Consumer Debt Collection Practices (ANPRM)

I have been contacted about a collection agency that stated that an old prescription charge was unpaid. The total was like $1500. When I asked for proof, I received a piece of paper that had three numbers on it that added up to $1500. Nothing more. Literally.

When a consumer asks for proof, they should at the very least receive a fully itemized listing of what it is is being collecting upon. (e.g. a detailed statement of account, or the un-paid invoice(s).) Additionally, consumers should receive documentation as to why they are legally responsible. (E.g. an agreement that they signed.)

I realize that for businesses that traffic in unpaid consumer debt this is going to be a huge burden as this information has long been lost. Too bad.

At the very least, this should be the standard for any debts incurred after a certain date.

Most of the consumer debt I see if coming from debt buyers and the consumer doesn't recognize the name or the amount. Many of these are beyond the statute of limitations to file suit but suit is filed anyway. Many consumers don't know to file an answer is court and a default judgment is entered. The information you suggest would help a lot in letting consumers know what this debt is. I would include the trail of ownership of the debt as there could be intermediary owners between the original creditor and final collector. Debts are sold and resold. It would also help to have some documentation of the specific debt having been sold so the consumer can verify the current ownership of the debt. Currently, all they get in response to a validation request is "we checked and you owe it". Our firm asks for specific documents related to the claimed debt and the response we get is "the courts say we don't have to provide any documents...go fish".

The majority of the collection disputes I help my clients with are never validated with documentation. The CRA simply sends a letter stating that the debt was verified although the dispute letter specifically asked for documentation.

As a creditor, I can agree with this notification on medical services since most people receive bills from companies they never heard of. When it comes to auto loans, and other monthly installment loans, I am sure the consumers are aware of the debt and who it is payable to, unless sold. This could be a huge regulatory burden on creditors that don't sell loans and follow current collection laws. After all, do very many people pay monthly payment to the same people for several months and them forget they owe the debt. All laws should not apply to all creditors.

It is important that a consumer receives notification that an account has arrived with a third party vendor. But a blanket notice covering every situation that may happen between now and the end of time should not be included in that notice.

The initial notification should include the following facts:
1. The original creditor
2. The amount of the claim
3. The last date of charge to the account

It should also include the following information:
1. If you do not recognize this obligation, please call our customer service line for additional information. Please understand that you will be expected to identify yourself before customer service would be able to provide that information. Utilize this toll-free number to reach customer service. You will not be able to speak with a debt collector on this line.

2. If you do not believe that you owe this money, contact customer service for information regarding your right to dispute a bill. This request can also be made by mail or you can find this list at CFPB.com

Finally, of course, the recovery industry can include a request for full payment of the obligation or a call to discuss resolving the matter. The bottom of the notice should include "This notice has been generated by a debt collector."

The CFPB should determine what standard information needs to be made available for verification of a debt and the collection industry should be required to provide that information when requested. The list should be standard and available on websites of the CFPB and sent by every member of the industry upon request. i believe the list should be:

1. Original Creditor account number
2. Itemized statement of obligation including amount and date of last charge and payment
3. Type of debt
4. Signed contract if debt was the result of a contract
5. Location where services or sale was initiated
6. Any other brand name/business consumer might recognize associated with the obligation (if applies)

Splitting these obligations of the recovery industry serves a positive consumer purpose as well as better serving the industry. Additionally, you will notice that I ignored the legal notification portion completely. Upon introduction is definitely the incorrect time to speak of legal action, the industry should be required to provide this notification only in cases that reach a minimum of a 50% chance that suit would be involved. This notification would have to be documented as sent no less than 45 days prior to taking any legal action.

I don't think that the partial SSN should be included. That raises too many privacy concerns. And I'm sure that one day a debt collection company will have a "system malfunction" and will "accidentally" send the full SSN. Plus, what if it is sent the the wrong Ms. Jones. Too many consumers have similar names in the same city. Lastly, many different companies classify a partial SSN as the first 5 digits whereas other stick to the traditional last 4 digits. If a mail thief is lurking, then he might have access to a consumers full SSN.

