Portland, ME: Field Hearing on Debt Collection Practices

Welcome, everyone. Welcome to the Consumer
Financial Protection Bureau’s field hearing in Portland, Maine, on the issue of debt collection.
The Consumer Financial Protection Bureau is an independent federal agency whose mission
is to help consumer finance markets work by making rules more effective by consistently
and fairly enforcing those rules and by empowering consumers to take more control over their
economic lives. My name is Zixta Martinez. I am the Associate
Director of External Affairs at the CFPB. Today’s field hearing is being livestreamed
on our website at consumerfinance.gov, and you can follow CFPB on Twitter and Facebook. We will begin today’s field hearing with remarks
from Maine’s Attorney General, Janet T. Mills; and the Superintendent of Maine’s Bureau of
Consumer Credit Protection, William Lund. Next, the CFPB’s Director, Richard Cordray,
will provide remarks on the Bureau’s most recent work in the area of debt collection.
Following Director Cordray’s remarks, Assistant Director Corey Stone will lead a discussion
with a panel of experts on the topic of debt collection. Following the panel, we’ll kick off the audience
participation portion of the field hearing. This portion provides audience members with
the opportunity to share their stories and your observations about what you are seeing
and experiencing in consumer finance in your community. Today’s audience includes community
leaders, advocates, industry representatives, and, of course, consumers. We are pleased
to welcome staff from the offices of Senator King, Congresswoman Pingree, Congressman Michaud
of Maine, as well as staff of the office of Congresswoman Shea-Porter of New Hampshire.
Also with us today are elected state and local officials and their staff from Maine, New
Hampshire, and Vermont. Thank you all for joining us today. So let’s get started. Our first speaker is
Janet Mills, who was elected last year to serve as Maine’s 57th Attorney General. This
is not General Mills first time in the Attorney General Chair. In 2008, she was elected as
Maine’s 55th Attorney General and became the first woman to hold the office of Attorney
General in Maine. Prior to her election as Attorney General, General Mills served in
the Maine House of Representatives representing the town of Farmington in industry. She served
on the Judiciary Committee, the Criminal Justice and Public Safety Committee, and the Appropriations
Committee. She also taught in the Justice Studies program at the University of Maine-Augusta. During her time in office, Attorney General
Mills has been on the forefront of consumer protection. Most recently, she announced last
month that over 1,300 Maine citizens were going to begin receiving checks to compensate
them for robo-signing abuses as part of the national mortgage settlement. Attorney General Mills, it is my pleasure
to welcome you to today’s field hearing. [Applause.] ATTORNEY GENERAL JANET T. MILLS: Thank you.
Thank you, Ms. Martinez. Thank you very much. I thank you very much. As she mentioned, I am both the first and
second woman Attorney General in Maine. That will be on Jeopardy one of these days, Director
Cordray. [Laughter.] ATTORNEY GENERAL JANET T. MILLS: It is a pleasure
to welcome you to Portland, Maine, those of you who are not from Portland, Maine, to talk
about debt collection. It’s an odd thing to talk about on a beautiful summer day like
this but really a necessary topic to discuss. You know, I am old enough to have heard about
the Great Depression, growing up, learning about it from my grandparents and my parents,
aunts, uncles, and elders in the community. At that time, your credit cards were unheard
of for that generation who lived through those very hard times. Credit was like putting something
special, a special suit or dress, on layaway at Peck’s or Sears or Wards, until savings
accrued to pay for it and you could take it home free and clear, and it was yours. You
didn’t keep paying for the item. And then the mass production of cars and trucks
in the 20th century brought loan companies specializing in paying for vehicles over time,
and is there anybody in this state that doesn’t owe money on a vehicle? The post-war housing boom of the 1950s engendered
a mortgage loan industry that has grown by leaps and bounds, while mass production of
appliances and toys and manufacture of clothing led to volume consumption and consumerism
and very intense competition among these businesses. Good credit has become like a judge of character,
second only to religion in some circles. Debt is now sold on TV, on radio, on the Internet,
among national and international banks and financial institutions, as Americans of all
ages are bombarded with ads that rival the seductive cigarette commercials of the ’50s
and ’60s. Postsecondary education, whether for profit or nonprofit institutions, they
have been enslaved to federally ensured loans as much as they are to endowments, and now
we are told that outstanding student loan debt has surpassed outstanding credit card
debt, and student loan debt relief ads are crowding the airways and the Internet, some
of them sponsored by outfits which extract an upfront fee simply to enroll a debtor in
a federal program that is already generally free. So when the recession came crashing down a
few years ago and the subprime mortgage crisis brought the economy to its knees, those who
were drowned in debt, whether for school or for appliances or cars and mortgage loans,
they had no escape, no resource, and often very little understanding of the cause of
the crisis. We heard a lot about the failure of Wall Street
and the suffering of the major institutions on Wall Street, the big banks too big to fail,
but we heard very little about the suffering and the real life hardships of those consumers
who were brought to their knees by subprime mortgage lending and by the debt crisis that
affected every family in this nation. Now popups on the social media pages of millions
of consumers’ computers advertise debt relief services, and they’re as plentiful as the
spuds sprouting in the fields of Aroostook County in July. No, this is not your grandmother
or grandfather’s debt service or layaway plan with Wards or Peck’s or Sears. Debt is an
industry. It’s something my grandparents would never comprehend, and the question for us
now in the public sector is how to separate the predators from the benefactors, how to
regulate without depriving consumers of legitimate market choices, how to protect them from themselves
in many cases. The question also is how to rein in unconscionable
debt collection practices and debt relief services while permitting legitimate businesses
to provide needed credit for consumers who see tough times. In Maine, we’ve seen a rise in student debt.
We’ve also experienced an increase in our senior population. We’re the grayest state
in the nation, as we read in the paper every day, and we have seen seniors being preyed
upon by unscrupulous predators, some of them, leading them to conclude that they will need
to work until the day they drop if they are going to support themselves, protect their
meager Social Security income, and perhaps even leave a piece of prosperity or security
to their loved ones. So, in Maine, these are some of the challenges
we’re facing, and we look forward to working with the federal government and particularly
Rich Cordray, Director Cordray, and the Consumer Credit Protection Bureau in addressing these
challenges at every level. We also have a very active Consumer Protection Division for
some 40 years, since the adoption of the Unfair Trade Practices Act and Debt Collection Practices
Act since that time, and we work very closely with Superintendent Will Lund, and I’m glad
to see him here today and to be conversing with him about our mutual issues. We are pleased
to work with him on litigation. We’ve brought four major pieces of litigation in the last
year and a half on debt collection practices, and I’m here to share those experiences with
you and to learn from this audience how we can do our jobs better. So I want to welcome you to Portland to Maine
in particular and welcome Director Cordray and the federal Consumer Protection Bureau
to our beautiful state to discuss these issues of mutual concern. Thank you very much. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Attorney General
Mills. Our next speaker is William Lund, the Superintendent
of Maine’s Bureau of Consumer Credit Protection. Superintendent Lund has led the Bureau of
Consumer Credit Protection since 1987. He and his staff oversee many aspects of the
consumer finance industry, including nonbank mortgage lenders, debt collectors, loan brokers,
retail creditors, money transmitters, credit reporting agencies, and nonbank ATMs. His
office administers credit-related statutes and protects consumers by conducting compliance
examinations, responding to consumer complaints, issuing licenses, and providing consumer education
and outreach. If it all sounds familiar, much of it is the same as what the Consumer Financial
Protection Bureau carries out, so much so that I wonder how much we may have borrowed
from Maine and Superintendent Lund. Superintendent Lund, welcome. Thank you for
joining us. [Applause.] WILLIAM LUND: Thank you very much, and welcome
to Maine, and welcome to Portland. General Mills, those were outstanding remarks.
I didn’t necessarily appreciate your looking to me when you talked about Maine being the
grayest state in the nation. [Laughter.] WILLIAM LUND: I am most pleased to be hosting
Director Cordray, other administrators of the CFPB, fellow regulators from New England
States and even the Commonwealth. We will have a chief, a district court judge here
either now or later today and many other distinguished guests. My name is Will Lund. I work with about a
dozen folks up at the State of Maine’s Bureau of Consumer Credit Protection. As you heard,
I do feel—or as you can sense, I do feel a great kinship with the federal CFPB. First,
the names of our agencies are amazing similar: Consumer Financial Protection Bureau versus
Bureau of Consumer Credit Protection. In fact, they are so similar that nearly every day,
we receive consumer complaints from Nebraska and Iowa and other states from consumers there
asking for our help. We have developed a very rapid referral process to jet those complaints
down to the federal regulators. Secondly, as you have heard, with the exception
of depository institutions, which my agency does not regulate, our jurisdictional areas
are very, very well lined up, from truth in lending to fair credit reporting to fair debt
collection, RESPA, ability to pay standards for mortgages and so on. In terms of the number
of programs, we are ahead and we will remain ahead for years in my judgment unless the
CFPB gets into such notable areas as rent to own, pawn ships, nonbank ATM terminals,
and litigation funding providers, so I think we’re safe in that race so far. Third, I feel a kinship with the CFPB because
they have—some would say stolen; I would say hired away—many state regulators to
fill their ranks. So that when I am asked to meet with the CFPB, it is as if I am at
a state regulators conference. The CFPB is beginning to understand what we
state regulators have known for a long time, and that is that it’s very difficult to provide
real protection to consumers. I was talking to a CFPB staffer about 6 weeks ago, and I
said that I was going to be watching very carefully to see whether their high level
of consumer response was going to remain because it started out—or it has started out very,
very strong. In the early days of the CFPB, in my opinion, many creditors simply asked
or responded, replied by giving—or by providing whatever relief was requested because, quite
frankly, they were intimidated by the CFPB. So now we will see whether that high level
can continue, and so far, I think that it will. The folks I have talked to at the CFPB, I’ve
told them that if creditors begin sensing that they are receiving form letters rather
than careful analysis of consumer complaints that they will begin responding with form
letters, and that really doesn’t get to the root of consumer assistance. The staffer responded
by saying that they are really becoming or close to being overwhelmed, or at least there’s
a danger of them being overwhelmed by the numbers of complaints and that the complaints
are very complicated. Again, that’s something that state regulators have known for a number
of years. So I welcomed him to our world. I’ve done some prosecuting in the past, some
defense work, and some plaintiff’s work, and I think it’s best to think of each consumer
case as a legal case that walks in your door. You get some facts from your clients. You
get some facts that your client doesn’t tell you and that you won’t know until you go out
on a limb for that client. You’ve got a law or regulation to apply to the facts. You’ve
got limited resources and time, and you’ve got a host of other cases calling for your
attention. You get complaints if you do things in a way that the consumer is not happy with,
and if you get in many years an occasional thank-you note for a job well done, it’s so
rare that you post it and frame it and put it on your wall. Debt collection is a large part of what we
deal with here in Maine, and I am delighted that the CFPB is focusing on that issue, especially
in the area of payday lending, collection of payday loan debts. We need all the help
we can get, and I welcome their participation. I think it’s great that the CFPB has come
to Portland. I think it’s great that regulators from our other New England states have traveled
here to join us. I think it’s great that lawyers and industry representatives are also here
today. It’s a daunting challenge to provide effective consumer complaint while still recognizing
the legitimate business practices of the majority of the members of the industry out there.
