Sacramento, CA: Field Hearing on Debt Collection 7/28/2016

Welcome to the Consumer Financial Protection
Bureau’s field hearing in Sacramento, California, at the McClellan Conference Center. At today’s field hearing, you will hear from
Director Richard Cordray and a panel of distinguished experts, who will discuss issues related to
debt collections. Today the Bureau published an outline of proposals
under contractor and alternatives considered for a debt collector and debt buyer rulemaking,
pursuant to the Small Business Regulatory Enforcement Fairness Act, or SBREFA. The Consumer Financial Protection Bureau,
or CFPB, 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 for the External
Affairs Division at the CFPB. Our audience today includes consumer advocates;
industry representatives; federal, state, and local officials; and, of course, consumers. We are delighted that you are all here. Let me spend just a few minutes telling you
about what you can expect at today’s field hearing. First, you will hear from CFPB’s Director,
Richard Cordray, who will provide remarks about the debt collector and debt buyer rulemaking
outline of proposals pursuant to SBREFA. Following the Director’s remarks, John McNamara,
the Acting Assistant Director for the Office of Installment Lending and Collections Markets,
will frame a discussion with a panel of experts. After the discussion, there will be an opportunity
to hear from members of the public. Today’s field hearing is being live-streamed
at, and you can follow CFPB on Facebook and Twitter. I am now pleased to introduce Richard Cordray. Prior to his current role as the CFPB’s first
Director, he led the CFPB’s Enforcement Office. Before that, he served on the front lines
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 an Ohio State Representative, Ohio Treasurer, and Franklin County Treasurer. Director Cordray? Thank you, Zixta, and welcome, everyone. I’ll try to get this mic in the right relationship
to my face. Thank you all for coming today. I am glad to be here in California, which
has actively sought to protect its consumers from bad debt collection practices. In fact, the Rosenthal Fair Debt Collection
Practices Act was enacted in 1977, here in Sacramento, at the same time as its federal
counterpart in Washington, D.C., yet it goes further by applying most of its provisions
to first-party creditors as well as third-party contract collectors, a premise we will be
considering carefully ourselves as we proceed. These laws were enacted to put an end to abusive
practices by debt collectors. They have made a large difference in the lives
of consumers. Yet, even today, we continue to hear about
serious problems with debt collection: debiting accounts without authorization, calling at
all hours of the day or night, threats of arrest or criminal prosecution, or threats
of physical harm to consumers and even their pets. Together, the Consumer Financial Protection
Bureau and the Federal Trade Commission have worked to curb some of these worst abuses
with vigorous enforcement of existing federal laws. To date, we have ordered creditors and debt
collectors to refund hundreds of millions of dollars in enforcement actions based on
unlawful debt collection practices. But there still is much work to be done to
assure that consumers are treated with the dignity and respect they deserve throughout
the debt collection process, and that is what we are here to talk about today. We recognize that debt collection serves an
important role in the proper functioning of consumer credit markets. If people owe money that they borrowed on
their credit card or because they took out a student loan or received service from a
telephone company, they are obligated to pay the money back, and they should do so. But for many understandable reasons, huge
numbers of Americans fall behind on their debts at one time or another. We estimate that about one in three consumers—more
than 70 million people in all—were contacted by a creditor or collector seeking to collect
a debt within the past year. In the debt collection market, notably, consumers
do not have the crucial power of choice over those who do business with them when creditors
turn their debts over to third-party collectors. They cannot vote with their feet. They have no say over who collects their debts,
and they likely know next to nothing about the collector until they receive a call or
a letter. This can quickly lead to a barrage of communications,
which in some cases are designed to be harassing or intimidating. Often debt collectors are motivated to go
to almost any lengths to try to extract as much as they possibly can from the debtor. This is because they are typically paid based
on the amount they collect, the relationship may be fleeting, and the more distant risk
of being called to account later may not outweigh the immediate urgency of getting paid today. It is not surprising, then, that for many
years, the debt collection industry has drawn more complaints than any other, not only complaints
to the Consumer Bureau, but also to other agencies and officials in federal, state,
and local government. To date, we have handled about 250,000 debt
collection complaints, which is about one-quarter of all the complaints we have received. Last year alone, we fielded 85,000 debt collection
complaints. The largest segment had to do with continued
attempts to collect a debt that the consumer said was improper, because it was not their
debt in the first place or because it had already been repaid or discharged in bankruptcy. Without clear rules of the road that can be
effectively enforced in an even-handed manner, the companies that try to collect debts in
the right way will have trouble competing against others that are willing to bend the
rules or push the limits of the law to get an advantage. A collections item can start as an overdue
car payment, medical bill or utility bill, or any kind of unpaid invoice. The story of how a financially struggling
consumer gets to the point of owing money can reflect all the many limitations of human
nature and the human condition. Some people just put their head in the sand
and avoid payment. Other problems result from poor or unfortunate
choices. Often the overdue bill is due to bad luck
or some unexpected larger tragedy like job loss, illness or injury, or the dislocations
caused by divorce. Those living under the shadow of indebtedness
already tend to bear an emotional toll, which is intensified as they experience the new
trials of the debt collection process. When a consumer fails to pay the original
creditor, that creditor usually makes some effort to collect on its own but eventually
may hire a third-party collector or sell the debt to a debt buyer. When the creditor sells off the debt, that
typically means it has given up trying to recover the funds owed and has settled for
recouping what it can by selling the delinquent debts, perhaps for as little as pennies on
the dollar. The new debt owner then has the legal right
to seek to collect the full amount of the original debt. In addition to trying to contact the consumer
to seek payment, the debt owner may report the debt to the credit reporting companies,
which creates pressure to pay it off, or may file a lawsuit against the consumer. The main federal law that protects consumers
and governs the industry is the Fair Debt Collection Practices Act, enacted almost 40
years ago. Since then, courts have come to different
interpretations of the statute, creating uncertainty for debt collectors and consumers alike. Moreover, as new forms of technology have
emerged, many questions have arisen as to how to apply the law. For example, the law explicitly addresses
the use of postcards, collect calls, and telegrams, but is silent about the use of voicemail,
e-mail, and text messages. In 2010, the Dodd-Frank Wall Street Reform
and Consumer Protection Act authorized the Consumer Bureau to be the first agency to
issue comprehensive federal rules on debt collection. Since we opened our doors, we have been studying
this industry as we engaged in enforcement and supervisory activity to improve legal
compliance. We have engaged extensively with stakeholders
across the spectrum and conducted our own research, and we have also looked to the good
work done in this area by our colleagues at the Federal Trade Commission. One of their research reports concluded that
debt collectors need to have better information so they are more likely to collect from the
right person in the right amount. That’s a point that we have taken to heart. Today we are considering proposals that would
drastically overhaul the debt collection market. Our rules would apply to third-party debt
collectors and to others covered by the Fair Debt Collection Practices Act, including many
debt buyers. As part of our overhaul, we also plan to address
first-party debt collectors soon but on a separate track. The basic principles of the proposals we are
considering are grounded in common sense. Companies should not collect debt that is
not owed. They should have more reliable information
about the debt before they try to collect. They would have to limit the number of attempts
to make contact and should give consumers better information and more control over the
process. Collectors also would have to make it easier
for consumers to pursue disputes, and they would be barred from collecting on disputed
debts that lack proper documentation. These same requirements would follow along
with any debts that are sold or transferred to another collector. Both consumers and responsible businesses
stand to benefit by improved standards for debt collection. Consumers deserve to be treated with dignity
and respect, and businesses should be able to operate fairly and reasonably to collect
the debts they are legitimately owed. In the United States today, debt collection
is a $13.7 billion industry that employs more than 130,000 people across approximately 6,000
collection companies. When these companies receive a portfolio of
debts to begin collection, they may get only basic data—for example, name, address, creditor,
and an amount claimed to be due. If the account is later sold or transferred,
the information that goes with it is often incomplete, and anything a consumer had submitted
may not be passed along. That breeds inaccuracy. Our proposal under consideration would require
collectors to substantiate a debt before seeking to collect on it. Collectors would have to confirm that they
have sufficient information to start collection, such as the full name, last known address,
last known telephone number, account number, date of default, amount owed at default, and
the date and amount of any payment or credit applied after default. In addition, we are considering requiring
collectors to refrain or cease from collecting if certain warning signs appear, such as a
portfolio with large amounts of missing information or a high dispute rate. These rules would apply to each successive
debt collector. Each new collector would have to review their
files to establish a reasonable basis for demanding payment, and if debt gets sold,
it would have to be accompanied by specific information about the debt, information that
benefits the consumer, not just the collector. For example, if a debt collector learns that
a consumer is represented by an attorney, that information would have to be passed on
to the next collector. For an active-duty servicemember with protections
under the Servicemembers Civil Relief Act, that information would have to be passed from
one collector to the next so those protections would be readily known and maintained. Documentation of claims has long been a problem
at all phases of the debt collection process, but let me focus on the process of seeking
repayment through the courts, which is where bad information can hurt consumers the most. When debt collectors file a lawsuit to collect
