and there is a time limit for how long it stays on one's credit report. One way to keep track of this is to require people to be notified if a debt is sold. It is required when a mortgage is sold. It seems like a no-brainer. The rules should also be written to discourage -- no, to bar -- collections companies from passing around debt for the purpose of keeping it on credit reports.
gmt512
November 13, 2013 - 4:22pm
I concur with previous comment. If consumers are informed when our mortgages are sold that should be a rule across the board. Sending a letter by mail isn't very expensive, either. It should contain the amount, info on original debt, the name and address of who owns the debt and I'd even add the amount the debt was sold for. Consumers can keep track for one thing, and make sure these debts are not posted twice on our credit reports, it will let people know who to contact about the debt.
gmt512
November 13, 2013 - 4:24pm
I think it should be kept uniform. Why differentiate between credit card or auto loans? It seems to make sense for sellers to send notification.
Csramesh
November 17, 2013 - 8:59am
The buyer or seller should send the notice. You get a notice about collection without authenticity .?
musicman82
November 18, 2013 - 3:56pm
Consumers generally have no notice and do not know that a debt has been sold until checking their credit report or until a collection agency calls to collect a debt.
Being notified of a debt being sold, would at least allow the consumer to verify who is actually the owner of a debt. (I once paid a debt to a collection agency, only to find that I had paid one of 3 collection agencies who claimed to own the debt).
With regards to costs, most consumers and most debt buyers are unable to detail how a 2200.00 debt becomes a 7000.00+ debt. And I found that very few even knew the original creditor's name, yet still attempted to collect this debt.
The new rule should at minimum state the Original Creditor's name, and that Debt Buyer has purchased the right to collect the debt. This would allow the consumer to verify that a debt buyer has the right to collect the debt.
Moderator
November 21, 2013 - 2:57pm
Hi musicman82, welcome to RegulationRoom and thank you for your suggestions. Do you think consumers need any other information, either in the validation notice or a notice that the debt has been sold? CFPB has questions and ideas about what information should be in validation notices, including how fees should be broken down. You can join others talking about this on the topic page The "validation notice" sent to consumers.
Determined1
November 19, 2013 - 7:19pm
Give Consumers Fair Notice and A Chance to Bid on Their Own Debts When Banks Sell Defaulted Obligations to Debt Buyers
When a consumer falls behind on loan or credit card payments, the bank often “sells” the account to a debt buying company for a few pennies on the dollar.
Debt buyers contribute nothing to society. Yet, they are allowed to obtain windfall profits by pursuing impoverished consumers for the full face value of such debts. This is unfair. If a bank is going to sell a consumer’s debt for pennies on the dollar, the bank should be required to notify that consumer, and allow that consumer a fair chance to bid on and purchase his/her own debt, on terms just as favorable as the terms offered to any other debt buyer. I hope the CFPB will consider new rules in this regard.
Please note there is currently a petition on the White House website for this issue at:
https://petitions.whitehouse.gov/petition/give-consumers-fair-notice-and...
It was initiated here: http://www.californiacollectiondefense.com/please-sign-petition-allow-co...
Thank you.
RHN91362
November 24, 2013 - 1:19pm
This option doesn't make economic sense. Debt buyers do serve a practical purpose because they allow the creditor to unload a massive amount of debt at one time. The cost of negotiating individual deals with each of those 1 million delinquent consumers would negate the benefit they get from the consolidated offload. Debt buyers allow the creditors to clear their books, which enables the cycle of lending to continue. The transaction between those two entities doesn't change what is actually owed on the account.
stopwithspoofedcallerID
December 10, 2013 - 4:11pm
This is a fantastic idea. Right now, debt buyers buy debt for an average price of 4 cents on the dollar. Many debts are bought for 2-4 cents on the dollar and many other debts are given away for free. Once the original creditor has made the decision to sell the debt, they should try to contact the debtor one last time to let them have a chance to payoff their debt at a significantly reduced rate. If I were an original creditor, would like to get the most money I could for a debt owed to me. And so if I could get 10 cents on the dollar directly from the debtor, rather than 4 cents on the dollar from a debt buyer, then I would see no reason not to offer a significantly reduced debt settlement rate to the debtor (or as you call it, letting consumers bid on their own debt). Right now, original creditors offer no significant reduced rate to debtor before selling for 4 cents on the dollar. Most creditors barely even offer debtors 10% off the debt as a settlement offer. Sure, a creditor could more quickly offload portfolios to debt buyers by selling them at 4 cents on the dollar. But creditors could also make way more money offering a onetime chance at 10 cents on the dollar (or something really attractive but still more than 4 cents on the dollar). Perhaps the CFPB should make a rule that allows consumers/debtors the chance to receive a onetime offer that is valid for only X amount of days (maybe 45 days) from the date of the letter sent from their creditors of a significantly reduced rate. The offer would only be valid for a short amount of time and would also inform the consumer that, should the consumer not accept the offer, the creditor would then turn it over to a debt buyer. This letter would only be sent if the creditor’s intentions are to sell the debt and not just another attempt to collect. So that this way it gives the consumer one final chance to clear the debt owed and the creditors also have less loss and more profits and would be able to lend to more consumers, give better rates to consumers, and stimulate the economy. Because more money that is changing hands at higher values (10 cents on the dollar vs. 4 cents on the dollar) instead of sitting in the accounts receivable section waiting to be collected (one day, if ever) stimulates the economy. This rule would not negatively impact anything (or anyone) and only positively impacts everyone. One minor impact might be on the debt collection industry possibly receiving less debt in their portfolios that they buy, but this minor impact is offset by the large positive impacts on the economy.