My experience is only with medical bills. The debt collectors seem only to know (a) what hospital and (b) how much. When you've been doing the hokey-pokey from emergency room to nursing home and back again over a period of months, that information is not much help.

What's really needed is an itemized bill that's a lot clearer than the "statement of benefits" we get now. Something as clear as: "You were in X hospital on this date. You had this test and that test. They cost a gazillion dollars, but we bargained them down to $17.48. Please pay this amount."

It is unwise to require that the debt collector send sensitive personal information to the debtor (e.g., SSN, account number) as such a requirement would expose the debtor to the danger of ID theft.

Every validation notice should include, not only the name, but the address and phone number of the current owner of the debt. It is not always the case that the consumer knows who the owner of the debt is, or how to contact them. This would not be a burden on collection agencies, because it would only require the collection agency to cut and paste the address and phone number of the debt owner onto the validation notice. The collection agency should already have this information in their company records, as the debt collector is forwarding consumer payments to said debt owner's address. This would allow the consumer to attempt to deal with the debt owner directly to try to resolve the dispute. For example, a case of mistaken identity can more easily be resolved by talking to a customer service representative of the debt owner, than by talking to a debt collector. The debt collector has no authority to correct the mistake, but a customer service representative of the debt owner does.

Every validation notice should include the collection agency's license status: license number, state of license, original license issue date, and current license expiration date.

They need to include the name of the original creditor as well as the account number and the brand name the consumer would recognize. Date and amount of last payment, copy of the last billing statement (supposedly) sent to the consumer. However I also think they need to send a copy of the original debt document with the consumer's signature. Someone can send me bills for something I don't owe, but they can't send me a signed paper I never signed.

I think the requirement for a debt collector to send a validation notice 5 days after the initial contact is backwards. I believe communication between the debtor and debt collector would be improved if the debtor has the validation notice before the initial telephone contact. The debt collector should be required to mail the debtor a validation notice 5 days before any phone contact, not 5 days after. Otherwise, the debtor is speaking with an unknown caller, who has surprised them with a demand for money. The debtor has not been provided with any time to prepare their thoughts, or to formulate important questions about the alleged debt. They may be caught "off guard", increasing the fear and anxiety of the debtor, which would necessarily lead to impaired verbal communication. The debtor has no written factual statement to refer to during the phone call, while the debt collector has all of the factual details in from of them on their computer screen, and can cite facts and figures. This situation creates an imbalance of power not conducive to good communication. This proposal to require debt collectors to send a validation notice 5 days before the first telephone contact would impose no financial burden on the debt collector, because validation notices are already required to be sent to the debtor. It is simply a change in the timing of an already existing requirement.

Providing too much information in the first notice creates a risk of divulging sensitive personal information to the person who now lives where the actual debtor used to. I do think that providing the chain of ownership information (especially original creditor) should be provided for sold debts. When it comes to medical debts, HIPPA becomes another concern. Therefore, specific info on medical debts should only be provided AFTER the collector has verified that they are communicating with the proper party.

In the case of medical debt, the statement should inform the consumer of the date and location of the service provided, including the name of the doctor who was in charge of the case (rather than a consultant or firm that never contacted the consumer) or the commonly used name of the location (such as a hospital or clinic) where the service was performed. In my experience, cost-conscious consumers who are wary of scams have declined to pay legitimate medical debt because they did not recognize the debt and could not get an answer to the basic question, "Why do I owe this money?" When the debt is unexplained, it is prudent to refuse to send money, yet when the debt is in fact legitimate, the consumer may suffer severe penalties for failure to pay.

A validation notice for medical debt should not simply repeat numerical codes or obscure abbreviations. It should state, "You were billed on (DATE) when you went to (PLACE)." If other debts related to the same visit have been paid, the letter should say so, e.g., "You already paid for other services during this visit, but you still owe..." Or, "Your insurance paid for some of the costs of this visit, but you still owe...."

This issue is related to the absurd complexities of medical billing, but those complexities should not be used to conceal the origin of a debt from a consumer.