We are partnering in every way possible with the CFPB to continue to do our best to help
consumers. We are working to have access to the portal of consumer complaints, so that
we can again effectively help Maine consumers. So I am just delighted to be able to be here
today to welcome you and to participate in this morning’s and this afternoon’s activities.
So thank you very much. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Superintendent
Lund. The next speaker is Richard Cordray who became
the CFPB’s Director when he was appointed by the President on January 4th, 2012. Prior
to his role, Director Cordray led the CFPB’s Enforcement Office. Before that, he served
on the frontlines of consumer protection as Ohio’s Attorney General. In this role, he
recovered more than $2 billion for Ohio’s retirees, investors, and business owners,
and took major steps to help protect its consumers from fraudulent foreclosures and financial
predators. Before serving as Attorney General, he also served as Ohio State Representative,
Ohio Treasurer, and Franklin County Treasurer. Director Cordray? [Applause.] RICHARD CORDRAY: Thank you, Zixta. I want
to especially thank General Mills and Superintendent Lund for the both illuminating and actually
quite personal nature of their comments, and we do apologize for fishing among the ranks
of the State regulators, but we’ve gotten some of our best people from there, so we
don’t apologize too sincerely. [Laughter.]
RICAHRD CORDRAY: Also, welcome and thank you to all of you who have taken your time to
be here today. We are here for this fielding hearing to say more about a very difficult
marketplace, which is the marketplace for the for the collection of consumer debts.
This topic has long been a source of frustration for many consumers practically I’m sure for
as long as there has been consumer debt, generating a heavy volume of consumer complaints at all
levels of government. This subject is also the focus of considerable enforcement activity
by the Federal Trade Commission, including yesterday, by state attorneys general, and
most recently now by the new Consumer Financial Protection Bureau. We are all determined to
make steady progress together to protect consumers in this area, and it will take all of us to
do that. Debt collection also has more salience today
than perhaps at any time in our country’s history. In the wake of the recent financial
crisis, we see far too many people who have fallen into financial difficulties. Many lost
their jobs. Many lost their savings and even their homes. Bills piled up and sat unpaid.
Many consumers fell behind, either because of bad decisions they made or because they
were victims of predatory practices or just of tough economic conditions during the Great
Recession. The best estimates are that currently 30 million Americans, nearly one out of every
ten of us, came out of the financial crisis with one or more debts in collection for amounts
that average about $1,400 per person. While we can put a number on debt, we cannot
quantify the emotional toll that it takes on consumers to live under the shadow of indebtedness,
especially if they are treated poorly by debt collectors. Such experiences are almost inevitably
accompanied by mounting feelings of frustration and helplessness. While many debt collectors
play by the rules and treat consumers fairly and respectfully, others try to get ahead
by flouting the rules. Our job is to root out bad actors and protect consumers against
unfair, deceptive, and abusive practices and other legal violations which damage both consumers
and also every debt collector that tries to operate within the law. We recognize that debt collectors represent
a wide spectrum of firms. They are an essential part of the credit system. Congress has concluded
that much lending should be done on the basis of the borrower’s ability to repay, and we
underscored this notion with the important Qualified Mortgage rule we recently adopted.
But the principle of lending based on the ability to repay runs in tandem with the broader
and accepted notion that people who owe money to others should in fact repay the money they
have borrowed, and they should feel their obligation and responsibility to do so. In fact, I have served as a debt collector
myself in two distinct positions in local and state government. When I served as Franklin
County Treasurer, I set new records for collection of unpaid delinquent property taxes. As Ohio
Attorney General, I was the primary debt collector for the state government, where we also set
records for repayment of funds, but I was also charged with enforcing the law against
debt collectors that were operating in the state. I came to appreciate how challenging
all of this work can be. At the same time, I came to know that debt collection can be
done the right way: treating people honestly and with respect for the circumstances in
which they may find themselves. I also came to know how hard it is on people when debt
collection is done the wrong way. In January, the Consumer Bureau first began
to exercise its authority to supervise firms that have more than $10 million in annual
receipts from consumer debt collection activities. Our supervision authority extends to about
175 debt collectors and debt buyers, which account for more than 60 percent of the consumer
debt collection industry as measured by annual receipts. And, yes, as General Mills mentioned,
it is now an industry. Through our examinations, we are now in a position to evaluate whether
federal consumer laws are being followed at every stage of the process, from credit origination
to debt collection, and through our enforcement authority, we can take action when we see
the law being violated. Last month, we held a joint roundtable with
our partners at the Federal Trade Commission to gather information and solicit input from
a wide range of stakeholders on the integrity of information used in debt collections and
in lawsuits against debtors. We often hear about collectors who pursue payments from
the wrong consumers or for the wrong amounts. This can happen when information about a debt
changes as it gets sold off, and this data may be unrecognizable to the consumer as the
debt gets passed down the line. At our joint roundtable, we heard strong consensus about
the need for robust national documentation standards and the need to maintain the accuracy
of information used to collect debts. We will keep that in mind as we move toward a rulemaking
process on debt collection issues. Today, we are announcing other steps in our efforts
to ensure accountability in this market and make sure that all consumers are being treated
fairly. We have already learned a great deal about
the debt collection marketplace from our ongoing supervision and enforcement work. Based on
that work, and in support of it, we are issuing two bulletins that warn companies about practices
that will receive particular attention. The first bulletin makes clear that certain
practices in the collection of consumer financial debts violate the law, regardless of what
kind of entity engages in them. Only the conduct of third-party debt collectors and debt buyers
is subject to the specific restrictions and prohibitions set out in the federal statute
known as the Fair Debt Collection Practices Act. First-party collectors, or those seeking
to collect directly on debt they themselves extended to a consumer, are generally not
covered by this statute. Today’s bulletin makes clear, however, that these first-party
collectors are subject to the general prohibition against unfair, deceptive, or abusive acts
or practices in the Dodd-Frank financial reform law, and many of the same kinds of restrictions
may be applicable here as well. Some collection methods violate the law because
they involve deception. Our bulletin identifies a number of practices that we view as likely
to be illegal in this regard. For example, no matter who owns the debt, the person collecting
cannot use any false, deceptive, or misleading representation to get a consumer to pay. Debt
collectors should not threaten legal action, like arrest or prosecution or imprisonment,
when they do not have the authority to pursue it. They should not falsely represent the
amount of debt that is owed or misrepresent that a consumer’s debt could be forgiven.
It is also improper to fail to post a customer’s on-time payment correctly and then charge
them late fees, and intimidation, abusive tactics, or profane language are simply out
of line. These are just a few examples of data collection practices that can harm consumers. So today’s bulletin makes clear that we will
be working to ensure that everyone collecting on consumer debts is following the law. This
is consistent with our new responsibility to engage in evenhanded oversight of entire
markets, regardless of whether or not individual participants are chartered institutions, like
banks, or non-chartered institutions, like debt collectors and debt buyers. Illegal practices by anyone harm consumers,
erode consumer confidence, and undermine fair competition by responsible providers in the
financial marketplace. The law clearly recognizes that debt collectors can significantly hurt
consumers in ways that go beyond pure dollars and cents. Much of the law was deliberately
crafted to protect the dignity and privacy of the individual consumer and to ensure that
he or she is treated with the respect we all deserve, even if we have fallen behind on
one or more of our financial obligations. Our second bulletin warns companies that they
must be especially careful whenever they make statements about how paying a debt will affect
a consumer’s credit score, credit report, or creditworthiness. Our experience indicates
that the debt collection industry would benefit from cautionary counsel on how to have these
discussions with consumers. Debt collectors use all sorts of strategies, some legitimate
and some illegitimate, to convince consumers to pay their debts. One strategy is to discuss
how the unpaid debt affects a person’s creditworthiness, and we are concerned that some of these discussions
could be illegal. The text of this bulletin highlights some
of the potentially deceptive claims that debt collectors may make to consumers about their
credit reports and credit scores. Debt collectors know that the information in a credit report
can have a powerful influence over a consumer’s further access to credit, and they may use
this as leverage when talking to consumers. But some debts are too old, under federal
law, to be included on a consumer’s credit report for most purposes. Collectors may try
to conceal this fact, telling consumers that paying the debt would remove it from their
credit report, even though the debt does not show up there anyway. We have also seen other
types of cases where debt collectors mislead consumers by telling them that paying a debt
would improve their credit score or creditworthiness. The bulletin is intended to serve as a warning
that such practices are wrong and that the Consumer Bureau will be attentive to hold
people accountable for illegal actions. Today, we are also announcing two ways we
are helping consumers help themselves to hold debt collectors accountable under the law.