on a debt, as they often do, few consumers have the resources, the time, or the ability
to appear and defend their cases in court. This will often lead to a default judgment
and a victory for the debt collector, regardless of whether the suit is against the wrong person
or for the wrong amount. It is even true where the time allowed for
filing the lawsuit has already expired. Our research indicates that default judgments
are entered in 60 to 90 percent of the lawsuits that are filed. These situations encourage sloppy or even
fraudulent practices. Nearly a year ago, we took enforcement actions
against two of the largest debt buyers in the country—Encore Capital Group and Portfolio
Recovery Associates—for churning out lawsuits using robo-signed court documents. In numerous cases, the companies had no intention
of proving the debts in court. Instead, they relied on consumers defaulting,
even where their paperwork often stated incorrect balances, interest rates, and due dates. The two companies were ordered to pay $61
million in consumer refunds and stop collection on more than $128 million worth of debts. We also have been active on the debt seller
side of the equation. Along with Attorneys General from 47 states
and the District of Columbia, we took action against JPMorgan Chase for selling invalid
credit card debt and for robo-signing documents. The bank was ordered to pay $50 million in
consumer refunds and $136 million in penalties and payments. It also agreed to halt collection activity
on more than 528,000 consumer accounts, including a permanent ban on collecting the accounts,
enforcing them in court, or selling them to someone else. But enforcement actions alone cannot fully
resolve these problems. Our proposal under consideration would make
clear that collectors must meet a higher threshold before pursuing a lawsuit than before they
make a verbal or written claim to a consumer, and the proposal under consideration would
make clear that collectors are barred from filing a lawsuit to collect on a debt where
the statute of limitations has expired. It is not enough simply to assure that debt
collection is premised on the right person and the right amount. Consumers need to understand what the collector
is doing and why. Consumers also need a protection when it comes
to what, when, where, and how collectors communicate with them. Debt collectors are generally prohibited from
engaging in acts that harass, oppress, or abuse consumers, but many consumers still
complain about repeat or frequent phone calls; debts that are wrongly disclosed to third
parties; and contacts at inconvenient times or places, such as when they are in the hospital. Our proposal under consideration would give
consumers more information and control in their dealings with collectors and limit excessive
contact. When consumers are contacted by collectors
for debts they do not recognize or barely remember, they may not know what their next
move should be. They may wonder if it is a scam. They may feel pressure to pay a debt they
do not believe is accurate, just to make the collector go away. So one thing we are considering is to enhance
the information people receive from collectors. Debt collectors already must give consumers
initial notices about the debt that contain limited information, but we have heard from
many consumers who remain confused even after getting these notices. We are considering expanding the information
in these notices so consumers get much more detail about the debt. We also want consumers to be better informed
about the debt collection process. Many people do not know what rights they have,
when they can invoke their rights, or how they can dispute a debt. The initial notices consumers receive from
collectors often are written in legalese that can be hard to understand. On the other side, industry has been hesitant
to edit or improve these letters because of concerns about potential liability if they
do not repeat what the law says word for word. So we would require collectors to provide
a statement with specific information about a consumer’s federal rights written in plain
language. This would include a notice of their right
to stop or limit communications, a statement that the debt is too old to support a lawsuit,
and information about the Consumer Bureau’s website, where they can file a complaint or
ask CFPB to answer their debt collection questions. The proposal we are considering would also
put consumers in control of their communications with collectors. One provision would limit collectors on each
account to no more than six attempts per week to contact a consumer they have not previously
reached. This cap would cover all contact attempts
through various phone numbers, e-mail addresses, or postal addresses, including unanswered
calls and voicemails. After the consumer has been contacted initially,
a collector would then generally be limited on each account to one actual contact per
week and no more than three attempted contacts per week. Consumers would also be able to stop collectors
from using specific channels to contact them. For example, they could more easily block
collectors from calling on a particular phone line, such as a work phone, or calling during
certain hours. If consumers say not to call on their cell
phone, then the collector would have to comply. We also are considering a 30-day waiting period
for collectors seeking to collect the debt of a consumer who has passed away. This would protect the dignity of surviving
spouses or others who may be coping with the early stages of the grieving process. The third category of protections we are considering
has to do with disputes. Under current federal law, consumers can dispute
the debt or ask for more information if they are unsure whether they owe money to a creditor
or how much, but few consumers fully understand their rights to question or dispute a debt. Under the proposal we are considering, just
by asserting a disagreement about the validity of the debt or the right of the collector
to collect that debt, consumers would obligate the collector to go back and check their documentation. Collection activity could not resume until
the information is confirmed. We would make it easier for consumers who
do not believe they owe that amount to file a dispute at the very beginning of the process
by including a tear-off sheet at the bottom of the notice sent to the consumer. Consumers could mail this form back to the
collector and simply check the relevant boxes on the form, explaining why they think the
collector is wrong. If they do so within 30 days after receiving
the notice, the collector would be blocked from contacting them until after the dispute
has been investigated and written verification has been provided. A key point is that collectors would not be
able to bury the dispute just by selling the debt to a new collector. If they have not resolved the dispute before
selling the debt, any new collector would have to investigate and address the dispute
before seeking payment. Today we are sharing this outline of proposals
to reform debt collection with representatives of small entities engaged in debt collection. Next month, these representatives will meet
with a small business review panel we are forming along with our colleagues from the
Office of Management and Budget and the Office of Advocacy of the Small Business Administration. The panel will explore the potential impact
of these measures on small businesses. We will also be meeting with consumer and
industry stakeholders to obtain their input. As Thomas Fuller once said, “Debt is the worst
poverty.”  It can overwhelm people and imbue them with
a sense of helplessness. By cleaning up the integrity of this process,
we would resolve many of the problems at their foundation. Consumers should not be limited to being passive
participants in a system they do not trust or understand. We are determined to put the burden of proof
on the debt collector and take some of this weight off the consumer. We will remain determined to address these
issues in ways that improve people’s lives. Thank you. Thank you, Director Cordray. At this time, I would like to invite all the
panelists to please take their place on the stage, and as they are doing so, I will briefly
introduce the CFPB and guest panelists. John McNamara serves as the Bureau’s Acting
Assistant Director for the Office of Installment Lending and Collections Markets. Anthony Alexis serves as the Assistant Director
for the Bureau’s Office of Enforcement. Keo Chea serves as the Acting Assistant Director
for the Bureau’s Office of Community Affairs. Our guest panelists include Brent Yarborough,
Attorney, Zarzaur & Schwartz, P.C.; Jim Mastriani, President and CEO of Velocity Recoveries;
Linda Guinn, President, CB Merchant Services; Scott Maurer, Associate Clinical Professor,
Santa Clara University School of Law; Graciela Aponte-Diaz; Director of California Policy,
Center for Responsible Lending; and Susan Shin, Legal Director, New Economy Project. John, you have the floor. Great. Thank you. Good morning, everyone. My name is John McNamara. I am the Acting Assistant Director of Installment
Lending and Collections Markets and the Debt Collection Program Manager in the Bureau’s
Division of Research Markets and Regulations. It’s a pleasure to be with you today to moderate
a panel discussion, the panel discussion portion of our field hearing about debt collections. We’ll hear from a number of respected panelists
today. They include both consumer advocates and industry
participants from around the nation. Each panel member will give us some background
and provide their perspective. We will then pose questions to our panelists
and engage in a discussion. The panel discussion will be followed by the
public comments component of the hearing where we will hear from members of the public who
have signed up to share their observations. As Director Cordray noted in his remarks,
there is significant consumer harm in the debt collection marketplace as well as some
degree of legal uncertainty. Today the Bureau published an outline of proposals
under consideration and alternatives considered pursuant to the Small Business Regulatory
Enforcement Fairness Act, SBREFA, for a debt collect and debt buying rulemaking. The proposals under consideration are designed
to improve the information and data integrity in the debt collection system and empower
consumers to make informed choices when responding to alleged debts. The SBREFA proposals address a variety of
issues, including the substantiation of debts by collectors, the legal status of voice-mails
and e-mails among other measures. We are here to learn more about the debt collection
market and the implications our proposals would have for it, if implemented. The Bureau issued an Advanced Notice of Proposed
Rulemaking, which generated considerable attention and over 23,000 comments. We met with numerous consumer advocates, academics,
our federal and state partner agencies, and industry representatives and trade groups
and their members. We conducted three research projects to understand
the experiences that consumers have with their debt collectors, to understand the cost structure
of debt collection firms, and to understand the efficacy of disclosures related to debt
collections. This is another step in the process of gathering
feedback and studying the industry as we move towards a proposed rule. With that in mind, I’d like to invite our
panelists to present their opening remarks. Each panelist will have 3 minutes to make
a brief statement. Following the statements, Keo Chea, Acting
Assistant Director of the Office of Community Affairs; Anthony Alexis, Assistant Director
of the Office of Enforcement, and I will moderate a discussion with the panelists. And, with that, we’ll start with you, Brent,