Harry Osell
November 20, 2013 - 1:36pm
not sure where to chime in so here I go..I have had years of experience with debt collectors and a lot to say...when my remarried I started getting calls about a few credit cards my spouse had fallen behind in. the amount was not disputed and after a lot of calls I got retirement funds and paid the debts..oddly which I did not like the collector when asked to send in the mail the details and agreement to the amount we had on the phone agreed on said "we don't do business that way, only by phone" well I did on the phone authorize the release of my bank funds for the amount he and I had agreed on but I had no proof no agreement what the debt was not that it had been paid..fortunately we were never again contacted about that debt . and when contacted about other past due debts from collectors again the phone was the only way they collected money ...a few thousand ..each time..I would like to see changes for the collectors to be required to mail the agreement of collection with the credit card numbers dates and amount
Moderator
November 20, 2013 - 1:58pm
Welcome, Harry Osell, and thanks for sharing. Subtopic 3 of the post on Unlawful Collection Practices talks about payment methods. You can read more about that issue and comment there.
Harry Osell
November 20, 2013 - 1:44pm
a second comment in recent years and I do mean years an ongoing debt collection annoyance has been the calls I get . When I do answer them they are always for someone I do not know that never lived here.. It happens all the time I have answered and said I don't know the person called and been told my number is removed from the call list..but that does not stop the calls either a non answer , or a computer , or being told to hold by a computer, and always always it is a person I have never heard of..figuring out how to stop different debt collectors from calling my number for people that do not live her and I have never heard of would be wonderful
DVD
November 20, 2013 - 3:43pm
I strongly believe when the original lender sells the debt to a JDB and the consumers pays off or settles the debt it should reflect paid or settled in the original lenders internal records.
dnoel71
November 22, 2013 - 1:47pm
As a former bill collector for over 17 years there are alot of ways the industry needs to be cleaned up. I do believe that a debtor should be informed of when a debt is transfered from original creditor to a collector and whether or not that collection agency purchased the debt or if the agency is contracted by the original creditor to collect the debt. There is a big misconception that I see being made in most of these comments that everything is "purchased" which is far from the truth! I personally have not and would not work for an agency that purchased debt, because I know and have heard the horror stories of not only how they treat the debtor but also how the business as a whole treats the collector.
Moderator
November 24, 2013 - 11:04pm
Welcome to RegulationRoom, dnoel71, and thank you for sharing your thoughts. Can you tell us more about how it can be helpful for consumers to know that the debt was purchased rather than simply referred to a collection agency? Is there any other information that debt collectors can give in the notice to help consumers, or would it be better to include more detailed information in the validation notice instead?
RHN91362
November 24, 2013 - 1:24pm
I agree that it benefits everyone when notice of sale or assignment is given to the consumer. I am not aware of any part of the industry other than mortgage servicers who presently give notice. The benefit is clear - it reduces confusion, reduces the risk of misapplied/lost payments, and produces a clear chain of ownership. It would be costly to the creditors selling the debt, but not so much as to be prohibitive. Creditors have to send notices under a variety of other laws. I don't think this addition would make that much of a difference. I think the notice should state the account number, the entity to who it is being sold (including contact information) and the amount currently owed. It should be sent by the seller, who has the most current information for the consumer, and a copy should be provided to the debt buyer as part of the sale package.
CollectionDefenseGuy
January 25, 2014 - 4:50am
If a bank is going to sell a consumer's debt, the bank should be required to notify that consumer IN ADVANCE, and allow that consumer a fair chance to bid on and purchase his/her own debt, on terms just as favorable as the terms offered to any other debt buyer (which at present is usually pennies on the dollar).
Debt buyers contribute nothing to society. Yet, they are allowed to obtain windfall profits by pursuing impoverished consumers for the full face value of such debts.
This proposal would entail changes more extensive that just "notice" as it would require a change from bulk loan sales, to requiring an opportunity to purchase individual loan in certain circumstances.
Moderator
January 28, 2014 - 10:34am
Welcome to RegulationRoom, CollectionDefenseGuy. At this stage, CFPB is looking for information on problems consumers and responsible debt collectors are having. CFPB doesn’t have legal authority over absolutely every aspect of debt collection, however, the agency will carefully consider what you and other commenters say here.
michaelolenick
January 27, 2014 - 9:09am
One theme we see throughout comments is that debt sold adds confusion as to whom is the creditor, and also triggers a new credit entry, making the debt appear as incremental (additional), when it is simply transferred, and fresh.
The solution to this is simple; do not allow credit bureaus to ever list more than one entry for the same debt. Put the burden of accurate recordkeeping on the bureaus, because they are the only entities who have a responsibility for accurate recordkeeping and they are paid to keep accurate records.