First, the Consumer Bureau now will accept consumer complaints about debt collection,
including those referred from Maine, which has long been one of the issues that consumers
complain about most frequently at all levels of government. So we will be able to address
consumer debt collection complaints and help individual consumers try to reach an appropriate
resolution with their collectors. Consumers can submit a complaint against any
company that tries to collect a debt from them, but consumers can also do more. They
can choose to submit a separate complaint against the company with whom they had the
original account. This intake system will be useful as a feedback mechanism for creditors
that have hired third-party debt collectors or sold their debts. They will be made aware
of the kinds of struggles consumers are having with their continuing debts and can potentially
rethink what is happening to their customers or cut off those collectors they deem to be
problematic. We have found consistently that complaints
provide us with essential insight into the actual experiences of consumers who are navigating
the complex financial marketplace. It is through our consumer response function that we are
able to have the most direct and immediate impact on the lives of individuals. Once a consumer submits a complaint to us,
it is screened and forwarded to the appropriate company. The company reviews the information,
communicates with the consumer as needed, and determines what action to take in response.
It then reports back to us and to the consumer. We invite the consumer to review the response
and provide feedback. We review the feedback, using this information along with other information,
such as the timeliness of the company’s response, to help prioritize complaints for investigation.
We already accept complaints on many other consumer financial products and services,
mortgages, credit cards, student loans, auto loans, bank accounts, credit reports, and
we are pleased now to be able to take debt collection complaints as well. We will learn
much from these efforts. The second way we are helping consumers is
by publishing five different action letters on our website that consumers themselves can
use to communicate with a debt collector. This approach reflects our view that self-protection
can be an effective form of consumer protection in some situations. Several of the letters
are designed to help consumers gain valuable information about the debt being collected.
Putting a specific request to a debt collector in writing is often the best way to do this.
Other letters help consumers protect themselves from unscrupulous behavior by debt collectors.
These action letters are valuable because consumers have rights under the law, but they
often do not know what rights they have or how to assert them. For many Americans, self-help
is a good starting place in the struggle for dignity and respect. These letters are not
a substitute for legal advice or representation that consumers may want to seek as a means
of preserving their legal rights, but they are important initial tools that consumers
can use to protect themselves. The first action letter is for consumers seeking
more information about a debt the collector has told them they owe. It asks specific questions
about the debt and can be used to inform the collector that the consumer is disputing the
charges until they have more information. This letter is useful for a consumer who may
not immediately recognize the nature or amount of the debt or who needs to find out more
about the debt before deciding whether to pay it. The second letter tells the debt collector
to stop contacting the consumer unless the debt collector can show evidence that the
consumer is responsible for that particular debt. The letter also makes clear that the
consumer is disputing the debt. Consumers who affirmatively believe they have no responsibility
to pay the claimed debt may want to send this kind of letter. The third action letter is for consumers who
want to restrict when and how a debt collector can contact them. Under the Fair Debt Collection
Practices Act, debt collectors are prohibited from contacting a consumer about a debt at
a time or place they know, or should know, is inconvenient. Until the collector is put
on notice, more specific notice of the consumer’s individual circumstances, however, much contact
might occur that the consumer actually finds harassing. In this letter, the consumer tells
the debt collector how they would like to be contacted, which is a useful option for
a consumer who wants to work with the collector to resolve a debt. The fourth letter is for consumers who have
hired a lawyer. Generally, the debt collector should be directed to contact the lawyer instead
of the consumer in this situation. So in this letter, the consumer provides the debt collector
with the lawyer’s information and puts the collector on notice by specifying that any
further contact should be made only with the lawyer from that point forward. The fifth action letter tells the debt collector
to stop any and all contact. Under the Fair Debt Collection Practices Act, a collector
generally must stop contacting a consumer after it receives a written request to do
so. But it is also important for consumers to note that stopping contact from a debt
collector does not cancel the debt, and it does not prevent the collector from suing
them. For consumers who find that they are being harassed by a collector, this letter
can be a valuable option. The point of these action letters is to place
debt collection activities on the plane where they belong. They should be business dealings,
and they should not become personal in nature. It is simply not true that every consumer
contacted by a debt collector is a so-called “deadbeat,” and even those mired in tough
economic situations are entitled to the dignity and respect they deserve as free and equal
human beings. Giving someone grief and making their life miserable are familiar but unacceptable
debt collection tactics. Armed with knowledge of their rights and how to pursue them, consumers
will be better able to stand up for themselves and defend against such tactics. We ask those
in the consumer movement to help us make people aware of these resources that are now available
as part of our Ask CFPB page on the Consumer Bureau’s website at consumerfinance.gov. The marketplace for the collection of consumer
debt remains a very challenging market for consumers. It did not get this way in a hurry,
and it will take time to change it in a lasting way. But we will work closely with our partners
across the country to achieve that important result. Consumers need to know that they have
someone who will stand on their side, and we want to ensure them the dignity of being
treated fairly, even in adverse economic conditions. We take these goals to heart, and they will
guide our actions. Those debt collectors that are treating consumers fairly have nothing
to worry about and should go on about their business, but those using illegal means to
collect consumer debts should be forewarned that we will not tolerate such behavior. We
will use our supervisory and enforcement authorities to identify and eliminate illegal practices
while simultaneously empowering consumers to stand up more effectively for their rights
under the law. Promoting honest behavior in the marketplace
is in our country’s best interest. Both responsible businesses and consumers stand to benefit
by enforcing adherence to these basic norms. There is no reason why debt collectors cannot
treat consumers with dignity and respect, even as businesses are able fairly to collect
the money that is actually due to them. Thank you for joining us here today, and I
look forward to vigorous and enlightening discussions. Thank you. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Director Cordray. At this time, I would like to invite staff
and distinguished panelists to join the stage. While the panelists take their stage, I want
to take a moment to thank those joining by livestream. You can access the web link by
Twitter or Facebook, and before we get started with our panel discussion, I will take just
a few moments to show you how you can file a complaint with the CFPB. Consumers will be able to submit their complaints
regarding debt collection by clicking on the Debt Collection icon on consumerfinance.gov
or calling our Contact Center at 855-2372. When submitting a complaint, consumers will
tell us the type of debt, the specific issue and sub-issue, their narrative about what
happened, and their desired resolution. When consumers submit their case, they will
be asked to tell us the name and information of the company that is contacting them about
the debt, the name and information of the company that the original account was with.
Consumers can choose to submit a separate complaint about each company, if there are
more than one, using the single complaint. They can also add any documents, like their
G notice, if they received one from the debt collector. Consumers provide their contact information
similarly to all other product complaints. On the Review and Submit page, the consumer
can see exactly what information will be sent to the company and edit their information
before submitting the complaint. After they submit the complaint, consumers will receive
a complaint number for each company that they submitted a complaint for and can track the
status of each complaint by logging at consumerfinance.gov/complaint. Additionally, consumers can find the sample
letters that Director Cordray described at consumerfinance.gov/blog/debt collection/
or at Ask CFPB when you have questions. So let’s get started with our panel discussion.
Deputy Director Antonakes joined the CFPB in November 2010 as the Assistant Director
of Large Bank Supervision and was named the Associate Director for Supervision, Enforcement,
and Fair Lending in June of 2012. His background includes more than two decades as a financial
services regulator. In January of this year, he was named as the Acting Deputy Director. Corey Stone is the Assistant Director for
the CFPB’s Office of Deposits, Cash, Collections, and Reporting Reports. His team works across
all of the Bureau’s divisions to build market intelligence, develop policy options, and
coordinate with consumer groups and industry to do outreach in the markets it covers, including
debt collections. Corey, you have the floor. COREY STONE: Thank you, Zixta, and thank you
and all of your colleagues for organizing this out-of-the-Beltway event. We know there’s
a lot that goes into bringing all these people together in places, and these are an important
part of our outreach as a Bureau. So it’s a pleasure to be here in this beautiful city
and this gorgeous hall. Director Cordray spoke today about a number
of different initiatives that the Bureau is taking in the debt collections market, and
these are quite varied, and they really reflect the complexity of debt collections. These
cut across—our debt collections activity cuts across all of the different kinds of
credit in the market. We tend to talk about credit card debt because it is the biggest—it
has been the biggest category for a while, but the fastest growing categories of debt
collections today are student debt and medical debt, and each of those has particular complexities
and contexts that we need to pay attention to. There are over 4,000 debt collection companies
and many more creditors who are using debt collection agencies to collect debt, and so
these represent local players, national players, a vast array of different kinds of organizations
and companies of varying levels and sophistication. And we need to pay attention to that and their
ability to comply with the law. And there are many different parts of the
process. So from initial notice to consumers, all the way down to, as a last resort, litigation
and all of the things in between, from the telephone calls to the voicemails to the conversations
that happen over the phone, each of those has a particular importance in the process
and present opportunities for effective collection and also opportunities for harm to consumers. So we use this event as we used our roundtable
last month as part of being a data-driven agency to learn more about the process and
learn more about what consumers are experiencing and how we all at the state and national level
can work to make it better. We have assembled distinguished panels today
of consumer advocates on my left and industry representatives on my right, and we will be
introducing the panelists, each of whom will give 3 minutes of remarks, and then Zixta
and Steve and I will be posing questions to them as part of the larger effort today to
learn more about what consumers are experiencing and how we can make the system work better. So I am going to start by introducing our
consumer panel on our left. We will begin with Dalié Jiménez, who is an associate
professor of law and the Jeremy Bentham Scholar at the University of Connecticut Law School.
We will then hear from Alexis Iwanisziw, a research and policy analyst for the New Economy
Project in New York City, and finally, we’ll hear from Frank D’Alessandro, who is the southern
regional directing attorney of Pine Tree Legal Assistance, here in Portland. Dalié? DALIÉ JIMÉNEZ: Thank you, Corey. It’s a
pleasure to be here, and I’m very excited, both about the announcements that Director
Cordray just made with regards to the Bureau’s activities in debt collection as well as really
excited to learn about the letters that have just been posted to the CFPB website. I am
excited because those letters really aim to empower consumers to communicate with debt
collectors, and consumer, yes, can communicate with debt collectors now. The problems might
be that they may not feel like they have the right language or understand their rights
or know what kinds of questions to ask, and these letters go to that. And this is interesting to me because of the
larger concern I have about the number of lawsuits filed in debt collection proceedings
and the number of consumers that actually never show up to answer those lawsuits which,
depending on which study you read, goes between 70 and 90 percent of consumers who are sued
in a debt collection proceeding that don’t show up, and so that ends up meaning that
for those consumers, the collector can get a default judgment, which in many cases can
mean garnishment or a lien on their home if they have one, which is a very serious consequence
for consumers, and the question is why is it that they don’t show up. Is it because
they don’t understand the consequences? Is it because they don’t know their rights or
they’re intimidated by the process, by the legal system? And I actually have a study with Lois Lupica
at Maine Law School and Professor Greiner at Harvard Law School, where with Pine Tree
Legal Assistance as well, that is going to try to find out the answer to that question,
by giving consumers a sort of empowerment package, giving some consumers an empowerment
package with information about how to resolve or how to help themselves in a lawsuit and
giving some an offer of representation by Pine Tree, and seeing whether those things
actually make a difference in either the number of consumers who engage with the debt, either
by showing up or by contacting the collector, or the results of the lawsuit, the outcome
of the lawsuit, or even more importantly later on, their financial health and well-being.