and we’ll work our way this way, ending with you, Susan. Thank you. I want to thank Director Cordray and John
McNamara and the others— We can’t hear. There you go. There’s a button. Thank, Director Cordray, John McNamara, and
the others with the Bureau who put this program together for allowing me to participate. The National Creditors Bar Association is
a trade association composed of more than 500 law firms focused on the representation
of creditors. Those member firms employ over 3,000 attorneys
who represent creditors and collections, bankruptcy foreclosure, the defense of consumer law claims,
and much more. Most NARCA members are small firms. In fact, over 90 percent of members are considered
small businesses by the SBA. NARCA members represent creditors of various
types and sizes, from large credit card issuers to small local businesses. While I’m an officer of NARCA, the opinions
I give are my own and not those of the organization. In concept, at least, there is perhaps no
lawsuit more basic than one to recover an unpaid debt. Though while the concept of a collections
suit might appear relatively simple, we all know that debt collection today can be quite
complex. Most of my practice is focused on helping
collectors, including attorneys, comply with the FDCPA and other laws applicable to debt
collection. I also respond to complaints and defend lawsuits
when things go wrong, despite a collector’s best efforts. Without question, there are examples of real
abuse in debt collection. I can only imagine how powerless I would feel
if an unscrupulous collector or someone pretending to be a collector threatened to have me arrested
or to take everything I own over a debt that I don’t owe or perhaps does not even exist. But my experience over the past 15 years tells
me that most complaints and lawsuits are the result of unintentional errors, and unfortunately,
more than a few lawsuits, the result of genuine confusion over legal requirements. A letter that has safe harbor status in one
circuit can get a collector sued in a neighboring state, and a phone message approved by a court
today might be found to violate the FDCPA in another case just a few weeks later. NARCA members are committed to the fair and
ethical treatment of consumers throughout the debt collection process. We are also committed to upholding the truth
that is placed in us as officers of the court. But, in the end, lawyers are obligated to
advocate for their clients. Often the lawyer’s duty to the creditor client
can be fulfilled while also giving consideration to the best outcome under the circumstances
for the consumer. Whenever possible, my fellow NARCA members
work to strike that balance in order to achieve an outcome that is satisfactory to both the
client and the consumer. However, there are times when attorneys must
pursue their clients’ lawful claims. Collection attorneys fulfill a unique role
in the collection process. In addition to possessing the power to file
lawsuits and execute judgments, lawyers are often the only creditor representative that
the consumer meets face to face. Of course, this usually occurs when a case
goes to court, but even at that moment, when many consumers fear it’s too late to resolve
a debt, the parties can usually work out a solution that satisfies both sides. Indeed, in a number of jurisdictions, our
creditors’ rights attorneys and state creditor bar associations have worked with judges to
set up innovative court programs, explain the different roles of court personnel and
creditor lawyers, and provide simple and non-intimidating systems for the resolution of consumer debt. But those outcomes require consumer participation
which depends, in large part, on the attorney’s ability to communicate with the consumer. I hope that debt collection rulemaking can
help resolve and bring clarity to some of the issues faced by creditor attorneys. I’ve been fortunate, through my volunteer
work with NARCA, to meet with CFPB staff on numerous occasions. On each occasion, bureau representatives were
thoroughly prepared and generally open to the consideration of different perspective. I know that they have worked and continued
to work very hard to promulgate rules that will protect consumers without overly burdening
legitimate debt collection. I truly appreciate the opportunity that I
have been given to provide my views and I look forward to continued dialog on these
important issues. Thank you, Brent. Jim? Thank you. I’d also like to thank the CFPB for the opportunity
to participate in this panel. My name is Jim Mastriani. I’m President of Velocity Portfolio Group,
a New Jersey-based debt buyer. Velocity is in the business of acquiring non-performing
consumer debt and working with consumers as they repay their obligations and move towards
financial recovery. I also serve on the board of directors of
DBA International, the industry’s largest trade group, which represents more than 575
companies that purchase performing and non-performing receivables on the secondary market. The debt buying industry is a important segment
of the nation’s credit-based economy. The ability of debt buyers to purchase distressed
accounts from originating creditors provides benefits not only to the originating creditors
but to all consumers and businesses that rely on the availability of credit at reasonable
interest rates for their purchasing needs. The DBA appreciates that the CFPB has recognized
debt collection as a critical part of the nation’s credit market infrastructure. Consumer access to credit is a privilege,
not a right. When this privilege is exercised appropriately,
everyone benefits—consumer borrowers, lenders, and ultimately the nation’s economy. Ethnical debt buying and selling provides
important benefits, to consumer borrowers who are assisted in meeting their repayment
responsibilities, to lenders who receive a return on their investment, and to the consumer
credit economy which debt buying helps to catalyze. The law should protect and promote ethical
debt collection which safeguards the rights of consumers and provides clear and effective
rules of the road for collectors. The law should not be misused to enable borrowers
to turn legitimate loans into de facto gifts. In the long run, this will reduce the availability
of credit for all consumers and make credit more expensive. The law should be as clear as possible—effective
rules, effective remedies, and appropriate safe harbors for good-faith efforts to comply
with the law. Recognizing the need to further protect consumers
and adopt uniform industry standards and best practices, in March 2013, DBA International
launched its industry-leading National Receivables Management Certification Program, consisting
both of company and individual certification. DBA’s rigorous self-regulating certification
program is the recognized gold standards within the accounts receivable management industry. By establishing uniform national best practice
standards, DBA certification ensure that its certified members exceed the consumer protection
requirements of state and federal law. Thank you. Thank you, Jim. Thanks for the comments. Linda? I would like to express my appreciation to
the CFPB and Director Cordray for the opportunity to participate on this panel. I’m honored to be here. I am President and CEO of CB Merchant Services,
which is a debt collection company entering its 100th year in business. We’re a small business located in central
California and we represent a wide variety of clients. Many of those clients we serve are small business. Some are one to two invoices away from closing
their doors. Our company is representative of this collection
industry as a whole in this regard. The services we provide are important to small
business, as many simply cannot afford the professional trained staff needed to resolve
unpaid accounts. I am the current President of California Association
of Collectors, the largest state unit for American Collectors Association International. In California alone there are 185 member agencies. Sixty-two percent have 10 employees or less. American Collectors Association International,
with over 4,000 member agencies, reports that 78 percent of those members are also small
businesses. Our trade associations, ACA and CAC, and the
entire debt collection industry have already made significant investments in the areas
of compliance and education, to ensure a customer-focused experience Our representatives are trained
to listen with compassion and identify ways to help resolve the account. I entered into the collection industry 39
years ago, and at that time there were typewriters on our desks, note cards to keep track of
accounts, rotary-dial telephones, and yes, we were even smoking at our desks. There has been much change over these past
almost 40 years, but our guiding principles remain the same. We treat people how we would like to be treated
if we were in the situation. The vast majority of agency operators are
well-intentioned small business employers who want to operate within the rules and regulations. This is becoming more and more challenging
as local, state, and federal authorities add additional rules and regulations, some of
which are conflicting. We are looking for clarity and uniformity
so we know what is acceptable and what is not. Thank you. Thank you, Linda. Scott? Good morning and thank you for inviting me. I work at a law school clinic where low-income
consumers come for help. Often times they have issues with debt collectors. And one of the most frequent complaints that
I hear involves frequent and/or harassing phone calls from debt collectors. Existing law sets a standard that a debt collector
should not cause a telephone to ring repeatedly with intent to harass, and courts have really
struggled to determine what that means, and there hasn’t been a uniform response. There is a published Federal District Court
opinion that held that 127 calls to a consumer over a 2-month period did not constitute harassment
as a matter of law. So I commend the CFPB for stepping into this
area and creating a bright-line rule. I think a bright-line rule is needed and,
at first blush, I think the rule that the CFPB is looking at is reasonable, which is
if the debt collector knows where the consumer is located, one live conversation per week
and three attempts is all they should need to make. Debt collectors have every right to contact
consumers, to inform them of the debt, to give them an opportunity to pay, and to let
them know what the lawful intended consequences of non-payment would be. But I don’t think there are any other legitimate
reasons for debt collectors to call consumers, and I think all that information can be conveyed
to consumers in a single phone call, or maybe two or three phone calls over the period of
a month. So I do think the proposed standards are a
huge step in the right direction. Furthermore, a lot of consumers who are in
financial crisis are going to be dealing with four to six accounts that are in collection,
and although the standard appears to limit the calls to one a week, they may be actually
dealing with daily phone calls. So it is important that the CFPB allow consumers
to go further and to tell a debt collector to limit calls to once a month, or just to
communications in writing. I was also pleased to see specific examples
of time, place, and manner restrictions, such as “I’m at the hospital.” That’s all I should need to say, so that you
know that it’s an inconvenient time to talk to me. But when a debt collector calls and says,
“I’m calling to talk to you about your debt to Bank of America,” and the consumer says,
“I’m at work,” shouldn’t those three words be enough to let the debt collector know that
this isn’t a convenient or appropriate time to talk to the consumer? I think most consumers would say that it is
