The CFPB should absolutely adopt rules concerning substantiation of purported debts and, where a consumer timely disputes the existence or amount of a purported debt, alleged creditors and debt collectors should be prohibited from reporting any adverse information to CRAs about the debt and CRAs should be prohibited from including any adverse information on a consumer's credit report about the debt until after the debt collector or creditor obtains a final non-appealable judgment substantiating that the debt is in fact owed and the amount of the debt. Currently, debt collectors are attempting to collect upon purported debts and reporting negative information to CRAs based solely on assertions by creditors that a debt is owed. Further, the "verification" of a debt is usually nothing more than a piece of paper from the purported creditor stating the amount of the debt that the purported creditor asserts is owed. Even where the consumer has disputed the existence of the purported debt in light of, for example, legitimate legal defenses and counterclaims, the creditor or debt collector often times reports negative information to the CRAs thereby damaging the credit profile of the consumer. Although the FCRA requires that the CRA notate that the debt is disputed by the consumer, the damage to the consumer's credit standing is already complete as potential lenders and/or employers will see the negative information on the credit report and may take adverse action in connection with their lending or employment decisions based solely on the fact that negative information appears on the consumer's credit report. As a result, the threat of negative reporting by debt collectors to the CRAs can be highly coercive, unfair and deceptive in that a consumer may feel forced to pay a purported debt, even if the debt is legitimately and in good faith disputed, to avoid adverse information appearing on their credit report. I have recently personally encountered this exact situation after I became involved in a dispute with a property management company as to whether a lease termination fee was due under the terms of the lease for an apartment that I had vacated prior to the expiration of the lease. The property management company and I disagree as to whether the express terms of the lease require the payment of a lease termination fee. After I refused to pay the property management company for any lease termination fee, the property management company contacted a debt collector and asserted that I owed a debt notwithstanding that I have repeatedly disputed by notice to both the alleged creditor and the debt collector the existence of the debt under the express terms of the lease. The debt collector has proceeded to report negative information to the CRAs which has negative impacted my credit standing even though there exists a legitimate ongoing dispute as to whether the debt even exists in the first place. Further, the debt collector's "verification" of the debt was nothing more than an invoice from the property management company indicating the amount that the property management company asserts is owed. Under circumstances where a consumer timely disputes the existence of a debt or the amount of the debt, creditors and debt collectors should be prohibited from reporting adverse information to CRAs and CRAs should be prohibited from including adverse information on a consumer's credit report about the purported debt until the creditor or debt collector obtains a final non-appeable judgment so as to avoid the highly coercive, unfair and deceptive consequences to consumers. Further, a "verified" or "substantiated" debt should not be deemed to exist until a final non-appealable judgment is obtained under circumstances where the consumer timely disputes the existence or amount of debt. Such a rule would ensure that creditors and debt collectors only pursue litigation for debts they believe actually exist and avoids adverse impacts to consumers prior to the time the debt is verified and substantiated by a final non-appealable order of a court of competent jurisdiction.
The CFPB should adopt a ruling that, under circumstances where a consumer timely disputes the existence or amount of a debt, reporting adverse information to a CRA about such disputed debt or including information about a disputed debt by a CRA on a consumer's credit report is an unfair and deceptive act or practice until such time that the creditor or debt collector obtains a final non-appealable judgment substantiating the existence and amount of the debt.