I think these are important questions to CFPB. There are many, many questions and issues
in debt collection. As Corey said, it’s a very complex system, and it really does touch
on the lives of many, many consumers, 30 million and counting, and Implementation’ very excited
the CFPB is putting a lot of their efforts behind this. Thank you. COREY STONE: Alexis? ALEXIS IWANISZIW: Thank you, and thank you
to the CFPB and to Director Cordray for having me here today. My name is Alexis Iwanisziw,
and I am a research and policy analyst at New Economy Project, former. NEDAP. We promote
economic justice in low-income communities and communities of color in new York City,
and among our activities, we bring impact litigation, and through a legal hotline, we
work with low-income New Yorkers to resolve a host of financial justice issues. Our hotline is flooded with calls from people
whose lives are being devastated by abusive debt collection lawsuits. People can’t pay
their rent or can’t pay their utility bills because collectors have frozen their bank
accounts or are garnishing their wages, and because of too often fraudulent debt collection
judgments that appear on credit reports, people are unable to find housing or even jobs as
more and more employers are checking people’s credit. I’m going to focus today on two major debt
collection issues we see in New York: first, the prevalence of abusive debt collection
lawsuits particularly filed against people living in communities of color; and second,
the large bank’s role in facilitating abusive debt collection tactics. We just released a report called The Debt
Collection Racket in New York. That report shines a light on abusive debt collection
lawsuits filed by collectors that routinely obtained default judgments from the courts,
even though they almost always fail to present evidence of the debt, as the law requires.
These abuses stem largely from structural problems related to the buying and selling
of old charged-off debts. We also found that New York’s communities
of color have disproportionately borne the brunt of these abusive debt collection lawsuits.
Communities of color make up all 10 of the New York zip codes, with the highest concentrations
of default judgments and debt collection lawsuits. These are the very communities that banks
redlined for decades, that have been at the epicenter of the predatory lending and foreclosure
crises. These abusive debt collection practices are directly linked to broader economic discrimination
and wealth inequality. Another problematic debt collection issues
we’ve seen relates to banks that illegally facilitate and profit from payday lenders’
abusive collection tactics. Some Internet payday lenders make loans in New York illegally,
and as the CFPB has documented, payday loans trap people in an inescapable cycle of debt.
We’ve seen that when borrowers request that banks stop payday lenders’ illegal debits,
which they have the right to do under federal law, the bank often refuses and then charges
overdraft fees when there isn’t enough money to cover the payday lenders’ attempt to debits. In the case of our client, Ms. B, payday lenders
attempted to debit her bank account 55 times over the course of two months, and her bank,
one of the country’s largest, charged her more than $1,500 in overdraft fees. The bank
then proceeded to harass her to pay the overdraft and negatively reported her to Chex Systems,
which prevented her from opening a new checking account at another bank. We sued the bank over these illegal practices,
and I’m pleased to report that we reached a groundbreaking settlement with them, and
the bank has committed to revamp its systems and procedures to ensure that it now properly
stops payments upon customers’ requests. Our organization has worked on debt collection
abuses for years as a matter of racial justice and neighborhood equity. We look forward to
the CFPB using its authority to create meaningful standards for bank’s sale of charged-off debt,
to address rampant robo-signing abuses, and other violations of law that I’ve described
today. Thank you. COREY STONE: Thank you. Frank? FRANK D’ALESSANDRO: Thank you. I’d like to
thank the CFPB for getting outside the Beltway today and being in Portland and permitting
our participation in this field hearing. When Pine Tree Legal Assistance first opens
its doors nearly 50 years ago, one of its first major court victories involved a challenge
to the longstanding debt collection practice in Maine that permitted judgment creditors
to imprison Maine debtors until a judgment was satisfied. Since the recent economic collapse
precipitated by under-regulated financial markets, Pine Tree has intensified its work
in the area of consumer rights, first with the defense of homeowners and foreclosure
actions and more recently with the representation of consumers against third-party debt collectors. Our recent experience in both foreclosure
and credit card debt collection cases has been remarkably similar. In both instances,
we encountered a system dominated by mortgage services and debt collectors who are able
to obtain court judgments with very questionable evidence. We encountered homeowners and consumers
that were terrified that nonpayment of a mortgage or credit card debt would result in their
incarceration, and we encountered stiff resistance from many quarters to the notion that attorneys
should even appear in court and vigorously advocate for a homeowner behind on their mortgage
payment or a family who might be over their head in credit card debt. We have learned two things from our experience.
The first is that legal representation makes a dramatic difference in the outcomes for
homeowners and consumers, and, second, additional legal protections are desperately needed to
fully address consumer interests. The vast majority of cases brought by debt
buyers in Maine courts result in a default judgment. We also routinely observe cases
in which people agree to make payments that they cannot afford from income that is exempt
from collection, such as disability or retirement benefits. This is wrong. It’s against the
law, and we need to do better. In order to remedy the problems that we have
repeatedly observed, at a minimum, the following four steps should be taken. First, every communication
from a debt buyer or debt collector with a consumer should be in plain English and explain
the steps a consumer needs to take to avoid a default judgment or another loss of their
rights and describe the types of income that a consumer may have that are exempt from collection.
Second, debt collectors should be prevented from taking any action to convince a consumer
to make payments on a debt that is time-barred or otherwise uncollectable at law. Third,
subsequent debt buyers need to be held responsible for the acts of previous debt collectors;
and, finally, action must be provided to all consumers, so they have the power to bring
a case on their own behalf to make sure that legal protections are enforced. That’s it. COREY STONE: Great. Thank you, Frank, and
thanks to all of our consumer advocate panelists. I will now introduce our industry representatives.
Frist, we will hear from Joann Needleman, who is president-elect of the National Association
of Retail Collection Attorneys, and after Joann, we’ll hear from Patrick Morris, who
is the CEO of ACA International, the largest trade association of debt collectors. Joann? JOANN NEEDLEMAN: Thank you, Corey, and thank
you, Steve, and thank you, Director Cordray and the whole CFPB staff for inviting me to
participate in today’s field hearing. Portland is my second favorite city. I was coming here
anyway, and thank you very much for allowing me to do that a day early. And it’s an honor
to be here, and thank you to the participants in the audience today for coming. My name is Joann Needleman, and I am an attorney
and vice president of the law firm of Maurice & Needleman, which is located in both Pennsylvania
and New Jersey. My firm represents clients in the consumer financial services industry,
and we litigate extensively in matters involving the Fair Debt Collection Practices Act, which
you will hear today being referenced as the FDCPA, and the Fair Credit Reporting Act,
which we will talk about in terms of FCRA. I’ve been a collection attorney for 17 years,
and, additionally, as Corey indicated, I am the president-elect of the National Association
of Retail Collection Attorneys, also known as NARCA. NARCA is a trade association comprised
of over 700 debt collection law firms committed to the fair and ethical treatment of all participants
in the debt collection process. Our members are required to adhere to NARCA’s code of
professional conduct and ethics, and as attorneys, we are required to practice law in a manner
consistent with our responsibilities as officers of the court. As attorneys, we must also adhere
to applicable state and federal laws, rules of civil procedure, state bar licensing, and
certification requirements, and rules of professional conduct for our particular states in which
we practice. The CFPB’s recent bulletin regarding the prohibition
of unfair, deceptive, abusive acts or practices, as we will probably call as “UDAAP” today,
and the collection of consumer debt identifies these same prohibitive acts as are already
identified in the FDCPA. Debt collectors who engage in UDAAP as well as those who intentionally
ignore and violate the FDCPA is unacceptable. Ultimately, this harms consumers by creating
communication barriers between legitimate debt collectors and consumers who legitimately
want to resolve their debts. NARCA concurs with the CFPB that consumers
must be treated fairly and with respect, and NARCA supports measures that will help consumers
distinguish professional, responsible, and ethical collectors from those who are not. NARCA appreciates the CFPB’s collaborative
approach to finding solutions to the issue facing consumers. Over the past several years,
representatives of NARCA have met with representatives of the CFPB personally to discuss these issues.