enough, and I think most employers would agree. I will point out that the consumers that we
represent who are being harassed often times are being harassed by first parties. I appreciate that we’re at the third-party
stage right now. I do think it’s important to have those same
standards applied to first-party debt collectors as well. The other thing I wanted to congratulate the
CFPB on is the model form, the Summary of Rights, huge step in the right direction in
that current law just requires a small amount of information to be conveyed to consumers
about their right to dispute the debt, and it’s not very understandable. I would say that in addition to providing
model language, it’s important for the CFPB to address formatting issues, because most
debt collection letters I’ve seen are very good at making important information appear
basically unreadable and boilerplate and all caps on the back of letters. Finally, I wanted to say and commend the CFPB
for, for the first time, requiring debt buyers and debt collectors to transfer information
to other debt collectors about the fact that the consumer has said “it’s not my debt” or
“cease communications.” I understand the latter is something that’s
just under consideration. I would strongly support allowing a consumer
to say to a debt collector, “With respect to both yourself and any subsequent debt collectors,
I don’t owe this money. Please cease communications,” so that they
don’t have to go through the same process over and over again. Thank you. Thanks for your remarks, Scott. Graciela? Hi. Good morning. I’m Graciela. I’m with the Center for Responsible Lending. We’re a research and policy organization. We’re dedicated to protecting home ownership
and family wealth, by working to eliminate abusive financial practices. We’re concerned about debt collection practices
that are unfair and abusive and can take advantage of financially distressed consumers or unfairly
strip families of wealth. Today’s hearing is critical for millions of
Americans who are being pursued by debt collectors, whether they owe debt or not. I’ll focus my remarks today on debt buyers
and collection tactics, as well as give an initial response to the proposed rule. To start, debt buyers purchase billions of
dollars in stale debt at a steep discount, often pennies on the dollar, and then attempt
to collect the debts themselves. Debts are often sold with inaccurate and incomplete
information. Second, the collection tactics used result
in people being harassed and wrongly pursued for debts they don’t owe, have already paid,
or are too old to be subject of a lawsuit. Over the past decade, debt buyers have extracted
millions of dollar in payments and court judgments from consumers, often resulting in garnished
wages, damaged credit scores, and other financial harms. Abusive debt collection practices harm millions
of people, particularly low-income consumers without access to legal representation to
defend against these abuses, and communities of color, which are also disproportionately
targeted by unfair lending practices. A recent study concluded that majority black
neighborhoods are hit twice as hard by debt collection court judgments as majority white
neighborhoods, even adjusting for differences in income. Here in California, as well as North Carolina,
Maryland, and New York, have laws that have passed to require debt collectors to use full
and accurate information and documentation when collecting debts, and despite debt collectors’
claims, research shows that these kinds of reforms do not dry up consumer credit. We commend the CFPB for seeking reforms to
debt collection. The proposal announced today endorses the
common sense idea that people should not be harassed for debts they do not owe. However, we are concerned that some of the
provisions in the proposal will not do enough to protect consumers from unwarranted collection
attempts. Specifically, the proposal does not go far
enough to require that debt collectors adequately document that they are pursuing the right
person for the right debt. Moreover, several states have enacted strong
protections to address these abuses. The CFPB should, at minimum, be improved to
match these protections, rather than setting weaker standards as outlined in the proposal. In conclusion, debt collection plays a critical
role in a functioning economy. Abusive debt collection practices have no
place in our financial marketplace. Thank you. Thank you, Graciela. Susan? Thank you, Director Cordray, and the CFPB
for inviting me here today. My name is Susan Shin and I am the Legal Director
of New Economy Project, which, for the past 20 years, has worked to promote economic justice
in New York City’s neighborhoods of color and low-income neighborhoods. For the past 11 years, we have run a free
legal hotline through which we have heard from thousands of New Yorkers harmed by discriminatory
and abusive debt collection lawsuits. We recently spoke with Ms. S, an African American
woman whose only income is from Social Security disability. She had just learned that a debt buyer, a
company that buys old, charged-off debts for pennies on the dollar, had frozen her bank
account. It turned out that the debt buyer had sued
her years ago for a debt she didn’t recognize, lied to the courts about notifying her about
the lawsuit and about having proof of the debt, and then obtained a default judgment
against her, which it then used to freeze her bank account. We’ve heard from thousands of New Yorkers
with stories just like this. Some people learned a judgment had been entered
against them only after they were denied housing or employment because of the judgment, which
was now on their credit report. All too often, the judgments were for debts
that were, in fact, too old legally to be sued on, arose from identity theft, or had
already been paid. New Economy Project’s research has shown that
in these lawsuits debt buyers have attorneys 100 percent of the time, whereas the New Yorkers
sued have legal representation only 2 percent of the time. And in case after case, debt buyers have obtained
default judgments by blatantly lying to the court. As discussed in our report, “The Debt Collection
Racket in New York,” we found that the highest concentration of these default judgments were
in New York’s communities of color, most of them middle income, black, communities in
Southeast Queens, the same places that banks have red-lined for decades and that were at
the epicenter of the predatory lending and foreclosure crises. Through these abusive lawsuits, debt buyers
have systematically extracted billions of dollars in wealth from communities of color,
perpetuating economic inequality. Like many other consumer protection issues,
abusive debt collection is also fundamentally an issue of racial and economic justice, and
I would be remiss if I didn’t also mention that banks have played a major role in facilitating
these debt collection abuses. With co-counsel, our organization recently
settled a class action lawsuit against a network of debt collectors that we had alleged had
engaged in these very abuses, from fraud on the courts through rampant robo-signing to
a raft of due process violations. Not only have we secured the return of millions
of dollars to New Yorkers, we are working closely with our state courts to vacate nearly
200,000 default judgments, with a total face value of $800 million, and a major network
of debt collectors is no longer in business. We applaud the CFPB for the much-needed enforcement
actions it has taken against banks, debt buyers, and debt collection law firms. In New York, we have worked hard to secure
strong, enforceable debt collection rules and that we’ve seen a dramatic decrease in
these debt collection lawsuits as a result. We urge the CFPB to likewise issue strong
rules that will hold all of these entities accountable for engaging in or facilitating
these and other debt collection abuses. Issuing such rules is one critical way to
address wealth inequality and racial injustice. Thank you. Thank you, Susan, and I’d like to thank all
of the panelists for their thoughtful comments. At this point, Keo, Anthony, and I are going
to engage the panelists in a series of questions to continue the dialogue, and the first question
is for you, Brent. What are some of the best practices currently
used by debt collectors in their interactions with consumers? When I think about best practices, I initially
think about tracking and handling of complaints and disputes. While responding to complaints is not new,
recently more collectors have implemented sophisticated systems and leveraged technology
to help track and analyze those complaint. I believe this is a best practice that has
become nearly universal in the last few years. But I want to take a moment to talk about
documentation. For a long time, documentation was provided
to collectors as needed. While some people in collections thought that
we had a pretty efficient system, let’s face it, it was hardly Walmart’s famous supply
chain management. For lawyers, once a suit is filed, there are
court deadlines that are not always forgiving, so like most lawyers, collection lawyers prefer
to have necessary documents before they actually need them. Over the last few years, lawyers have been
working with their clients to facilitate the transfer of documents before a suit is filed,
and generally before the first communication is even issued. But documents necessary to support a credit
card debt are different from those used for a car loan, a student loan, a mortgage, or
other type of debt. Collectors also need documents to verify debts
when this is required under the FDCPA. The act requires a collector to mail verification
when a consumer disputes the debt in writing within 30 days of receiving the validation
notice, but the act does not explain how this is to be done. Court decisions have given various answers. Some say that a simple invoice or similar
document is sufficient, while others require more, up to and including documents that actually
address a consumer’s specific dispute. A best practice is to address the consumer’s
specific dispute when providing verification of the debt. Another best practice, that I see a good bit,
is to provide verification even if the dispute is raised orally, rather than in writing,
and I think that many, if not most collectors are actually doing this. Collectors often go above and beyond the strict
requirements of the act when trying to resolve a legitimate dispute that is made in good
faith, but if we are to codify these best practices we should consider that they could
be abused by a small group of consumers or other purporting to help those consumers. I’m reminding of the billing error scam that
was perpetuated a few years ago. I expect that most collectors of credit card
debt saw these form letters that were created by a scam debt elimination program that preyed
on consumers even more than collectors. As an aside, I want to commend the Bureau
for the work they’ve done to shut down illegitimate debt settlement and debt elimination programs
that take consumers’ money will providing no services and cost collectors substantial
money responding to frivolous complaints and disputes. The billing error scheme asserted that the
entire account, going back many years in some cases, was a billing error under the Fair
Credit Billing Act. The courts quickly shut this theory down but
we should consider that something similar could be attempted if there is a requirement
that collectors respond to every dispute with documentation specific to the dispute, particularly
because it is difficult and sometimes impossible to document transactions that occurred many
years ago on an account that only recently went into default. This question is for Scott. What experiences have you had in assisting