Currently the cost of sloppy systems is externalized to both creditors and borrowers, both of whom tend to re-externalize it to other creditors and borrowers in the form of higher costs. It is irrelevant whether these dual entries are caused by negligence, incompetence, or malice on the part of the creditor or collector because it is the responsibility of the credit reporting agency to make this practice impossible.
Adding steep fines for double reporting would incentivize CRA's to police their systems so each debt only garners one entry. Since CRA's are immune from libel suits in most of the country regulatory oversight is especially important. Conversely, clarifying that reporting agencies are not immune from state libel laws -- that regulatory authority is in addition to state defamation law -- would also quickly incentivize more accurate reporting.
Moderator
January 28, 2014 - 12:23pm
Thank you for your comment michaelolenick, and welcome to RegulationRoom. Since you discussed CRAs, you may also be interested in reading and commenting on what CFPB has to say about reporting disputed debts to CRAs on the subtopic “What should happen with unverified debts?”.
sbwaddell
January 30, 2014 - 4:25pm
Consumers normally are unaware that their debt has been sold to a collection agency. They, one day, get a call about the debt from someone unbeknownst to them. The collection agency wants the consumer to remit the payment to them, when actually, principal on the debt never decreases because the collection agency gets their cut (commission) off the top. The debt is there essentially, forever with added late charges, interest and other penalties. I submit to the CFPB to finalize the "Know Before You Owe" rule and to outlay the debt validation rules so that consumers can make an informed choice before wasting their money on a debt they may not owe.
CollectionDefenseGuy
January 30, 2014 - 4:36pm
Additional disclosures debt buyers (or sellers) should be required to make include the following:
1) how much was a debt sold for; and
2) If a debt buyer issues a 1099c issues with respect to a debt, then how much of a tax benefit are they claiming in connection with issuing the 1099c.
The first item should be disclosed for many reasons. For one thing, it impacts the fundamental fairness of the subsequent negotiation between consumer and debt buyer. Debt buyers and collectors may go on a tirade about personal responsibility and windfalls. However, it is at least debatable as to which-way such value judgments cut when a debt buyer is trying to get 100 dollars from an impoverished consumer on an account for which the debt buyer paid only 3 dollars. Debt buyers may say that their purchase price is not relevant to the legal rights they have purchased. However, a sense of fairness does matter in laws; it is why we humans make laws in the first place (or it least it is the polite justification for them). Thus if the price is not legally relevant to the rights the debt buyer is purchased, then regulations should be passed that make it legally relevant. In any case it is certainly relevant to the negotiation, insofar as it would impact what consumers are willing to pay, making it de facto relevant.
Second, debt buyers tend to issue 1099c's for the full face value of the alleged debt when the "forgive" it. This seems to imply a massive tax-fraud on the American public, because they are getting a tax-benefit that is worth far more than the asset that they purchased. This should be publicly disclosed to make it more difficult to get away with. If a debt buyer purchases a debt for 5-cents, then "forgives" the debt as being a $1.00 debt, issuing a 1099C for that amount, is the debt buyer claiming the full tax benefit of losing a $1.00 of income? Is that company really just buying $1 million dollar tax break for $10K? This is unfair for the consumers whose debts are implicated and also unfair for all of us who are supposed to benefit from tax revenues (i.e., all of us).
Angel butler
February 3, 2014 - 10:05am
Debt was sold to another company. So now debt is listed on my credit twice. So debt will last more than 10 years on report. Plus I've been a victim of identity theft twice. Both times I reported it to the police and to the credit agencies. Unfortunately nothing police can do but write a report for proof. Credit agency was ordered to put a fraud alert on my social but fail to do so.
gmt512
February 28, 2014 - 7:32pm
Get a copy of the police report and mail it to all three. They HAVE to put a freeze on your report, and you get a pin, and if you have to lift it you need to have that pin. It is quite a pain. I had a burglary in 2012 -- 14 pages of items stolen, I had to call all my credit cards and get issued new ones. Heartbreaking --not just things like my computer, but items of great value, and great sentimental value. The least you should have is the peace of mind of having a freeze on your report. And they HAVE to do it. Otherwise, go to a lawyer and let them dangle on the end of the meat hook. It is a pain, but worth doing.
LAWZME
February 27, 2014 - 5:08pm
Notification that a debt is being sold would be ideal as it would afford the debtor the opportunity to negotiate the amount and possibly assist in thwarting any potential negative reporting on one's credit report. If a debtor is afforded the opportunity to negotiate his or her debt for a reasonable amount, perhaps the selling and reselling of debt may be marginalized. More and more consumers have emails and other modes of communication and therefore, it would be in the best interest of all parties to amicably resolve issues. However, should the dispute not be quelled, reasonable arrangements should be afforded to the debtor. Debts as assets is an outrageous concept and it behooves both the debtor and the creditor to "work-it-out". That is in the best interest of all. It begins with information, communication and resolution.
gmt512
February 28, 2014 - 7:29pm
There ought to be a limit on the number of times that debt can be sold.