The CFPB has always provided an open ear and a forum for thoughtful discussion and the
exchange of ideas and viewpoints. I was very pleased to participate in last month’s CFPB/FTC
roundtable discussion which helped identify issues and possible solutions regarding debt
collection data. NARCA was also very appreciative for the opportunity
to offer its input on the design of the CFPB’s debt collection complaint portal, which you
saw on the slides this morning. The CFPB was very gracious in allowing its representatives
to present a webinar to all NARCA members on the complaint process, and NARCA had the
opportunity to encourage its members to register their contact information with the CFPB. Through this interaction, NARCA has developed
a better understanding of the CFPB’s initiatives and deep commitment to consumers. Likewise,
I believe the CFPB has come to understand the viewpoints and concerns of NARCA’s members,
which also demonstrates a commitment to consumer protection and fair and reasonable regulation. Expanding on the open line of communication
NARCA has enjoyed with the CFPB, it is also critically important that consumers communicate
and participate as well, not with just the CFPB or state regulators, but also with the
people who are attempting to collect your debt. Communication is the single most critical
action that can lead to resolution of issues. If you receive a letter or a call from a collection
attorney, respond. Open a dialogue. Ask questions. Be specific. If you dispute a debt, let us
know what it is that you dispute. Remember that communication is a two-way street. While the CFPB has provided you with some
sample letters that may be helpful in some circumstances, the idea is to communicate—the
idea is not to communicate in order to build barriers, but to communicate in order to achieve
a resolution. NARCA has also developed tips for consumers in responding to a consumer—to
a collection attorney, and it is on our website at narca.org. Finally, if you receive a summons to appear
in court, please, please appear. I know the court process seems intimidating, but it is
designed to provide a level playing field that treats all parties equally. It does this
in two ways. First, as collection attorneys, we are bound by our ethical rules of professional
conduct and state bar rules to treat consumers—to communicate with consumers in certain ways,
especially when they don’t have attorneys, and, second, inside the courtroom, you have
a completely impartial, unbiased judge who is the ultimate finder of fact. This is your
opportunity to explain your side of things, and it is important that you be heard. Today’s hearing epitomizes the CFPB’s collaborative
approach with the participation of industry and advocacy panelists and, most importantly,
the consumers in this audience. I particularly want to thank them for taking the time out
of their busy day to attend today’s hearing. Thank you. COREY STONE: Thanks, Joann. Pat? FRANK D’ALESSANDRO: Thank you, Corey. The ACA is pleased to participate and appreciates
our ongoing work with the CFPB to help the Bureau better understand our industry and
help our members better understand the Bureau. To give you a little context, ACA International
is the largest trade association in the world for debt collection. We have about 5,000 member
worldwide. We’ve worked with the CFPB from the outset
on its creation of the consumer complaint resolution process for debt collection that
the Director mentioned earlier. ACA has helped provide insights and feedback from our membership
on important aspects unique to consumer debt collection that the CFPB should be considering
as it created this complaint resolution process. Last month, similar to what NARCA did, we
jointly hosted a teleseminar to help ACA members learn about the details of this new process,
which was immensely valuable to our members, and there was high participation. And we thank
the Bureau for providing the speakers for that as well. CFPB continues to work with ACA to get member
questions about the complaint resolution portal answered from that seminar, and ACA continues
to encourage its members to sign up to the complaint resolution company portal, and many
ACA members have participated in the training that’s been held by the CFPB. The last count
I heard in the last couple days was over 600 or so of our agencies have already signed
up. Now, while some might want to paint with a
broad brush—and I don’t want to quibble with your seating arrangements, Corey, but
our view is that debt collectors are not the enemy of consumers. Our members take collection
laws and consumer complaints seriously and want to resolve them and deal with consumers
every day in a respectful and professional manner. We believe that consumers are best
served when they have the opportunity to communicate and resolve their complaints, as was mentioned
earlier. Communication between a consumer and a debt collector is absolutely critical,
and without that communication, we can’t resolve the reason for the contact. We can’t identify
a wrong party contact, and, importantly, without communication, we can’t address and resolve
consumer complaints. We are heartened by the CFPB’s recent report
outlining a reduction in consumer complaints against debt collectors, but, no, there is
much more work to be done to continue to reduce complaints from ever occurring and resolving
existing complaints. Based on the counsel of the Better Business
Bureau’s annual report on inquiries and complaint statistics, we have reportedly shown that
when given the opportunity to communicate with the consumers, we can be successful at
accomplishing this feat. U.S. collection agencies resolved 86 percent of the consumer complaints
received in 2012, exceeding the national average of 77 percent for all industries. In society, debt collectors and others are
publicly measured by the raw numbers of complaints received. It garners significant media attention
and is often used as a benchmark of industry performance, yet often there is also little
context to these consumer complaints. It is imperative to point out that just because
a consumer has complained to the CFPB does not mean or imply that the debt collector
has actually violated the law or engaged in wrongdoing of any kind. Each year, creditors and debt collectors make
more than 1 billion contacts to consumers, and the number of complaints is relatively
small in comparison. We need to keep this in mind before castigating debt collectors
or connecting complaints automatically to bad behavior. Our members believe consumers have important
rights under federal and state law and describe to be treated fairly, respectfully, and free
of deception and abuse. It is a hallmark of our training, and ACA will continue and encourage
active communication between consumers, consumer groups, and third-party debt collectors, in
addition to working with the CFPB to provide feedback that refines the resolution process
to ensure that it accurately reflects the environment of consumer debt collection. Thank
you for having me. COREY STONE: Thank you, Pat, and thank you,
Joann and Dalié, Alexis, and Frank. We will now begin our questions with Acting
Deputy Director Antonakes. STEVE ANTONAKES: Great. Thank you, Corey.
Good afternoon, and welcome, everyone. Like everyone else, I’m especially pleased to be
at this outside-the-Beltway hearing, especially pleased because it’s an opportunity for me
to come home to new England. I want to welcome all of our panelists here today. And, Patrick for being patient and for being
the last to speak, you have the benefit of getting the first question. So Director Cordray
announced earlier today that we will start taking complaints on debt collection, and
you also referenced some of the efforts of your members to become ready for this process.
I just would ask you to speak a little bit more so about how your members feel about
having complaints taken on debt collection practices by the Bureau. FRANK D’ALESSANDRO: Thank you. Thank you for
letting me go first again—or last first. We’ve worked with regulators at the state
level, certainly at the federal level, on matters pertaining to industry oversight since
the association was formed in 1939. Our members, I think, are very familiar with the laws and
the regulations governing their work. As I mentioned earlier, we do extensive training
through the association and at all the agencies that I visited to make sure that members are
familiar with that. Our members have welcomed the development
of the complaint portal. Our members, I believe, are ready for it. Most have already robust
internal compliance departments, and as I had mentioned earlier, as we had put the word
out that you all were starting to ask for the contact at the agency, there was a quick
response. Our agencies want to get these complaints resolved and want to make sure that you all
have the person to talk to, to get them resolved timely. STEVE ANTONAKES: Thank you. ZIXTA Q. MARTINEZ: I want to add my thanks
to the panelists as well. We learn a great deal from these conversations and are grateful
that you are willing to engage in conversation with us. This question is for Professor Jiménez. Professor
Jiménez, can you describe what you see as some of the benefits and potential challenges
as well to having the CFPB take debt collection complaints from consumers? DALIÉ JIMÉNEZ: Absolutely. I think—well,
I’ll start with the benefits because I think there are many, and they are very exciting
actually. One is just the availability of information for the Bureau and other regulators,
but where the problems might be, both physically where they might be around the country, as
well as what kinds of collectors, whether it’s a particular type of debt being collected
or a particular size or company that is collecting, and any problems associated with that, so
a sort of heat map, if you will. I think that is invaluable to determining where to focus
efforts, limited resources in terms of enforcement and other investigations. The other one is that all of that information,
if the Bureau continues to do what it’s been doing in the past, will be public at some
level for the rest of the country to search and to look at and to see whether their state
or their area is particularly hard hit by these types of complaints or others and to
use that in their—you know, whether it’s an Attorney General or others as they are
pursuing cases or trying to resolve some of these issues. The fact that beginning with this system,
unlike the FTC, we will be able to—sorry—the CFPB will actually do some investigation of
the complaints if it thinks it’s warranted, will actually resolve them in the sense of,
yes, there is a violation of law here or there isn’t, not all, but the ones with its limited
resources, it can get to. We will actually have some more detailed information
about what really is going on. Are consumers complaining about things that aren’t violation
of law, but they just perceive as inconvenient or they think they might be violations of
law, or are there really true violations going on here? And that sort of gets me to the downside or
the potential pitfalls here, and that is, if the volume that the FTC was seeing plays
out with the CFPB or anything close to that, it will be I think very difficult, given the
staff that CFPB has, to really pay as much attention to those complaints as it wants
and as it has with other kinds of services. So I think that is the challenge in the balance
here, but I’m very hopeful. Thank you. COREY STONE: I have a question for Joann,
and this relates to the bulletin Director Cordray announced today related to communications
about credit reports and credit scores. How feasible is it for a collector or, for that
matter, a collections attorney to know that a debt is or isn’t obsolete for credit reporting
purposes? JOANN NEEDLEMAN: Thank you for that question. The answer is it’s really—it depends. I
hate to give you that answer, a typical lawyer answer, but sometimes it’s not feasible, and,
again, it comes back to issues of information. The FCRA says that you can’t report a debt
that is 7 years past default, and sometimes default, does that mean charge-off? Does that
mean last date of payment? So we have to define what that is. Sometimes there’s information where we don’t
know. Maybe there was a payment, so maybe that could extend the time. So it can be difficult,
but I can tell you from my perspective in dealing with members who are collection attorneys,
that is not an issue that we run into because most of our members don’t credit-report. To
the extent that our members do any pre-litigation activity and have communications with consumers,
yes, that is an issue. I think that there’s—I know that there’s trading on that issue, but
it’s not—I think that’s something really more that Patrick can talk about because I
think that many of his members are involved in more credit reporting, just based on agencies
and working with creditors, more so than my member law firms. But I think your question raises some issues,
and, again, that goes back to what we were talking about last month. It’s the information
of data integrity. How do we get the proper information to know what is the default, and
how does that information travel? COREY STONE: And thank you for pointing out
the ambiguity of when the clock starts. It is I think under the FCRA the date of first
delinquency rather than default— JOANN NEEDLEMAN: Yeah. COREY STONE: —which has its own definitional
issues, but, Pat, do you want to—do you have anything to add? FRANK D’ALESSANDRO: Yeah. Let me just start
by saying I’m not an attorney, and I’m not going to fake it with this question. [Laughter.] FRANK D’ALESSANDRO: Yeah. I just think kind
of an important point to bring forward is, look, the debt collector’s work in the third-party
world relies on the data provided by the creditor, and a bunch of folks have already referenced
the roundtable that a lot of us participated in last month with you all and the FTC. And
this includes account details, documentation, information about the consumer believed to
have incurred the debt. Certainly, I think the information provided by the creditor is
going to be pivotal to what most third-party collection agencies then have and can do. COREY STONE: Thanks. STEVE ANTONAKES: So my next question is for
Alexis. Alexis, as you know, certainly credit scores are comprised of many variables, many
of which are interrelated. With that in mind, is it possible that a creditor could reliably
tell a consumer that taking a certain action would have a direct impact on their credit
score? ALEXIS IWANISZIW: As we see on our hotline
and we hear from callers to our hotline—we do have a legal hotline—it is absolutely
the case that debt collectors will tell people that paying a debt will have a certain effect
on their credit score, even when the collector may not be able to be reliably sure that that
is the case or may not be reporting to credit bureaus. So the CFPB’s action today issuing
the bulletin, reining in that abusive practice is really important . And I’d just like to say one thing about why
this tactic works for collectors also. It’s because people are so concerned about their
credit and how it determines their access to jobs, to housing, to insurance, and, of
course, loans as well. And the credit bureaus, the private companies that aggregate this
information, have really stepped up their marketing, and this expanding use of credit
information has a discriminatory impact on lower income people, on people of color who
are too often targeted for predatory financial products. STEVE ANTONAKES: Great. Thank you, Alexis. ZIXTA Q. MARTINEZ: This next question is for
Pat. Pat, can you talk a little bit about standard procedures and creditor operations?