clients with disputing debts before they are sued and helping clients who are sued? What information would help consumers better
know whether and how to dispute debts that they may not owe or may not owe in full? Starting with how we help consumers dispute
debts, typically we’re going to do that in writing by contacting the collection agency. Typically we are going to be providing the
collection agency with information. For instances, “I know that I’m a victim of
identity theft. Here’s a police report. Here’s an FTC affidavit,” or “The debt that
you’re contacting me about was settled. Here’s a copy of the settlement agreement,”
or “I cancelled the transaction. Here’s a copy of my letter cancelling the
underlying transaction.” In terms of helping consumers in litigation,
if we believe that a consumer has a defense to a debt, then we represent consumers in
court and we often bring cross-complaints under the federal FDCPA if we feel like the
debt collector’s misrepresented legal status of the debt and/or California’s version of
that act, the Rosenthal Act. In terms of information that would be helpful
to consumers in disputing their debts, if I had to pick one piece of information it
would be for consumers to know whether or not the debt is barred by the statute of limitations,
and it looks to me like the CFPB’s proposal is going to address that. In California we have a law that’s specific
to debt buyers, that requires the debt buyers to notify the consumer under two separate
circumstances. One is when the debt is so old that it can’t
be sued on, and they say because of the age of the debt we will not sue you for it. And the other is when the debt is beyond the
Fair Credit Reporting Act obsolescence rules, that they will neither sue nor report. I think that’s a good model, and I saw some
similar language in the proposal the CFPB released last night. Other than that, there’s a whole range of
legal reasons why a consumer might not owe a debt. There are all kinds of federal and state consumer
protections that consumers just don’t know about. The co-signer rule, the Door-to-Door Sales
Act, the California Translation Act. So I think it’s a great idea, in the Summary
of Rights, to refer consumers to the CFPB website, which should, in turn, refer consumers
to places where they can get free legal advice in their community. Thank you. Jim, what challenges do you face when using
or thinking about using new types of technology such as e-mail, text, and other newer types
of technology to communicate with consumers? Debt buyers face many challenges when using
or thinking about using new technologies. As Director Cordray indicated in his opening
remarks, when the FDCPA was enacted in 1977, it contemplated communication via telephone,
postal mail, and even telegram, but did not and could not reflect the advent of new technologies
like e-mail communications through smart phone or Internet, autodialers, text messaging,
or social media. The challenge for debt collectors and debt
owners arise when attempting to apply the FDCPA’s prohibitions to a technology that
was not envisioned at the time of its enactment and does not fit into the statutory framework. These new technologies create tremendous opportunities
for consumers, debt collectors, and debt owners to communicate in ways that are more convenient
and less costly than prior methods. However, currently, these new technologies
most often go unused by debt collectors in favor of traditional telephone and mail communication,
because of concerns about liability and running afoul of the FDCPA. Many debt owners and debt collectors won’t
respond to a consumer via e-mail because of a concern that such communication is not in
writing, or utilize text messages, even if that is the preferred method of communication
by the consumer, because of liability concerns under the FDCPA. The DBA believes that consumers should be
able to communicate with and respond to collectors through electronic communication and emerging
technologies and urges the CFPB to create clear, effective rules to enable that. The next question is for Graciela. What type of information do consumers need
to know about their debts, the debt collection process, and their rights in dealing with
debt collectors? What types of information do you think would
be most useful for consumers in determining whether or not a debt is owed? Sure. Thank you. As important as it is for consumers to know
their rights, it’s perhaps more important for debt collectors to engage in debt collection
practices that are not abusive, unfair, and deceptive. In order to do so, they need to have and actually
use full and accurate information and documentation about the debt, including information about
the consumer, the amount owed, documentation to support the claim, the collector’s right
to collect the debt, and previous collection attempts. If a debt collector or collection attorney
doesn’t have the information or doesn’t adequately review it, they should be prohibited from
attempting to collect the debt, suing on the debt, or selling the debt. These types of requirements will go a long
way to ensure people are not unnecessarily harassed or sued for debts they do not owe. As the parties seeking payment on a debt,
the debt collector needs to have full and accurate information in order to support the
claim. The burden should not be on the individual
to prove that the debt is not owed. It should be on the collector to establish
this fact. Thank you. Thank you. Linda, what information would be helpful in
assisting consumers in recognizing their debt and understanding the debt collection process? By and large, consumers recognize their debt
when we reach out to them. For the small percentage that need additional
information, there are already effective mechanisms in place for the consumer to dispute the debt
or request additional information. Unfortunately, most consumers select to avoid
the conversation or choose not to respond at all, and this does not help us identify
if there’s a problem with the account. It’s very, very important to have open dialogue
and learn more about the account through communication. This question is for Susan Shin. What steps d you think would be most useful
in helping consumers avoid litigation or after a complaint is filed, to understand the court
process? Thank you, Keo. I agree that there are many things that people
should know about with respect to their rights around debt collection, but to the extent
that the question is suggesting that the burden is on people, on consumers, to avoid litigation,
I think that’s problematic because so many debt collection lawsuits that we see, especially
those brought by debt buyers, are not legitimate to begin with. Many of the debt buyers are filing these lawsuits
without the intent or the ability, as the CFPB’s own enforcement actions have shown,
to produce documentation to back up their claims, and instead they’re filing these robo-signed
documents, falsely claiming that they have information that they don’t, in fact, have. But as far as helpful things for people to
know, I would share some of the key things that we share with people who call our hotline,
that if you are sued, to be sure to respond to the lawsuit, seek free legal advice whenever
possible—you can go to—and be sure to show up for all your court dates. Check your mail. When you’re in court, ask who you’re dealing
with. Many people who talk to us about their court
experiences say that they thought they were speaking to someone who worked for the court
or for the judge when, in fact, that person was the debt collection attorney. If you’re sued, also look into how old a debt
is, because it’s illegal to sue people for debts that are past the statute of limitations,
and know that the burden of proof is on the debt collector or the debt buyer. Debt buyers make mistakes. We’ve seen, for example, that two debt buyers
or multiple debt buyers have gone after one person for the same debt. So you should always demand that they are
producing the documentation to back up their claims. And finally, I would say that people should
always check to see if their income is exempt. If they’re receiving government benefits such
as Social Security, that is exempt from debt collection. Thank you. This last question, I’ll invite all panelists
to comment upon it. What are a few important things that consumers
should know about the debt collection process. We’ll start with you, Brent, and again work
our way from stage right to stage left. Well, because I work in the litigation world,
I’ll echo some of the things Susan said about do not ignore a lawsuit, is the first thing. But if you get a communication from a lawyer,
before a lawsuit is filed, I would say the consumer should know that the creditor actually
does not want to file that lawsuit. It can be very expensive. It takes resources to file the lawsuit. So if the debt can be resolved, whether it’s
by payment or settlement of the debt itself or whether it’s by resolving a dispute—if
there’s a dispute, we’d much rather get it resolved before we expend the money and go
to court and before a court action is made as a public record of the matter. So don’t ignore those letters and let’s try
to resolve it before a suit is filed. If a suit is filed, if you’re served with
a lawsuit, don’t ignore it. Seek legal advice if you have any questions
or if you think that you don’t owe the debt or you have defenses to the debt, such as
statute of limitations. But if you do owe the debt, it’s not too late
to work something out. And, in fact, during a lawsuit is actually
a really advantageous time, sometimes, for a consumer to get an opportunity to settle
the account, to set up payment. I think a lot of times consumer think that’s
when it’s too late and they put their head in the sand and don’t response. But that’s sometimes a very good opportunity
to resolve it in an advantageous way. Thank you. I think that the most important thing a consumer
should know about the debt collection process is the importance of communication. Debt collection helps consumers by ensuring
that they continue to have access to credit at affordable interest rates that wouldn’t
exist if defaults were uncollectable. For those consumers who do default, debt owners
and debt collectors are willing to work with them to provide unique solutions to their
outstanding financial obligations. However, this requires communication and participation
of the consumer in the debt collection process. Communicating with the debt collector often
results in greater negotiating power for the consumer than the consumer may have had with
the originating creditor, often resulting in the debt owner partnering with the consumer
to agree to extended payment plans with lower monthly payments, a stop on accumulating interest,
and favorable settlement of the consumer account for less than the original balance. The lack of ability of the debt collector
to communicate with the consumer to help them resolve their financial obligations often
results in the defaulted account winding up in litigation, a result which is less than
optimal for the consumer or for the debt owner, for reasons that Brent mentioned. Thank you. Linda? Consumers need to know there’s a big difference
between legitimate collection agencies and the scammers we keep hearing about in the
news. The majority of legitimate collection processes
begin with a collection letter that provides all the disclosures required by law and includes
the consumer’s right to dispute the debt. A collection agency will then attempt to reach
out to the consumer to start a conversation. Before we can release information, we need
to verify we’re speaking to the correct party. This requires an exchange of identifying information
that we can reasonably match to our system to confirm that you are the intended party