Speaking from a collection standpoint, I can tell you that most collectors would LOVE to give more information on the initial Validation Notice. The problem is, the murky case law related to "overshadowing" makes it risky to include anything other than what is in the statute - no more, no less. Here's what I would like to include on the notice:
1. Name and address of the current creditor.
2. Our relationship to the current creditor.
3. Name of the original creditor, and the name of the subsequent owner of that original creditor's records, if that original creditor no longer exists (e.g. WaMu, Wachovia).
4. Any brand name or company name associated with the account.
5. The type of debt.
6. The original creditor's account number, and any other account numbers that this account may have been known under.
7. The amount of the debt (more on this in the appropriate thread).
8. The date the account was opened (for revolving credit) or the date the debt was incurred.
9. The date and amount of the last payment made by the consumer.
10. The date and amount of the last charge or debit on the account (for credit cards).
11. The name and address of any co-debtor that is also receiving this notice (helpful for co-signers).

I don't believe that any portion of the SSN should be included on this letter, because it's just too risky. However, I think the full account number can be included because in almost all circumstances, the account would already be closed and unable to be used by identity thieves.

I do think it would be a bit of an expense on the part of creditors and debt buyers to provide this information to the agencies and law firms that they outsource collections to, but I believe that it would benefit those collectors as well as consumers to have this additional information. It would be necessary to mandate that this information be included whenever creditors sell portfolios of bad debt. But it would be worth it.

Validation should be obtained from the Creditor by the Collection Agency prior to any Collection attempt is made by the Collection Agency at the very least. It would be even better if the Collection Agency would give notice of validation at least 5 days before any attempt is made to Collect.
This notice would give the Consumer a narrow window to contact the Creditor directly to satisfy a debt that may be outstanding or to inquire about the details of the alleged debt before making a good faith payment to the Collection Agency.
The rules of Evidence Judicial Procedure should be horned during the validation process. With out meeting some measure of the burden of proof all functions of Debt Collection is simply a burden to the Tax Payer, any proceedings with out court worthy documentation would be frivolous.
If Custody of the debt is transfered form a Creditor to and Collection Agency the Contract must be available for the Consumer or Custody of the debt by the Collection Agency should be invalidated.
Privacy should be respected. When it come to mortgage debt; Upon the issuance of a mortgage form a bank the bottom line banks holding do not decrease. In essence The bank has written new currency (guaranteed by the future payment of the Property taxes, and other Taxes placed on the individual Citizens of the United States of America backed by there Social Security numbers and property deeds) in to existence. Essentially the Borrower is giving the full amount of the mortgage plus interest to the mortgage lender.

If the FDIC truly backs Lenders, The lender should maintain the documentation of the agreed debt and a Default should be handled by the FDIC. Outsourcing to a Collection Agency can compromises the custody of the debt and encourages harassment of the consumer by a 3rd party.

May Fraud be Minimal and Prosperity be Abundant.

Items 1 through 10 should all be provided
on the validation notice. Number 10 specifically should include the Date-of-service or DOS for the medical debt.
Many consumers do not realize that
medical debt goes to collections just like
any other consumer debt. They mistakenly believe that their insurance company will
resolve the issue. Also with extensive medical bills ( inpatient surgical stay)
consumers have professional bills from each physician ( radiology, pathology, etc)
in addition to technical component bills
for the facility. Many times the consumer never sees these medical providers and
either mistakes the bill for another aspect of the service rendered or, again, just assumes the bill/debt will "be taken care of". additionally the name of the consumer's insurance Co./plan on the validation notice would be quite helpful.
This may seem to be a great deal of extra information but the originating physician and/or facility obtain this information at the time of or prior to service.

I agree that expanding the scope of the validation notice would benefit consumers. Especially important is a means for the consumer to contact the original creditor and identify the account in question.

When debts are sold multiple times it becomes impossible for consumers to: (1) determine if the account is theirs; (2) validate proper assignment; and (3) determine if the statute of limitations has expired.

The current requirements facilitate "zombie debt" accounts which - although already paid by the consumer - come back to life again and again. Absent a means for consumers to identify an account there is no way for them to verify that they have previously paid that debt.

I believe all of the possibilities listed are necessary.

I never did business with Joe's Collection Agency and would never recognize any debt they allege is owed.

Interest and other fees would make the amounts unrecognizable either even in the event I could miraculously determine that $757.24 is an old utility bill.