For example, is it a standard procedure in creditor operations to do business in a manner
that might be considered an FDCPA or other violation if the creditor were also a debt
collector? FRANK D’ALESSANDRO: Well, again, the majority
of our members are third-party debt collectors and collection attorneys and not creditors,
but based on what we know from our creditor members, most of the large creditors already
confirm to the internal collections process, to the spirit of the FDCPA, for a lot of reasons,
the least of which, as I think most of the attorneys here will know, the FTC already
has the ability to consider nonconforming practices to be unfair or a deceptive trade
practice under Section 5 of the FTC Act. ZIXTA Q. MARTINEZ: Thank you. COREY STONE: So I have a question for Frank,
and this is maybe a great one for consumers. How can a consumer ensure that someone who
may be calling them about a debt has a legitimate right to contact them and collect from them? FRANK D’ALESSANDRO: Well, that can be a difficult
question to answer. Under the Fair Debt Collection Practices Act, the debt collector is supposed
to provide information validating the debt to the consumer within 5 days of the initial
communication with the consumer. The problem is when that doesn’t happen and a consumer
is not aware of their rights, there are other protections in the statute. The consumer can
request that information if they request it from the debt collector within 30 days of
the contact. Many consumers are not aware of that, and many debt collectors, if you
go outside that 30-day period, will refuse to provide the information. So it’s a difficult issue. It’s really important.
I mean, we have seen cases where a consumer—multiple parties try to collect the same debt for the
consumer, and so its’ important that the consumer be able to verify that the person contacting
them actually has the right to enforce a debt, and it’s not just a—you know, it’s not just—it’s
not just for show to make them prove that. It’s a really important thing that before
someone makes a payment on a debt, that they’re assured that the person they’re making the
payment to is the one to whom they may owe the money. COREY STONE: Thank you. STEVE ANTONAKES: That’s wonderful. So I will
begin the lightning round. I will have one question that I’ll ask of all the panelists.
I’ll ask for the consumer representatives to respond first and the industry representatives
to follow, and the question is this. If you were advising a consumer who wanted to resolve
a debt, what is the one thing that you would recommend that they would do, and what is
also something that you would tell them to be cautious about? So just one more time,
since I’m going to ask everyone to respond. Advising a consumer who wants to resolve a
debt, what would you recommend that they do, and what would you recommend that they be
cautious about? Dalié, we can start with you, if you like. DALIÉ JIMÉNEZ: Okay. Well, I guess it depends
on where, the stage at which the debt is at, but let’s pretend that it’s early on, and
they have just gotten a letter or a call. I mean, the question Corey just asked is critical,
make sure that this is the party that if you do believe you owe this debt that you should
be paying and get that. The letters that the CFPB has just put on their website actually
would help with that, at the very least, to get the consumer to say the right words and
to feel like they have confidence to do that, to request information that would validate
or verify that this is the right creditor, and be cautious both of that and of the amount
that you are being asked to pay, even if you believe, yes, I did have such a debt and I
didn’t actually pay it, make sure you get verification that the amount you are paying
is, you know, the correct amount. STEVE ANTONAKES: Thank you. Frank? FRANK D’ALESSANDRO: I think it would be—to
add to that, it would be helpful to contact, to get some legal help, you know, to consult
the CFPB website, to consult like Pine Tree Legal Assistance website, to speak to an attorney,
and not just assume that just because someone has contacted you that you owe the debt, especially
if you don’t feel like you owe the debt. If you feel like it’s the wrong amount, you feel
like you never had the credit card in the first place, or you never heard of this person
or this debt collection agency who’s contacting you and trying to collect the money, it’s
within your rights, and there’s nothing wrong about contacting, requesting the information
you need from the debt collector, for them to show you that they in fact own this debt
that they are trying to collect. ALEXIS IWANISZIW: Yes, I would echo what’s
already been said, especially about seeking free legal assistance or free financial counseling,
if it’s available. And I would also just point out that a lot
of the debt that we see that’s charged off by banks is debt that they’ve sold for pennies
on the dollar with very little documentation. So the banks aren’t held accountable for that
debt, and the collectors who are trying to collect on that debt are doing so with very
limited information and sometimes don’t have sufficient proof and therefore rely on rob-signing
and other abusive tactics when bringing lawsuits. So people should just be aware that that’s
going on as well. STEVE ANTONAKES: Okay. Anything you’d want
to add about anything consumers should be particularly cautious about in addition to
making sure they take the steps to verify that the debt is correct? ALEXIS IWANISZIW: Just also being aware of
their rights around exempt income, that Social Security, unemployment, many sources of income
are protected from debt collection, and people should also think about prioritizing debts
and making sure they don’t agree to settlement agreements that will not allow them to pay
their rent, pay their bills, put food on the table, and they can prioritize those things
above. STEVE ANTONAKES: Great. Thank you. Patrick? PATRICK MORRIS: Yeah. As was mentioned in
the Director’s remarks, you have to communicate. Avoiding a letter or not taking the call won’t
make that debt disappear, and by communicating and talking to the collection agency, you
can pay the debt. You can verify the debt. You can confirm whether or not they have reached
the right person, and, of course, as has been mentioned, it gives you the ability to notify
the agency if you dispute it, which then by law the collector must inform you of your
rights. STEVE ANTONAKES: Great. Thank you. Joann? JOANN NEEDLEMAN: Thank you, Steve. Your question
raises a good point, especially from the perspective of my members as attorneys. It’s hard for
us to advise consumers because we represent the client. So we have to be very, very careful,
and question like that really IDs the conflict that attorneys have in the debt collection
space, is that we have a professional obligation to properly and zealously represent our clients,
but at the same time, we have to give tremendous deference to consumers, especially if they
are not represented. So I’m happy to say that I agree with some
of the points that the consumer side is making. I do agree that if you have free legal services
available to you when you’re discussing the settlement of debt, absolutely go seek those
services. I think that they can provide some excellent counseling. And I also agree that when a consumer is confident
that this is their debt and this is their obligation and they want to pay it—and we
have this on our tips on our website—only agree to what you can afford. Do not enter
into an agreement that you can’t afford. That’s not going to resolve the issue. o, again,
the prioritization, the understanding of what your priorities are, your rent or whatever,
after that really look at what you have and make a settlement. You would be pleasantly
surprised that even a small commitment a month, even if it’s small, would be acceptable to
the majority of responsible and ethical debt collects. STEVE ANTONAKES: Great. Thank you. COREY STONE: Than you do our panelists, Joann
Needleman, Patrick Morris, Dalié Jiménez, Frank D’Alessandro, and Alexis Iwanisziw.
This concludes the panel portion of our public hearing, and we ask our panelists to accept
applause from the audience and leave the stage. [Applause.] RICHARD CORDRAY: Zixta, as they are leaving
the stage and before we start with the audience portion, there were two points came up in
the discussion, I just want to emphasize. The first point is why it’s very important,
as was noted, for a consumer to actually communicate with the collector, and that’s because there
is a certain amount of communication that occurs that is completely illegitimate. It
is not an actual debt collector. It is somebody who is a fraudster or a scammer imitating
or mimicking a debt collector. Around every financial services industry or practice that
we have seen, there is a fringe element of scams and frauds that exist. It happens with
mortgage servicing, it happens with debt collection, where people will simply be communicating
with completely phony things just to see what kind of money they can get. So that’s another
reason. And both legitimate debt collection companies and consumers are victimized by
that practice that pollutes otherwise normal communication. The second point is one that I really didn’t
cover adequately in my remarks when I talked about our Consumer Complaint Database. Not
only is it a method of resolving complaints, but it also is—we’ve done something somewhat
unusual, which is not unprecedented in the federal government, but we’ve opened up our
database to be accessible to the public. So once we go live with debt collection complaints—and
there’s a bit of a lag, maybe a 30-day lag as we go through the process and resolve individual
complaints—they will be logged into the system, and you will be able to help yourself
to take a look at what kind of complaints are being registered there, which ones are
coming from Maine, which ones involve which companies. And the point of that is that not
only as I said are complaints very useful to us in doing our work, but we think that
accordingly, they probably will be very useful to consumers, and we have heard that that
is so, and to companies to know what’s going on, know what their competitors are going.
So we do invite you to make use of the Consumer Complaint Database, not only about debt collection
complaints, but all the others that we take that may be helpful to you if you’re consumer
advocates working and advocating for consumers are public officials and as industry, as you’re
trying to understand what’s happening, and how you compare. Maybe you compare favorably
with your competitors in terms of your responsiveness and your speed, and if so, you should feel
free to brag about that. That’s a good thing. ZIXTA Q. MARTINEZ: Great. Now it’s time to
hear from audience participants here today. Our audience includes community leaders, advocates,
industry representatives, and, of course, consumers. The open mic portion of today’s
field hearing is an opportunity for the CFPB to hear from you directly, to get your perspective
on today’s discussion on debt collection, but also to hear from other consumer finance
trends and practices in your community and in Maine. Each person will have about 2 minutes for
comments, and what we hear from you is invaluable. It is part of how we take in new, fresh information.