The CFPB should absolutely adopt rules concerning substantiation of purported debts and, where a consumer timely disputes the existence or amount of a purported debt, alleged creditors and debt collectors should be prohibited from reporting any adverse information to CRAs about the debt and CRAs should be prohibited from including any adverse information on a consumer's credit report about the debt until after the debt collector or creditor obtains a final non-appealable judgment substantiating that the debt is in fact owed and the amount of the debt. Currently, debt collectors are attempting to collect upon purported debts and reporting negative information to CRAs based solely on assertions by creditors that a debt is owed. Further, the "verification" of a debt is usually nothing more than a piece of paper from the purported creditor stating the amount of the debt that the purported creditor asserts is owed. Even where the consumer has disputed the existence of the purported debt in light of, for example, legitimate legal defenses and counterclaims, the creditor or debt collector often times reports negative information to the CRAs thereby damaging the credit profile of the consumer. Although the FCRA requires that the CRA notate that the debt is disputed by the consumer, the damage to the consumer's credit standing is already complete as potential lenders and/or employers will see the negative information on the credit report and may take adverse action in connection with their lending or employment decisions based solely on the fact that negative information appears on the consumer's credit report. As a result, the threat of negative reporting by debt collectors to the CRAs can be highly coercive, unfair and deceptive in that a consumer may feel forced to pay a purported debt, even if the debt is legitimately and in good faith disputed, to avoid adverse information appearing on their credit report. I have recently personally encountered this exact situation after I became involved in a dispute with a property management company as to whether a lease termination fee was due under the terms of the lease for an apartment that I had vacated prior to the expiration of the lease. The property management company and I disagree as to whether the express terms of the lease require the payment of a lease termination fee. After I refused to pay the property management company for any lease termination fee, the property management company contacted a debt collector and asserted that I owed a debt notwithstanding that I have repeatedly disputed by notice to both the alleged creditor and the debt collector the existence of the debt under the express terms of the lease. The debt collector has proceeded to report negative information to the CRAs which has negative impacted my credit standing even though there exists a legitimate ongoing dispute as to whether the debt even exists in the first place. Further, the debt collector's "verification" of the debt was nothing more than an invoice from the property management company indicating the amount that the property management company asserts is owed. Under circumstances where a consumer timely disputes the existence of a debt or the amount of the debt, creditors and debt collectors should be prohibited from reporting adverse information to CRAs and CRAs should be prohibited from including adverse information on a consumer's credit report about the purported debt until the creditor or debt collector obtains a final non-appealable judgment so as to avoid the highly coercive, unfair and deceptive consequences to consumers. Further, a "verified" or "substantiated" debt should not be deemed to exist until a final non-appealable judgment is obtained under circumstances where the consumer timely disputes the existence or amount of debt. Such a rule would ensure that creditors and debt collectors only pursue litigation for debts they believe actually exist and avoids adverse impacts to consumers prior to the time the debt is verified and substantiated by a final non-appealable order of a court of competent jurisdiction.
Given the highly coercive consequences of having negative information reported to or by CRAs on consumer credit reports, I think it is reasonable that a debt not be deemed "verified" or "substantiated" unless and until there's a final non-appealable order, but only in circumstances where the consumer has timely disputed the existence or the amount of the debt. Currently, if you dispute a debt, the debt collector reports you to the CRAs and your credit standing is adversely impacted; i.e., the damage is already done at that point. In other words, the notation on the credit report that the debt is disputed by the consumer is largely ignored by potential lenders, employers, landlords, etc. Thus, disputing the debt does nothing to prevent harm to the consumer. The debt collector and creditor threaten to report you to the CRAs as a coercive tactic to force you to pay a debt even though you might legitimately not owe the debt or the amount claimed to be owed.
As for my proposal, I do not think this will lead to more litigation. Just the opposite. If a consumer doesn't timely dispute the debt, then the debt can be deemed verified or substantiated. If, however, the debt is timely disputed, creditors and debt collectors will have to evaluate whether to initiate litigation and weigh the likelihood of prevailing at trial and this may cause creditors and debt collectors to be more judicious about which debts to take to trial. This proposal would also protect consumers from having their credit standing negatively impacted until after it is conclusively determined that a purported debt that is disputed is in fact owed and the amount of such debt is conclusively determined.
As an alternative to my initial proposal, a rule could be adopted that would impose significant statutory penalties, treble damanages and recovery of attorney's fees against creditors, debt collectors and CRAs in the event the consumer can prove either the disputed debt doesn't exist or the amount of the debt is less than that claimed to be owed. This approach, however, places the burden of proof on the consumer and I feel strongly that the burden of proof should be on the creditors and debt collectors to affirmatively prove the existence and amount of any disputed debt before a consumer's credit report is adversely impacted.