The debt collector must be required to submit the original application for credit with the consumer's original signature and the original letter of approval for the credit. The debt collection company should be required to submit full documentation that the debt actually exists. Too many debt collectors rely on falsified affidavits.

As a banker in a small bank, I have been on both sides of the collection business. Bankers have to prove a debt and give consumers a chance of object to the validity. When I have had collection agencys contact us for medical collections, I found these people to be scum. They don't care if the debt is valid, correct, or anything else. They just know that they get 50% of everything they collect. You can request that they not contact you again, but they will. My suggestion is that collection agencies not be allowed to call at all and all correspondence be in writing. If anyone can tell me what I owe and why I owe it, I will pay it. They can't and they don't care.

I'd believe explaining their debt in the way current legislation has revolving accounts explain debt (minimum payment required, time it would take to pay off the debt with minimum payments, how much they'd end up paying with interest and fees during that time) would be logical.

The FTC got this one right. Alternative one is easy to communicate and understand. Terms like default and charge-off can be confusing and subject to interpretation.

Alternative one is the easiest to communicate and probably the easiest to understand. Accouting systems will vary from creditor to creditor and requirements beyond this would only become more cumbersome and costly for a creditor and more confusing for a consumer.
I would not have the breakdown be different for different types of credit extended. Computers and brains all across America will start smoking.

Simplicity ought to be the guiding principle and Alternative # 2 is closest to that principle, (but expressions like "charge-off" should be avoided. That's a technical term specific to accountants. Some average consumers just aren't going to know what it means).

Beginning with the amount owed on the date of default, then adding interest (including rate) is simple enough, (still, the calculation of that interest could be included). Any and all fees ought to be listed, explained and JUSTIFIED. The same should hold true for any other charges, followed by payments and/or credits added after the date of default. This presentation would provide a clear picture.

While Alternative 1 seems simplest, there are hidden complications. Who defines what "principal" means? With revolving credit accounts, interest accrues (as finance charges) and is rolled into the balance. So does "principal" mean only the part of the balance that was charged by the cardholder (very difficult, if not impossible, for a collector to calculate) or the total charged off amount? I understand that it can be difficult when dealing with different kinds of debts. But I don't think this option will work for a large portion of consumer debt. Alternative 2 doesn't work because who defines when a consumer "defaults" on an account? Many of us have missed a payment here or there, but we get back on track. So it's too ambiguous. That leaves Alternative 3 as the most feasible, but what about accounts that never had a periodic statement or billing statement? I propose breaking down the total amount by stating the amount owed on the last statement issued by the original creditor, or, if no statement was ever issued, the original amount of the debt when incurred, and then an itemization of all debits and credits applied since that balance.

I have a charged off loan which I have been trying to get a repay plan on but the debt is listed as one amount on my CBR and the debt collector had the balance increased by $12K more when discussing it over the phone. That is outrageous that they do not have an accurate amount of what is owed to the original lender.

Some problems that debt collectors and buyers have with giving consumers this information arises in the field of Electronic Data Interchange. Here, not all debts, especially with interest are calculated the same way, and since there are fees, such as statutory attorneys fees, and court costs, which can be added to the balance, calculating the balance becomes cumbersome when the data is transferred among Trading Partners on a daily basis because the data gets lost in translation over day-to-day lags. Computers don't think the same way people do and what we think is a simple calculation is muddled when partial payments are added and the data is transmitted between parties.

There should be no option to attempt to verify the debt. Attempts should always be required and if verification is not made, the debt cannot be further transferred.

Verification is a joke, it just means that they look at there computer again and say yes you owe the debt. They don't offer any proof that you owe the debt or that you are the actual person that incurred the debt. I had my identity stolen and I didn't even know it. They could not produce a signed credit card receipt to compare my signature.

A separate "summary of rights" should be sent to, and made available, to consumers. We are woefully uninformed and misinformed about our rights as consumers; what avenues of negotiation we can pursue; or even who can assist us.

Furthermore, there should be some laws on the books on when collectors cannot collect e.g. if the original creditor has not made an attempt to collect the debt for an extended period of time, I should not get a collection notice 20 years after the fact.