We want to hear from as many of you as possible. So I encourage you to please observe the time
limit, so that as many folks has signed up to share their observations have the opportunity
to do so. So, with that, let’s get started with State
Representative Jane Pringle. Representative Pringle, you will soon get a mic. JANE PRINGLE: Thank you very much. I am here
more to listen and learn, although one of my questions relates to the responsibility
of the lender in the first place of making sure that the person they are loaning money
to can pay it back. It seems to me watching the financial crisis, I kept wondering how
people were able to buy these homes. I knew how much I made and how much I could afford
to borrow, and it seemed like loans were being made in astronomical amounts to people who
didn’t have income or assets. So we didn’t hear about that. Is there any effort to look
into that or improve, or is that part of Dodd-Frank and not related to what you’re doing here
today? ZIXTA Q. MARTINEZ: Thank you. You just threw
a softball question at us. We have spent the first couple of years at the Bureau engaging
in mortgage market rulemaking, specifically around Title 14, that creates ability to repay
requirements designed to get both generally and specifically at precisely that issue. You’re right. In the run-up to the crisis,
loans were made without regard to ability to repay in many instances. Dodd-Frank Act
did address that, and we hope that we have created the kind of framework that will encourage
responsible lending attuned to ability to pay and make it a little tougher for the dishonest
originators that led up to the crisis. Thank you. Laura Buxbaum. LAURA BUXBAUM: I think I signed up last and
get to speak second. This is great. Thank you so much, Director Cordray, and all
of the CFPB staff for coming here to Maine. This is just wonderful to have you here and
telling us what you’re up to and listening to consumers and others from Maine. I work for Costal Enterprises, Incorporated,
CEI. We are a nonprofit community development financial institution based in Wiscasset,
Maine. We are a HUD-approved housing counseling agency. So my experience and comments have
more to do with mortgage lending and foreclosure prevention than with debt collection, per
se, although obviously they’re related. I wanted to comment on two things. One is
that I understand the CFPB has recently instituted a Consumer Financial Civil Penalty Fund, and
that I’ve missed the deadline for your comment period, but I wanted to say thank you for
doing that. I think it’s a great idea, and to reinforce the comments that I believe you
received from the National Housing Resource Center, this is a fund to help recompense—or
to be held for victims, but if victims can’t be found, then the funds will go into a pool
that can be used for financial literacy and consumer education, as I understand it. And
I wanted to urge you to also create as large a pool as possible and to include one-on-one
counseling in the allowable activities that you would fund, to include HUD counseling
agencies like mine as eligible recipients, and to think about a range of organizations
that could be recipients, including hard-to-reach populations, the ones that serve hard-to-reach
populations, limited English proficiency, and rural. We serve a rural population here,
and that’s really important. So I also wanted to say that I appreciate
the new rules that I saw on your website that will require counseling for high-cost loans.
I think that’s going to be in force in January of 2014. I’d like to ask you to do what you can. I
don’t know what is within your power to do, but to work with HUD and others to find ways
to incentivize support and even require housing counseling for other borrowers, borrowers
that may be putting down low down payments or that may be less than perfect credit and
maybe others, because our experience is that consumers who receive either homebuyer education
or one-on-one counseling, or both, become responsible homebuyers, don’t fall into some
of the traps of predatory lenders, and not just predatory lenders, but just don’t fall
into traps of borrowing more than they can afford, understand being responsible homebuyers. So those are my two comments. Thank you very
much. ZIXTA Q. MARTINEZ: Thank you, Ms. Buxbaum,
and thank you for the work that housing counselors do around the country. It’s very important
work. It’s front-line work. We know how difficult it is, but it is of great benefit to the consumers
that you serve. We received the comments from the National
Housing Resource Center. We meet with them frequently, and they have been an invaluable
source of important information, as we have worked toward putting together the Civil Penalty
Fund, and we will certainly take your views and suggestions into consideration in that
process. Thank you. Steve Parker. STEVE PARKER: Good afternoon. Thank you, and
thank you for all the panelists and you for coming. My name is Steve Parker. I’m an attorney,
a collection attorney with Daggett & Parker. I’m a member of NARCA as well. NARCA was represented
on the board—on the panel, rather. I just wanted to make two brief statements.
One, that, of course, that was said, the number of complaints clearly doesn’t necessarily—that’s
the number of problems. In nearly 25 years of being a collection attorney, I’ve had several
complaints with in fact Will Lund’s office. They’ve always been resolved, and not because
it’s been a problem that something has been done wrong. It’s because someone didn’t understand
the process. For example, someone had a court order for a payment. Their paycheck was garnished,
and they thought this was a terrible thing to do, but they just didn’t understand the
process. So not all—not all complaints, of course, equal a problem, equal something
that someone has done wrong. Very often, it’s something that people don’t understand the
process. Also, I believe it was Director Cordray had
made a comment that it shouldn’t ever be personal. I actually disagree. It should always be personal.
Every collector, when they are doing the collections, should know the information from the debtor,
what’s going on in their life. Especially when they are dealing with the debtor, working
on a collection, everything that debtor is going through is personal to them, and it’s
important to what can be done to the situation, how it can be resolved. An awful lot of debt
cases cannot be resolved. People don’t have the money. It doesn’t mean it’s not owed.
They just don’t have the money, so it can’t be resolved. But all those things are very
personal. So it’s really always personal. It certainly should never get out of line,
and the FDPCA clearly should always be followed. The very last thing is that another comment
said those collectors who are treating the consumers fairly have nothing to worry about,
and, unfortunately, especially with attorneys, that’s not always the case. There is a small
group of people who are disguised as consumer advocates, and we’re not talking about the
Frank D’Alessandros and the Will Lunds of the world. We are talking about people who
set up practices, who go after very minor technical violations of the FDPCA, which is
really something to be concerned about because what it does is it pushes a large number of
collection matters into litigation where it doesn’t need to be. Thank you. ZIXTA Q. MARTINEZ: Thank you, Mr. Parker.
You make some fair points, and we certainly take them into consideration and appreciate
your participation today. Renee Dillard. [No response.] ZIXTA Q. MARTINEZ: Diane Cipollone. DIANE CIPOLLONE: I am Diane Cipollone, the
director of training at the National Fair Housing Alliance, known as NFHA, which is
headquartered in Washington, D.C. NFHA is also a member of a large consortium of consumer
advocates known as the Americans for Financial Reform. On behalf of NFHA, I would certainly like
to applaud the Bureau for the announcement today that you will be using your rulemaking
authority under UDAAP to close an enormous loophole in the Fair Debt Collections Practices
Act; that is, that it does not apply to the original creditor collecting his own or her
own debts. In your opening remarks, Dr. Cordray, you
stated that your new rulemaking under UDAAP, you will be addressing the issue of the integrity
of the information and the data relied upon by creditors. This recommendation, we’re very
glad to hear this because this recommendation was also in a letter recently to you of May
17th from AFR, also urging the Bureau to use its authority to make sure that all collectors
have correct and accurate information on the particular debt. Requiring that data and information travel
from one collector to another if the original collector is unsuccessful and the debt is
closed would be a very, very strong consumer protection, akin to mortgage loan servicing
where one servicer then transfers—the servicing is transferred. All the information travels,
and the homeowner under—excuse me—the debtor in this case would understand, “Well,
who are you now? I’ve never heard of you.” So that if all of the information required
to be tracked as between the buyers of these debts, then that would go to the issue of
who does this debtor think is now collecting the debt. Is there some chain of authority,
so that the person contacting them, the debtor can rely on and say, “Yes, you are the person
I should be dealing with”? Thank you. ZIXTA Q. MARTINEZ: Thank you, Ms. Cipollone. Jim Devine. JIM DEVINE: Hello. My name is Jim Devine.
I’m an advocate with Homeless Voices for Justice, a public resource center, and I also have
a consumer seat on the board of directors of Pine Tree Legal. And, you know, I would like to express my
appreciation, first and foremost, to the City of Portland to honor their commitment to provide
emergency shelter to everyone who needs it, which the numbers is getting greater and greater,
and the overflow is going into the overflow. And it’s a distressing situation. I meet a lot of people. People are there for
a variety of reasons. I know of one individual, an older person from upstate Maine, who lost
his farm because of foreclosure, you know, and a variety of people, a number of debtors
are there for a variety of reasons. I think I really appreciate this forum here,
coming here, CFPB and all they do, and I appreciate what Pine Tree Legal does. I know that Pine
Tree Legal, because of resource problems, can only help about 20 percent of the people
that ask for help. So as far as the solution to this is concerned, from my perspective
and doing the outreach that I do, I think the more education that can be done to people,
to consumers, to that they know their rights and where they stand, what they can do about
their problems, so they don’t just throw up their hands and go occupy the shelter, you
know. Any hints or clues or opportunities to put the good word out that people have
their rights would be much appreciated, so thanks for the time. ZIXTA Q. MARTINEZ: Thank you, Mr. Devine.
Thank you for your comments and for the work that you do to help people. Lynn Bromley. LYNN BROMLEY: Hi. I’m Lynn Bromley. I am the
regional advocate for the SBA’s Office of Advocacy, and I just want to say thank you
for being here today. Just a couple of quick things. One is we all
know lots of small businesses use their credit cards to finance what they do. So the debt
collection issues have a huge impact on that economic drag, want you to pay attention to
that. And also when the net gets cast and people get pulled into the net, you talked
about the difficulty in protecting consumers, but also acknowledging that the vast majority
of the businesses practices are sound, that where that net has gotten too wide, I hope
you will hear from some of the people here today to let you know that, because that also
has a big drag in the economy. So I’ll defer the rest of my 2 minutes to
a consumer maybe that has had a bad debt collection experience, and I hope that you get to hear
that. Thanks. ZIXTA Q. MARTINEZ: Thank you, Ms. Bromley. Claude Morgan. CLAUDE MORGAN: Thank you. I want to thank
the panel. Very instructive afternoon and interesting information. I will just say that if we’re talking about
a dispute process between the debtor and a collector, there is a model that exists right
now for folks to dispute their credit reports and information in the credit reports, and
that’s through the e-OSCAR system. That allows an electronic portal for both the consumer
and the lender to clarify and to make accurate information. It seems to me that you might
take a peek at that model. It may be ready-made for this dispute process that you’re talking
about. It certainly keeps the clock ticking, and it keeps folks responsible. ZIXTA Q. MARTINEZ: Thank you, Mr. Morgan. Carol McCracken. [No response.] ZIXTA Q. MARTINEZ: Anthony Armstrong. ANTHONY ARMSTRONG: Thank you very much. Thanks.