we need to speak to. Usually we can match to a portion of a Social
Security number, date of birth, house numbers. Unfortunately, the scammers have made even
me leery of verifying anything over the phone, and this presents a challenge in the legitimate
collection process. If we can’t verify the identity of the person
we’re speaking with, to confirm it’s the intended party, then we cannot disclose the account
information and we invite the consumer to look us up in the phone book, or on the Internet,
and call us back. It’s important to work with the agency to
reasonably confirm your identity as we are often the first point of contact with the
consumer when an identity theft has occurred. Our representative are trained to listen with
compassion and identify ways to help the consumer resolve the account. We believe the vast majority of consumers
that enter into credit transactions intend to pay their accounts. Unique situations occur in all of our lives,
which is why you’ll find that we will periodically come back and revisit the account to see if
your financial situation has improved. Often times a financial lifestyle can change
from 6 months to the next 6 months. It is not the intention of any agency to harass
and a consumer has every right to tell us cease and desist—stop calling—though often
times that invokes a stalemate and you’re forcing the agency then to identify what’s
the next step. If the next step is that we’re going to the
legal process, which I will confirm, especially in California, is extremely expensive, answer
the paperwork. Show up in court. Challenge the agency to prove their documentation. Legitimate collection agencies have the information
to provide to you and want to resolve the debt responsibly. Thank you. Thank you, Linda. Continuing the discussion, Scott, what are
a few important things that consumers should know about the debt collection process? I’m looking at the Summary of Rights that
the CFPB put together for these materials, and I think they contain a lot of the most
important things. For my clients, I think, they would love to
know about their right to get the debt collector to cease communications by instructing them
to do so in writing. The Summary also notifies the consumer of
their right to dispute the debt at any time. I think it would also be useful to let the
consumer know about the proposed cooling-off period, so that there’s not going to be dire
consequences of the consumer disputing the debt. I do think it’s important to let the consumers
know about the fact that debt collectors can’t contact third parties, can’t contact consumers
at inconvenient times and places, and call with such frequency as to constitute harassment. Thank you. Graciela? Thank you. Debt collectors must abide by certain legal
boundaries, such as not calling the consumer at all hours or not engaging in any type of
verbal abuse of threatening behavior. Consumers need to know that they have the
right to ask debt collectors to stop calling them and the debt collector must then stop. If a debt is too old to be sued on, consumers
need to know that fact and need to know what happens if they agree to pay or make a payment
on this debt. Making any payment on old debt may restart
the statute of limitations and give the debt buyer more time to sue legally. Thank you. Susan. Thank you. I think a lot has been said about things that
people should know. I think that debt collectors, debt buyer,
original creditors, they spend a lot of time trying to get information from the person
they’re calling, from the consumer, and they should spend more time trying to be responsive
to people’s request for information, for documentation that backs up their claims. One of the panelists said that they don’t
want to go to litigation. Well, people we speak to on our hotline, every
day, they don’t want to be hauled into court for a debt collection lawsuit that’s not legitimate
to begin with, that can’t be proven, and that’s just wasting their time and the court’s time. They can’t afford to take off work. They may not be able to afford the child care
they would need to deal with this, on top of all of the stress. The CFPB really needs to issue strong rules
that will ensure that debt collectors, debt buyers, original creditors cannot be wasting
people’s times and the court’s resources on illegitimate, frivolous lawsuits, and I strongly
urge the CFPB to translate much of what they’ve accomplished through their strong enforcement
actions into strong rules that will stop this. Thank you. This concludes the panel discussion portion
of our program. I would invite the panelists to rejoin the
audience, and I’m going to turn this over to Zixta, who will continue with our public
comments. Can we give a round of applause to this terrific
panel? An important part of how the Bureau helps
consumer finance markets work is to hear directly from consumers; from industry representatives;
from our federal, state, and local partners; and from community advocates across the U.S. One of the ways that the Bureau gathers public
feedback is through events such as these. We have held field hearings, town halls, and
other events across the U.S.—from Miami, Florida; to Itta Bena, Mississippi; all the
way to Seattle, Washington. At these events, we not only hear from experts
in the field, we also invite the public to participate. And before I open the floor up for comments,
I want to remind folks that there are several other ways to communicate your observations,
concerns, or complaints to the CFPB. You can submit a consumer complaint with CFPB
through our website at Our website will walk you through that process. You can call 1-855-411-2372. The CFPB takes complaints about mortgages,
car loans or leases, payday loans, student loans, or other consumer loans. We take complaints about credit cards, debit
cards, prepaid cards, debt collections, money transfers, bank accounts and services, and
other financial services. If you don’t have a specific complaint but
would like to share your story with us, we have a feature on our website called Tell
Your Story, where you can tell us your story, good or bad, about your experience with consumer
financial products or services. Your story will help inform the work that
we do to protect consumers and create a fair marketplace. We have another feature called Ask CFPB where
you can find answers to over a thousand frequently asked questions about consumer financial issues
as well as additional resources. We have a Spanish language website—CFPB
en Español—which provides access to essential consumer resources as well as answers to consumers’
frequently asked questions. I encourage you to visit
to learn more about the resources and tools the Bureau has developed to help consumers
make the best decisions for themselves and for their family. Now it’s time to hear from members of the
public that are here today. A number of you have signed up to share comments
and observations about today’s discussion. The public comment portion of the field hearing
is also an important opportunity for the CFPB to hear about what’s happening in consumer
finance markets in your neighborhood. Each person who signed up to provide testimony
will have 2 minutes to do so, and what we hear from you is invaluable. We want to hear from as many of you as possible. So I encourage you to please observe the 2-minute
limit so that as many folks has signed up to share their observations have the opportunity
to do so. So let’s get started. Either Jennifer or Carlos will bring a mic
to you, and our first commenter is Harvey Moore. Good afternoon. My name is Harvey Moore. I am the president of the Moore Law Group,
a professional corporation. The Moore Law Group has offices in California,
Colorado, and New Mexico. I am also the president of NARCA, the National
Creditors Bar Association. My comments, however, are my own and not on
behalf of NARCA. Creditors’ rights attorneys provide legal
representation to creditors, not consumers. I represent credit card issuers, but I also
represent small businesses seeking to collect balances from consumers for services rendered
or products sold. As attorneys representing creditors, we have
ethical obligations to advocate for our clients in and out of the courtroom. My attorneys and staff seek to treat consumers
fairly and respectfully while fulfilling our ethical obligations. Our goal is to work with the consumers who
owe the debt, to reach an agreement that is fair and reasonable for all concerned. I hope that the final regulations do not limit
my ability to fulfill my ethical obligations to my clients and the courts. As a creditors’ rights attorney, I strongly
support regulation that allows for improved and mutually beneficial communications and
negotiations between creditors’ rights attorneys and consumers. I hope that the final regulations will foster
increased communications using all possible methods of communication, including those
that were not in existence when the FDCPA was enacted almost 4 years ago. Since the FDCPA’s enactment, the act’s requirements
and protections have evolved largely by state and federal case law. As a result, there has been substantial uncertainty
and inconsistency. I welcome rulemaking that will result in a
higher degree of consistency amongst the various jurisdictions in which creditors’ rights attorneys
practice, including providing creditors’ rights attorneys with safe harbors for communicating
with consumers. Thank you, Mr. Harvey. Suzanne Martindale? Good morning. Suzanne Martindale with Consumers Union, the
advocacy division of Consumer Reports. I want to extend a big thank-you to the Bureau
for taking a historic first step toward modernizing the standards at the federal level for debt
collection practices. The Fair Debt Collection Practices Act was
passed in 1977, before the Internet, before cell phones, and before answering machines. So we agree with many of the other stakeholders
here today who have expressed their concerns over years and years and years of inconsistent
regulatory opacity, inconsistent application of the law at the state and federal level. The federal inaction to date has left states
and courts to have to pick up the difference and try to make sense of what the minimum
standards should be. Here in California, many of us worked on the
Fair Debt Buying Practices Act in response to the enormous spoke in lawsuits that debt
buyers brought against consumers, particularly after the 2008 financial crisis where a lot
of people who were already economically insecure fell completely through the cracks and had
nothing more to give. And the standards were, unfortunately, way
too low. We saw the robo-signed affidavits. I saw them personally, as did so many of my
community partners. So we have worked here in California to ensure
that if you are bringing a lawsuit, you have access to the original documentation for when
the account was active. You had that information before you’re talking
to the consumer, certainly before you file the lawsuit, and you better have it before
you try to seek a default judgment. These are practices that I think responsible
collectors are already following, so this really sets important ground rules at the
national level to ensure that we are supporting what legitimate collectors do and that we
are protecting the dignity of consumers who are struggling with debt. Debt is stressful. All too many of us have it. Some of us are fortunate enough to be able
to make our payments, but it’s all too important that the CFPB set strong standards that ensure
that debt collectors have the right person, the right amount, and the legally enforceable
debt, and have the paperwork to back up their claims. Thank you so much. Thank you, Ms. Martindale. Jan Stieger? Thank you for the opportunity to comment in
this important field hearing on debt collection today. I name is Jan Stieger, and I am the executive