Anonymous
1
The CFPB should absolutely adopt rules concerning substantiation of purported debts and, where a consumer timely disputes the existence or amount of a purported debt, alleged creditors and debt collectors should be prohibited from reporting any adverse information to CRAs about the debt and CRAs should be prohibited from including any adverse information on a consumer's credit report about the debt until after the debt collector or creditor obtains a final non-appealable judgment substantiating that the debt is in fact owed and the amount of the debt. Currently, debt collectors are attempting to collect upon purported debts and reporting negative information to CRAs based solely on assertions by creditors that a debt is owed. Further, the "verification" of a debt is usually nothing more than a piece of paper from the purported creditor stating the amount of the debt that the purported creditor asserts is owed. Even where the consumer has disputed the existence of the purported debt in light of, for example, legitimate legal defenses and counterclaims, the creditor or debt collector often times reports negative information to the CRAs thereby damaging the credit profile of the consumer. Although the FCRA requires that the CRA notate that the debt is disputed by the consumer, the damage to the consumer's credit standing is already complete as potential lenders and/or employers will see the negative information on the credit report and may take adverse action in connection with their lending or employment decisions based solely on the fact that negative information appears on the consumer's credit report. As a result, the threat of negative reporting by debt collectors to the CRAs can be highly coercive, unfair and deceptive in that a consumer may feel forced to pay a purported debt, even if the debt is legitimately and in good faith disputed, to avoid adverse information appearing on their credit report. I have recently personally encountered this exact situation after I became involved in a dispute with a property management company as to whether a lease termination fee was due under the terms of the lease for an apartment that I had vacated prior to the expiration of the lease. The property management company and I disagree as to whether the express terms of the lease require the payment of a lease termination fee. After I refused to pay the property management company for any lease termination fee, the property management company contacted a debt collector and asserted that I owed a debt notwithstanding that I have repeatedly disputed by notice to both the alleged creditor and the debt collector the existence of the debt under the express terms of the lease. The debt collector has proceeded to report negative information to the CRAs which has negative impacted my credit standing even though there exists a legitimate ongoing dispute as to whether the debt even exists in the first place. Further, the debt collector's "verification" of the debt was nothing more than an invoice from the property management company indicating the amount that the property management company asserts is owed. Under circumstances where a consumer timely disputes the existence of a debt or the amount of the debt, creditors and debt collectors should be prohibited from reporting adverse information to CRAs and CRAs should be prohibited from including adverse information on a consumer's credit report about the purported debt until the creditor or debt collector obtains a final non-appeable judgment so as to avoid the highly coercive, unfair and deceptive consequences to consumers. Further, a "verified" or "substantiated" debt should not be deemed to exist until a final non-appealable judgment is obtained under circumstances where the consumer timely disputes the existence or amount of debt. Such a rule would ensure that creditors and debt collectors only pursue litigation for debts they believe actually exist and avoids adverse impacts to consumers prior to the time the debt is verified and substantiated by a final non-appealable order of a court of competent jurisdiction.
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Anonymous
2
The CFPB should adopt a ruling that, under circumstances where a consumer timely disputes the existence or amount of a debt, reporting adverse information to a CRA about such disputed debt or including information about a disputed debt by a CRA on a consumer's credit report is an unfair and deceptive act or practice until such time that the creditor or debt collector obtains a final non-appealable judgment substantiating the existence and amount of the debt.