My name is Tony Armstrong. I am chairman of the Legislative Committee for the Maine Association
of Mortgage Professionals. I’m involved in the board of directors of that association
and its predecessor organization, the MBA of Maine, for over 25 years. And I’ve been
in the mortgage banking industry in Maine for about the same amount of time. I own a
mortgage corporation, which is a small mortgage lender, resident here in Portland, and it
serves the entire State of Maine. I’m also an attorney. So I guess I would say that I
probably take a little more interest in the debt collection process, both on behalf of
my customers and as a public policy matter than maybe some people might because I tend
to get into the weeds a little bit along with some of my friends in the legal community. I had some prepared remarks here, considerable
prepared remarks, but I am going to just kind of skip over that. First of all, I’d like
to thank you very, very much for coming to Maine. It really is an opportunity for Northern
New England to speak directly to the folks at CFPB, and we really do appreciate it. Secondly, we really appreciate the fact that
you are focusing on this very important area to the mortgage banking industry and to consumers.
What we find is that we kind of—the people in my organization who I have talked to about
these issues, we tend not to be so focused on the debt collector and how he treats the
consumer on the front end or the contact and the days of response and all that. What we
find where the rubber meets the road is, when someone applies for a loan and unbeknownst
to them, their credit score comes in lower than they expect, and they either can’t get
the loan or get involved in a process that I’ll explain in a minute, that’s where we
get involved. So our focus is kind of interacting and helping the consumer interact with the
debt collector midstream, so to speak, and oftentimes I find that the system is set up
so that basically the debt collectors particularly on small debts won’t be harassing or calling
the consumer. They just sit and wait until the apply for a loan, and then the consumer
comes to them. That’s sort of the automatic aspect of all this. So what’s happened in our situation, my fellow
associates in the mortgage banking industry and in the banking industry which also has
members in our organization, along with credit unions, is that we are dealing at that stage
of the game with FICO scores and what happened and why is the FICO score lower and how did
this all happen. What I want to do for a second is digress
and make it very clear to people how things have changed in the last 2 years with FICO
scores when it comes to mortgages. Obviously, we all know FICO scores have become more and
more important over the years, but in the last couple of years, Fannie Mae and Freddie
Mac, for reasons we can probably all understand in another seminar, decided to adopt risk-based
pricing grids, and basically, what they are looking for is a higher payment from people
who are higher risk on a loan for a new home or for refinancing. And if you’re familiar
with these grids—I can provide them, but basically, they’re asking for a higher upfront
discount charge for the loan when you have a lower credit score, lower FICO score, and
a higher loan-to-value ratio. And this thing can be significant. The break points are 20 points on your FICO
score. So if your FICO score is 2 points lower or even 1 point lower than it might otherwise
be as a result of a debt collection error or some kind of error on your credit report,
what we found literally, it can change your pricing on your loan by up to 1.75 percent
on that grid. So if you have a $200,000 loan, all of a sudden, we’re telling you that if
we can’t help you resolve this problem on this debt collection matter which you dispute,
you are going to have to pay $3,500 more to get this loan or pay—if you understand the
discounting system—or pay up to three-eighths of a percent higher on your rate. So this
is a significant factor in who has been able to refinance and how much refinancing has
been able to occur to help people reduce their mortgage payments and to help move our economy
forward because people are spending less on mortgages. So I want to just—if people really appreciate
the significance of one mistake in the debt collection process. That’s my major point
there. I’m going to make three quick points. I’ll
avoid going through the list of the kinds of things that happen to people, but I can
assure you that I’ve had people who withdrew from their exercise club that’s associated
with a national franchise, and the guy in their exercise club forgot to take them off
the list. They had a credit card hit for 30 bucks for a month. They didn’t know. It went
into collection, and all of a sudden, they’re looking at me, and I’m telling them if we
don’t resolve this problem, you’re going to pay 1,500 bucks more for your loan to get
refinanced. ZIXTA Q. MARTINEZ: Mr. Armstrong, we’d be
happy to take your written comments. ANTHONY ARMSTRONG: Yes. I— ZIXTA Q. MARTINEZ: I really appreciate your
participation. ANTHONY ARMSTRONG: I do appreciate that. I want to make three suggestions. First of
all, I didn’t really get a close look at the new portal, but I really, on behalf of my
association, appreciate the fact that you’re making that effort to make it easier for consumers
to communicate. Secondly, I hope the portal is focused, is
broad enough so that people that are in the situation that I am describing downstream
can make that complaint, it’s not just an upfront, you know, “I’m getting harassed by
a credit collector type of complaint.” So I hope the portal makes it easy for people
to talk about the kinds of things that I’m talking about. I expect it probably is. Secondly, I think that one of the things you
might think about is what I would call a reverse tape-recording system because a lot of consumers
complaint to me about how they’re being treated over the phone by debt collectors, and I know
that the credit card companies love to tape-record things. Fine. RICHARD CORDRAY: Sir, there are a lot of other
people who want to speak here as well. You can talk to a member of the Bureau outside
of this particular public forum. If we have time at the end, we can come back to you.
Thank you. ANTHONY ARMSTRONG: I want to make one more,
one more recommendation. RICHARD CORDRAY: No. Thank you. We’ll go to
others, and if there’s time, we’ll come back to you. Thank you. ZIXTA Q. MARTINEZ: Thank you, Mr. Armstrong. Kenneth Wilson. KENNETH WILSON: Thank you. I appreciate that
you’ve come out to the great State of Maine and had a forum here. There were just a couple
of comments that I—or issues that I wanted to make, some of which were already addressed. With respect to the portal, I think it’s important
that, as I believe Mr. Parker pointed out, that there be some mechanism somewhere down
the line where there’s a sorting out of what are truly complaints regarding treatment of
consumers versus what are concerns of consumers but that don’t rise to the level of a complaint
regarding the collection activity. I think that would give you more valid statistical
analysis on those things. Secondly, it was interesting to hear today
that the CFPB has put out some action letters for consumers. As a member of the debt collection
industry, I know that we for years had asked the FTC if they were willing to put out some
guidance for our industry, particularly around the G Notice, and it would be I think useful
to members of our industry if the CFPB would consider making some standard language that
would adequately give consumers notice of their debt validation rights, while at the
same time protecting members of our industry from technical violations. Finally, to put I my 2 cents, I run a law
firm in Massachusetts that does debt collection. The question was asked by, I believe, Mr.
Stone of members of the panel of whether or not a debt collector can provide information
regarding the impact of paying debt on someone’s credit information or credit score. From my
own experience, the types of information that I get, I don’t think it’s possible. We have a strict policy in our office that
we do not talk at all about credit reporting or effect on credit score because, frankly,
we’re not experts in that area. How would I know? Thank you very much. ZIXTA Q. MARTINEZ: Thank you, Mr. Wilson. Sandra Cloutier. SANDRA CLOUTIER: I work at a credit union
right here locally in P:ortland and West Burke, and I’d like to make a statement on the mortgage-related
rules. In 2013, the CFPB issued final rules regarding
lenders, including credit unions, to determine whether a borrower has the ability to repay.
We do this already, so, you know, we don’t feel that obviously this is a problem. However,
the rule also sets forth strict definition of a qualified mortgage, to include a 43 percent
debt-to-income ratio and 3 points in fees limits. The rule is designed to offer consumers
basic protections, a concept that we all agree on and deserves serious scrutiny. In addition to that regulation, the CFPB has
issued a number of other mortgage-related regulations, including rules on mortgage servicing. In our opinion, this has not been fully considered
as the unprecedented burden and impact these regulations place on many credit unions. The
CFPB rules, in your own words, are significant, complex, and intertwined. On the origination
side, doing mortgages that are not qualified mortgages will be riskier and likely more
costly. So a credit union such as mine may not find the risk to be justified or worthwhile. On the servicing side, servicers would have
to adjust their current practices through gap analysis, capacity analysis, adjusting
policy and procedures, upgrading IT infrastructures, training, staff, and development of new forms
and compliant process. These changes will have enhancements and a major impact on smaller
organizations and the demand to increase staff in order to maintain compliance with overwhelming
changes set forth. ZIXTA Q. MARTINEZ: Thank you, Ms. Cloutier,
and thank you for giving us the opportunity to encourage credit unions to visit our regulatory
implementation webpage. We have engaged in robust conversations with credit unions around
the country to ensure that we understand their business operations and the impact to their
compliance and legal systems, and we agree with you. Credit unions were not part of the
lending that led to the crisis. We’re very sensitive to that, and we are very closely
monitoring the impact of the mortgage markets on small businesses like credit unions. Thank
you so much for raising that. RICHARD CORDRAY: Let me ask you two questions,
Miss. What’s the size of the assets of your credit union? SANDRA CLOUTIER: 2 1/2 million. RICHARD CORDRAY: 2 1/2 million? Okay. And
the loans you’re talking about, do you sell them in the secondary market to Fannie and
Freddie or FHA, or do you keep them in portfolio? SANDRA CLOUTIER: Currently in portfolio. RICHARD CORDRAY: Okay. Those are all qualified
mortgages under our rule. So there’s not a mortgage you’re making that won’t be protected
with the highest status of protection here, and mortgages you service, you service fewer
than 5,000 mortgages? SANDRA CLOUTIER: Yes, we do. RICHARD CORDRAY: So you’re largely exempt
from many of our servicing rules as well. So, anyway, take a look at our page. We’re
trying to get word out through the associations about the actual impact of these rules. I
think some of the anxieties which existed initially, and we understood, have turned
out to be substantially overblown, but we want to make sure that everybody understands
that carefully. Thank you. SANDRA CLOUTIER: Thank you. ZIXTA Q. MARTINEZ: Joanna Murphy? [No response.] ZIXTA Q. MARTINEZ: That concludes the field
hearing on debt collection in Portland, Maine. Thank you, everyone, for joining us here today.
What you have to say to us is very important. We take it to heart, and thank you to those
who viewed by livestream. [Applause.]

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