More information to the consumer with the initial notification would be more confusing and intimidating than it already is for them. Simplifying the initial notification while including information about how to contact someone if you do not recognized this obligation is the way to go. Then the CFPB can design and require everyone to send a separate Summary of Consumer Rights to a consumer. It could also be available in the exact same form on the CFPB website and on informed professionals websites within the industry.

I would maintain the consumer's right to ask for a cease communication, but I would suggest that the CFPB would serve everyone better by including that the CFPB would suggest that the consumer may be better served by keeping this communication available except as a last resort.

This solution also bears the added advantage of making sure the public is aware of the assistance available through the CFPB.

I agree that there documentation should always be provided. Why would I pay a debt without absolute proof that it belongs to me?

When the first collection agency can't collect they sell the debt to 2nd tier collectors. They sometimes sell it to 3rd tier collectors. My experience in helping resolve collection disputes is sometimes the first collector and always the third collectors do not provide debt validation letters.

Once companies have sold the debt to a collection agency they do not help resolve it in any way and the collection agency is only interested in getting money not whether the debt is real or there were some mitigating circumstances.

Sometimes the collection agencies will add extra fees to the debt which places an unfair burden then person with the debt.

The collection agencies in my experience helping resolve debt disputes will often NOT notify the credit agencies that the debt was resolved.

My experience is the collection agency will not correct the debt on the credit report! we need a law requiring the collection company to report debt repayment or debt settlement to the credit bureau in a timely manner... Say 30 days after the debt has been settled, or payment arrangements have been made.
It can be very hard to clean up your credit when working with collection companies...
they want their money but they don't care if your credit report is accurate!

We absolutely need a cap/limit on fees and interest on past debt!

For attorney debt collectors, being required to provide a list of all the rights the consumer may have comes perilously close to the provision of legal advice; even if it doesn't cross that line, the unsophisticated debtor may believe that an attorney is acting as a neutral court officer rather than as an advocate for an adverse party. I've had debtors ask me "Do I need to come to court for this?" after I've sued them.

The collector must include the rights in the validation notice

The collection agency is not required to actually validate the debt and provide information to the consumer. Example, I disputed a debt as valid. The return validation consisted of a one line sentence: "The consumer owes the debt." This is not to me or to any reasonable person validation. The collection agency should be required to at least furnish enough information to allow the consumer to recognize or dispute the debt. That information ideally would be a copy of the original application and a copy of the final billing statement.

Failure to properly validate the debt as described by furnishing final billing statement and original application would invoke the consumer's rights to have all further collection activity immediately barred and the ability of the consumer to have the debt IMMEDIATELY removed from their credit report. All too often it takes years to have false or misleading information removed from a consumer's credit report.

A credit reporting agency should be required to immediately comply with information regarding disputed debt and completely remove any reference to the debt. As an example, I am attempting to have a time barred paid lien removed from my Credit Report. 2 of the 3 bureaus immediately removed, 1 refuses to remove. I have sent documentation from the court, the original creditor, from the office of probate judge all to no avail. Without a remedy, I am left with a false item on my credit report.

The current validation notice is already too long--bordering on "boilerplate". To add more language to this would confuse or intimidate the least sophisticated debtor and/or lead them to immediately ask that the creditor cease communication. The problem with that strategy is that it forces the creditor to file suit, thereby incurring court costs that will be added to the debt. Instead, debtors should be encouraged to communicate their questions & concerns to the collector who can then (after right-party verification) openly discuss the account & quite possibly answer the debtor's question(s).

The case law related to this portion of the FDCPA has made it risky for collectors to include anything other than exactly what the FDCPA says. However, I don't think the law, as written, is easy to understand. For example - the first sentence says unless you dispute the debt, it will be considered valid ("dispute" and "valid" aren't defined), but then goes on to say what the creditor will do if you notify them in writing. So if the consumer only disputes verbally, what rights do they have, if any? I think the law should be clarified, and then I think the CFPB should create a uniform "Summary of Consumer Rights" that can be required to be included with all initial letters from collectors. That way, debt collectors don't have to worry about overshadowing and trying to fit everything onto one page, or with the tricky area of providing legal advice by interpreting the FDCPA for the consumer. Also, consumers can get a consistent message from all collectors. If there is a concern about it being separate from the initial letter from the collector, there can be a mandatory one-line disclosure providing a link to a CFPB website with that Summary of Consumer Rights.