director of DBA International, the primary trade association representing the debt buying
industry. And I must say welcome to Sacramento. Happy to have you here, and DBA is, of course—
We’re happy to be here. —our hometown. Happy to not be on a plane last night, like
I know many of you were. It’s DBA’s philosophy and we are truly committed
to working with the regulators and other policymakers at state and federal level to ensure that
new laws and regulations provide necessary consumer protections while not putting unnecessary
barriers to the collection of legitimate debt. An example, we have worked with the New York
Department of Financial Services and their courts in their new rules they adopted in
early 2015 as well as the California Attorney General’s office and the legislature in crafting
the passage of California Fair Debt Buyers Act in 2013. I’m proud to say that in the end, DBA was
in support of that legislation. We have worked across the aisle and with many
of the consumer groups represented on the panel today to work out some solutions to
the issues. It was in this spirit of wanting to ensure
consumer protection that DBA launched our certification program in 2013, a robust program
with over 20 best practices, gold standards that in most cases exceed current law at both
the state and federal level, and while we didn’t have a lot of time to look at the proposals
that came out, I will say that a quick look reveals that most of the DBA, the standards
that are in certification program, match very nicely with the proposals from the CFPB. DBA has worked closely with the CFPB these
last 3 years in the rulemaking process. We look forward to continuing to work with
the CFPB in the next steps and express our desire for the CFPB to continue to look at
DBA’s certification program for best practices in an effort to provide best consumer protections
while ensuring the payment of legitimate debt. Thank you, Ms. Stieger. Kelly Knepper-Stephens? Tamar Yudenfreund? Cheryl Wright? Tony Diaz? Good afternoon. My name is Tony Diaz, and I am speaking on
behalf of SchoolsFirst Federal Credit Union. We currently have 700,000 members serving
school employees of Southern California. Today’s proposal, while excluding first-party
creditors, does state that first-party creditors will be addressed on a separate track. The Bureau correctly indicates that Congress
specifically excluded creditors collecting their own debts from coverage of the FDCPA
when it enacted the act in 1977 because it concluded that the risk of reputational harm
would be sufficient to deter creditors from engaging in harmful debt collection practices. There is no evidence that this congressional
rationale does not continue to hold true today, especially for credit unions. Director Cordray has on many occasions voiced
his admiration for the credit union movement and the need to treat credit unions differently
from other types of financial institutions with remarks that credit unions typically
operate on a very different business model based on strong service. It is the goal of credit unions to treat our
member owners with respect and in a dignified manner, as evidence by the unblemished reputation
that credit unions have throughout the recent financial crisis. We’re concerned that a far-reaching debt collection
rule could sweep credit unions collecting their own debts under additional burdensome
and unnecessary regulations without a legitimate reason for doing so. We are further troubled by the prospect that
debt collection rules could inadvertently create an adversarial relationship with our
members. For example, requiring credit unions to read
the so-called mini Miranda Warning in the FDCPA to our members each time that a contact
is established will detract from the fact that we’re actually not in the practice of
using this information provided against our member, but rather focused on identifying
and reaching effective and holistic solutions and not on collecting payments. We exist to improve the lives of our members. Likewise requiring creditors collecting their
own debt to send out debt validation notices does not seem to comfort to any legitimate
purpose since the debt is owned by the creditor itself and not being transferred. Therefore, we believe credit unions should
be exempted from the final debt collection rulemaking as authorized by Section 1022 of
the Dodd-Frank Act. Lastly, SchoolsFirst further believes that
any debt collection rules will apply only to third-party debt collectors or the Dodd-Frank
Act-vested narrow authority in the Bureau to promulgate regulations relating to the
FDCPA, it would set an unwarranted precedent for the Bureau to essentially legislate requirements
that Congress intentionally excluded from the FDCPA via a rulemaking. We thank you. Thank you, Mr. Diaz. Albert Cadena? My name is Albert Cadena. I’ve been in the collection industry for 34
years here in California. I started when I was 19 years old. To give you a little bit of a background,
I’m the son of an immigrant family. When I was 10 years old, I was assisting my
parents to talk to—whether it was first-party or third-party creditors in talking about
their debt. I was taught to have ethical background communications. Communications is a key thing in our industry. We talked a lot about reaching out, letters,
calls. The key thing that I urge consumer advocacies
out there that talk to consumers, because I also do that as well, is to respond. Communicate. Talk to the collection agency, whether it’s
first party or third party. Talk to us so that we can come up with some
solutions, whether it’s a repayment program, a dispute, or some type of verification that
they need, whether they need to know that they paid the bill or didn’t pay the bill. I think it’s very important that the communication
is key, that consumers have communication with us. I have friends that call me and say, “I received
a collection notice. What do I do?” Call them. Communicate with them. Check your credit report. If there’s something on there you know you
owed—you moved five, six, seven times—consumer, you have an obligation, as well as I do as
a consumer to communicate back and forth to my creditors wherever I have been to give
them my new address, to give them my phone number. If I change my phone number, it’s important
that we all communicate and give everybody our phone numbers whoever we think we owe. You’re not sure you owe the bill? Communicate. That’s the big thing I want to stress, that
it’s very important for us to do so. That’s what I was taught. That’s why I got into the industry. Thirty-four years later, I’m still doing it. We have high ethical standards in communicating
with consumers. Being here in California, we have a diversity
of people we communicate with, whether it’s Spanish, English, any type of language. You have translation services, and that’s
important that we all have—we all do no a day-to-day basis. Thank you, Mr. Cadena. Thank you. Emily Rush? Hi. I’m Emily Rush. I’m the executive director of CALPIRG, the
California Public Interest Research Group, based right here, and I wanted to first just
applaud and thank the staff of the Bureau for their hard work on this rule, which we
think is a really important step forward, certainly from the last 40 years that things
have changed. We did our own analysis of your own complaints
database on debt collection a couple of years ago and found that by far the highest complaint,
25 percent of all complaints, are from people who say, “This debt is not mine.” The second highest complaint was that there
were too many phone calls. And so we appreciate that this rule attempts
to address both of those things. Like what other consumer advocates have said
before, we think that it could probably go farther, particularly on old zombie debts
that are too old to be sued upon, and so we’ll probably be providing you with some additional
comments on that in the future. And then the last thing I went to note—and
I know this is about the debt collection rulemaking, but the importance of the arbitration rulemaking
as well because there’s a lot of issues that go hand in hand with that one, so I want to
push you to move forward with a strong arbitration rule. Thank you very much. Thank you, Ms. Rush. Mary Ann Kelly? Jerry Terrill? Thank you. My name is Jerry Terrill. I’m the president of Superlative RM, here
in Oak Grove, and this is my twenty-third year in the collection industry. Speaking on behalf of the legitimate agencies
that are out there consistently trying to work with consumer groups and consumers to
resolve their debt, the biggest thing we run into is “This is not my debt.” Though I’ve got a name, I’ve got an address,
and I’ve got a Social Security number, there seems to be no solution provided that we have
to give the consumers of responsibility they need to take to prove that fact. And as we negotiate around that, they show
no urgency on their behalf or any concern that somebody has all of their personal financial
information—accurate Social, accurate date of birth, accurate home address, and accurate
full name. And I think by putting some—and I think
every single agency out here requests that these consumers file the necessary paperwork
to show fraud, identity theft, but a lot of them choose and opt not to. And all they would have to do is have a formal
way of being able to do that, whether it be through the CFPB through our own websites. The other thing I want to address is technology
communication. A lot of these consumers feel better about
not communicating over the phone. The ability for us to drive traffic through
our websites, through technology, I think, would really enhance the consumer communication. Thank you. Thank you, Mr. Terrill. Ohad Samet? Thank you. Hi. Thank you for the time today. My name is Ohad. I’m CEO of TrueAccord, a company that teaches
data and machine learning to fundamentally change the consumer experience and debt collection. We’ve been studying the new proposal since
yesterday. We believe it’s a big step towards improving
consumer protection. Weeding out bad actors is going to level the
playing field and create the race to the top to benefit everyone. When finalizing the rule, we think the CFPB
should continue to encourage innovation in the space by providing clear and unambiguous
guidelines on how to use new technology in the collections process. As a data-driven startup company, we have
empirical evidence showing that using new technologies in the collection space—text,
e-mail, social media—digitizing the dispute process significantly improves consumer protection,
and one, it improves protection measured by consumer feedback and a marked reduction in
consumer complaints. Consumers understand and react to our personalized
targeted communication. Two, it significantly reduces communication
frequency, reduces call volume by up to 95 percent, well under the limitations proposed
in this new proposal, using channels that consumers feel are much less instructive. Finally, it does all of the above by meeting
or exceeding traditional performance in liquidations, and nobody is going to go out of business
by using new technology. So, again, CFPB should consider supporting
innovation by providing clear guidance for the use of technology. It will improve consumer protection and will
help the industry as a whole, and we look forward to cooperating with the CFPB and policymakers
on this shared goal. Thank you very much. Thank you, Mr. Samet. Gina McNoughton? June Coleman? Hi. Let me thank the CFPB for coming—and all
of you for coming to sunny California, as a local. Welcome. My name June Coleman, a California attorney,
a director of the National Creditors Bar Association, a past president of the Sacramento County
Bar Association, and I have also held leadership positions in the American Collectors Association