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Anonymous
3
The CFPB should absolutely adopt rules concerning substantiation of purported debts and, where a consumer timely disputes the existence or amount of a purported debt, alleged creditors and debt collectors should be prohibited from reporting any adverse information to CRAs about the debt and CRAs should be prohibited from including any adverse information on a consumer's credit report about the debt until after the debt collector or creditor obtains a final non-appealable judgment substantiating that the debt is in fact owed and the amount of the debt. Currently, debt collectors are attempting to collect upon purported debts and reporting negative information to CRAs based solely on assertions by creditors that a debt is owed. Further, the "verification" of a debt is usually nothing more than a piece of paper from the purported creditor stating the amount of the debt that the purported creditor asserts is owed. Even where the consumer has disputed the existence of the purported debt in light of, for example, legitimate legal defenses and counterclaims, the creditor or debt collector often times reports negative information to the CRAs thereby damaging the credit profile of the consumer. Although the FCRA requires that the CRA notate that the debt is disputed by the consumer, the damage to the consumer's credit standing is already complete as potential lenders and/or employers will see the negative information on the credit report and may take adverse action in connection with their lending or employment decisions based solely on the fact that negative information appears on the consumer's credit report. As a result, the threat of negative reporting by debt collectors to the CRAs can be highly coercive, unfair and deceptive in that a consumer may feel forced to pay a purported debt, even if the debt is legitimately and in good faith disputed, to avoid adverse information appearing on their credit report. I have recently personally encountered this exact situation after I became involved in a dispute with a property management company as to whether a lease termination fee was due under the terms of the lease for an apartment that I had vacated prior to the expiration of the lease. The property management company and I disagree as to whether the express terms of the lease require the payment of a lease termination fee. After I refused to pay the property management company for any lease termination fee, the property management company contacted a debt collector and asserted that I owed a debt notwithstanding that I have repeatedly disputed by notice to both the alleged creditor and the debt collector the existence of the debt under the express terms of the lease. The debt collector has proceeded to report negative information to the CRAs which has negative impacted my credit standing even though there exists a legitimate ongoing dispute as to whether the debt even exists in the first place. Further, the debt collector's "verification" of the debt was nothing more than an invoice from the property management company indicating the amount that the property management company asserts is owed. Under circumstances where a consumer timely disputes the existence of a debt or the amount of the debt, creditors and debt collectors should be prohibited from reporting adverse information to CRAs and CRAs should be prohibited from including adverse information on a consumer's credit report about the purported debt until the creditor or debt collector obtains a final non-appealable judgment so as to avoid the highly coercive, unfair and deceptive consequences to consumers. Further, a "verified" or "substantiated" debt should not be deemed to exist until a final non-appealable judgment is obtained under circumstances where the consumer timely disputes the existence or amount of debt. Such a rule would ensure that creditors and debt collectors only pursue litigation for debts they believe actually exist and avoids adverse impacts to consumers prior to the time the debt is verified and substantiated by a final non-appealable order of a court of competent jurisdiction.
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Anonymous
4
Given the highly coercive consequences of having negative information reported to or by CRAs on consumer credit reports, I think it is reasonable that a debt not be deemed "verified" or "substantiated" unless and until there's a final non-appealable order, but only in circumstances where the consumer has timely disputed the existence or the amount of the debt. Currently, if you dispute a debt, the debt collector reports you to the CRAs and your credit standing is adversely impacted; i.e., the damage is already done at that point. In other words, the notation on the credit report that the debt is disputed by the consumer is largely ignored by potential lenders, employers, landlords, etc. Thus, disputing the debt does nothing to prevent harm to the consumer. The debt collector and creditor threaten to report you to the CRAs as a coercive tactic to force you to pay a debt even though you might legitimately not owe the debt or the amount claimed to be owed. As for my proposal, I do not think this will lead to more litigation. Just the opposite. If a consumer doesn't timely dispute the debt, then the debt can be deemed verified or substantiated. If, however, the debt is timely disputed, creditors and debt collectors will have to evaluate whether to initiate litigation and weigh the likelihood of prevailing at trial and this may cause creditors and debt collectors to be more judicious about which debts to take to trial. This proposal would also protect consumers from having their credit standing negatively impacted until after it is conclusively determined that a purported debt that is disputed is in fact owed and the amount of such debt is conclusively determined. As an alternative to my initial proposal, a rule could be adopted that would impose significant statutory penalties, treble damanages and recovery of attorney's fees against creditors, debt collectors and CRAs in the event the consumer can prove either the disputed debt doesn't exist or the amount of the debt is less than that claimed to be owed. This approach, however, places the burden of proof on the consumer and I feel strongly that the burden of proof should be on the creditors and debt collectors to affirmatively prove the existence and amount of any disputed debt before a consumer's credit report is adversely impacted.
View this comment in the discussion thread