A standard first letter would be an excellent idea - especially if states would agree on the content. Consumers could recognize the format and know where to look for the information they need. Consumer testing would be a very good idea. I believe that industry members would favor this to reduce litigation over technical violations. Taxpayers would benefit by reduced federal court expenses.

I like the Summary of Rights idea. I think that a validation letter and even an initial communication letter should included of Summary of Rights for State Laws and Fed Laws. This would help two fold: both the debtors/consumers and the debt collecting companies. The debtor/consumers would know their rights and the collectors would then also know the particular rights for the states that they are collecting in. This shouldn't be burdensome at all since the CRA already include Summary of Rights as do employers who check credit.

Require debt collectors to send validation notices via certified mail. There must be some way to prove the debt validation notice was at least sent, if not received. I have had the experience of a debt collector not sending me a validation notice. When I made a complaint to the Illinois Department of Professional Regulations, the debt collector did not have to prove that they sent the validation notice. All the debt collector had to do was claim that they had records of sending the validation notice in their computer system. Since I did not receive the validation notice, I did not know what my rights were.

I would like to see the validation notice requirement become compliant and consistent with the spirit of the Americans with Disabilities Act. For example, a validation notice could have a section with a check box, asking if the debtor has a disability that is recognized by Social Security. If so, the debtor would check the box. Then there would be several lines after the check box in which the debtor could explain to the collection agency what reasonable accommodations they are requesting. The debtor could be asked to provide proof of disability, such as a Social Security award letter.

I think the Massachusetts rule is a positive step in the right direction, and would be better than the current situation. Would the two calls be defined as two connected calls, or two call attempts, whether the call is connected or not? However, for those debtors who truly cannot pay at all, due to a serious adverse life event, such as the loss of a job due to a medical disability, their situation is not likely to change from week to week. For example, most disability insurance companies only require a patient's doctor to submit a re-certification of the patient's medical disability every 3, 6, or 12 months. In essence, the debt collector would be acting as a sort of medical re-certification investigator twice a week, which is unnecessary, burdensome on both debtor and collector, and potentially harassing.

A certified letter plus a regular letter should be sent. It proves that a consumer is at least aware of the debt and has X time to respond. Should cost any more then the postage of the regular letter.

What makes the difference on any federal law passed? The state, county, city make their own laws. That is what I have ran into and if a person does not hire a lawyer, are not a big group, there isn't much hope for the consumer. The law where everyone may hire a lawyer has limits--IE: Will not take a criminal or money cases if a non profit org. or free lawyer takes the case. I darn sure do not understand the laws etc. and I have tried to read about all this for 2 years. Of course I'm old and 100% DAV, that could be it.

The simplest way to implement a non-English notice would be to require notice in both English and the native language where:
(i) The original creditor has information about the debtor's language;
(ii) The collector obtains information about the debtor's language; *or*
(iii) The debtor lives in a ZIP code known to have a significant (5%?) number of non-English speakers.

This requirement should only apply to languages with large LEP populations - a threshold might be 100,000 - to avoid undue cost. For smaller populations, where obtaining a full translation might be uneconomical, collectors could include the following passage translated into the appropriate languages on an otherwise English letter: "This is an urgent debt collection letter. If you cannot read English, it is important that you find a translator."

I think that both an English and Spanish letter should be sent. This already happens with most legal and other important things (like voting and letters from school) in my State. But this should be a fed requirement to always include Spanish.

The collection notices should be sent in the same language of the original signed debt document.

A question that I'd ask surrounds dialects. There are numerous dialects for Spanish, French, etc. and it would be very expensive for agencies to translate every letter into every dialect of a certain language, Spanish being the most common for this type of occurrence.

What would be some recommendations from both the consumer population and those within the industry could suggest for which dialect to utilize in said letters?

In addition, would anyone believe that the potential language dialect barriers would/could lead to legal concerns? I'd greatly appreciate feedback, commentary and also recommendations on everyone's view on how to address differing language formalities.