and the California Association of Collectors. Collection lawsuits make up over 60 percent
of civil filings in California. The California Supreme Court and its trial
courts have created coalitions-developed processes to handle the volumes of all cases in this
time of diminishing court budgets, a problem faced by courts across the nation. I have worked in these coalitions with judges,
as have many of the attorneys here today. All of the stakeholders, consumers, attorneys,
courts want uniformity so that these cases can be handled fairly and efficiently for
all parties, but each state has different legal processes, and uniform practices in
one state will not work in another state. Regulations that supersede state law and state
legal processes would put both parties and the courts at odds with un-reconcilable dilemmas. Clear and understandable rules would benefit
the courts, the consumers, creditors, and their attorneys, but not rules that raise
issues about which rule to follow. Debt collectors and debtors need clear rules
regarding communications. The CFPB should consider how those rules apply
in all of the circumstances that surround debt collection. Do new notice periods take into consideration,
evictions laws, which purposefully provide very limited time periods? Do the new rules address complicated notice
procedures for foreclosures? Will the new regulation address how to meet
a judge’s order to communicate during litigation if communicating exceeds the cap set forth
in the regulation? And how will the new rules reconcile the differences
in these legal processes that vary state by state? Thank you, Ms. Coleman. These are important issues. Thank you. Troy Withers? Linda Guinn? James Michael Cameron? Ben Carl. Thank you, Director Cordray and to the rest
of your team. I know this has been a massive undertaking
since the ANPR came out in 2013, and there’s a lot of work left to do. I have a question related to—
This is not a Q&A session. This is an opportunity for you to share your
observations. Well, I understand that, but something to
consider in finalizing the rules—and it has to do with the chain of title requirement
and as it relates to debt registries. I represent a global debt registry which,
for the last decade, has registered and titled several million consumer loans, and those
records have been used in several state court actions to establish who is the proper owner
of those loans by virtue of the debt sales contracts. In response to the ANPR that had a certain
section on the issue of debt repository, several state Attorneys General wrote in, in support
of this concept of using a registry or titling system. The idea is not new. We have registries for real property, for
mortgages, for cars, for Wall Street transactions, for IP addresses. It’s a natural result of trying to clarify
title issues as it relates to any type of property interest. At this point, the CFPB did provide some language
in the recent NPR on payday loans, on the use of registries. This is a timely issue also because the Uniform
Law Commission is currently considering the same issue. The issue has been included recently in the
DBA certification standards as one path to meeting their chain of title requirements,
but all these policymakers are waiting for some sort of directive in this particular
rulemaking as to how to apply this concept into these business practices, so I’d ask
that you consider that as you finalize the rules. Thank you, Mr. Carl. Dave Rainbolt? Kelly O’Brien? My name is Kelly. I’m the CEO of Credit Bureau Associates in
Fairfield. I’m a third-generation debt collector and
am passionate about the collection industry and what it does for consumers and the clients
we serve. My business partner, Justin Cullum, and I
have both been in the industry for over 20 years and purchased our company in January
of 2015. Our company employs 41 team members, and we’ve
been fortunate enough to be able to provide a competitive salary and full benefits, including
an employer-matched 401(k), a paid vacation, a flexible schedule to support our team and
their families. Our team members help consumers each day to
resolve accounts and come up with solutions, whether it’s to review their budget or find
a source of money that they were unaware of. Our number one priority at our office is customer
service. This is something that’s been instilled in
our culture from day one. When I first started as a collector, I was
trained in the FDCPA, and then I had a long conversation with my grandfather regarding
what it means to work in a small community and the importance of customer service. He wanted me to understand that our clients
depended on us to provide the level of service that they provided and collect the money rightfully
owed to them and create an environment where the consumer feels valued and respected. Now, 40 years later, our core value number
one is providing customer service by going above and beyond for each of our clients and
the consumers we interact with. My hope is that the new rules from the CFPB
will be clear and allow us to collect money rightfully owed to our clients. We’d like to avoid the constant worry of consumer
attorneys coming after us for the gray area in the law. I know it sounds very optimistic; however,
in December of 1976, my grandfather wrote a note to his staff. And it included, “I do not think compliance
with these instructions is going to call for any great change in the matter in which we
have been collecting accounts.” I’m very hopeful that I can write a similar
to my staff in the coming months about the rules that the CFPB releases for us. Thank you. Thank you. Amanda Fried? Linda Dios? Hello and good morning or afternoon. Thank you very much for coming here to Sacramento
to discuss this issue. I am a consumer law attorney, meaning I represent
all of those folks who are being sued by debt collectors and banks, et cetera. I wish that everything I’ve heard here from
these wonderful debt collection companies was showing up in court because everyone I
have represented—and I have represented hundreds—there have not been the supporting
documentation behind the debt owed. There have been the harassing phone calls,
the numerous phone calls, and I just want to make very clear that I am happy to hear
that there are good debt collectors out here. And perhaps I am just getting those people
who come from other debt collectors. All I can say is we need your help. We need clear laws in place for these people,
and also to put that into the context of the Fair Credit Reporting Act, that, please, on
the zombie debts, don’t allow these debts to be reported until there has been some type
of confirmation that the debt is still valid and collectable. Thank you very much. Thank you, Ms. Dios. Sharon Steele Lindeman? Good afternoon. I’m Sharon Lindeman from the California and
Nevada Credit Union Leagues. As the proposal draft was only released today,
I haven’t had a chance to review it. However, I understand the proposal and the
SBREFA process do not include first-party debt collectors, like credit unions. On behalf of credit unions in California and
Nevada, I applause the CFPB for recognizing the very significant differences between credit
unions and for-profit third-party collectors. Credit unions have close and cooperative relationships
with their member owners and do not engage in abusive debt collection practices with
their own member as opposed to third parties collecting debts from unknown consumers and
for-profit. However, I want to note that some credit unions
do use third-party debt collectors. So I will assume that to the extent that any
part of this proposal impacts small credit unions, their viewpoints will be considered
and included in the Regulatory Flexibility Act analysis and included within a SBREFA
report. Director Cordray did note that you plan to
address first-party debt collectors on a separate track. Since Congress purposefully did not include
first-party creditors in the Fair Debt Collection Practices Act, we believe that credit unions
and other first-party creditors should also be exempt from any future CFPB rulemaking. I thank the Bureau for your time and the opportunity
to share our comments. Thank you, Ms. Lindeman. Rodney Hunter? Leonard Gilbert? Rodney Meeks? Good afternoon. I’m Rodney Meeks, CEO of Credit Consulting
Services, Salinas, California, a company my dad started in 1970. I’m second generation, been doing this for
31 years. I’d be retired right now if I would have stuck
with my firefighting career. This is a difficult, difficult business. It’s a difficult job. We’re talking to people that are in difficult
situations, having financial problems, as the young lady commented earlier, and it all
starts with a conversation. And it all starts with a positive dialogue,
and a lot of times, the consumers are on the defense as soon as we call them. So we have to be that positive reinforcement
to our collectors. We have to provide them with a significant
amount of training. We call-record everything. We always look for tone in the delivery to
make sure that they are disclosing the proper disclosures when they begin their call, and
they have to do the mini Miranda. They have to let the consumer know the call
is being recorded. That automatically puts the consumer on defense
right there, and then they have to overcome that uncomfortable initiative conversation. And it’s very difficult to get the consumer
on the phone. We use data analytics. We focus on the people that have the ability
to pay their bills and not on the people that don’t have the ability to pay their bills,
and those folks that don’t have the ability to pay their bills, if it’s a health care
debt, we’re going to help them to find another resource that will qualify them to pay that
debt, such as MediCal or any other type of government assistance program. So we have a lot of great people. I could tell you, we just hired a waitress
from Denny’s. We hired a medical biller from a company,
and we just hired a graduate from California State University, Monterey Bay. So these are regular people. They’re single mothers. I’ve got a single mother that has four kids
without any kind of support from any father. She’s got a daughter going to UC-Davis. She’s going to graduate next year, and she
wants to be a high school administrator. So we have legitimate people in this business
doing a phenomenal job, and they have the best communication skills of any industry
there is out there. Thank you, Mr. Meeks. Bob Keith? Eric Ross? Irwin Escanos? Rachel Terp? Hi. My name is Rachel Terp, a student at Berkeley
Law and volunteer at the East Bay Community Law Center. I wrote the initial draft of what became SB-233,
the Fair Debt Buying Practices Act. And I got to say, in addition to the hard
work of people like Ted Mermin and people at the EBCLC and Susan Martindale and others
at Consumer Union, one of the reasons I believe this law passed was because one of its sponsors,
Lou Correa, Senator in California, had been sued on a debt that he was not owed. They attempted to garnish his wages at the
statehouse, and he has direct access to levers of government, unlike many of the people around
California who are not so lucky and for whom being sued on an indirect debt can cause major
financial issues. And when the East Bay Community Law Center
sought to pass another bill on set-asides for default judgments, another—I believe
it was—no. It was a Senator. A Republican Senator stood up and said, “You
know, I was sued on a debt that I did not owe.” And so one thing I can happily report—I
still volunteer at the clinic, and I’m told by attorneys who work there regularly that
we’ve seen a drop for debts sold after January 1st, 2014, when the law came into being. We’ve seen a drop in the number of people
who are sued on debts that they do not owe, and for debts that were sold before then,
the same problem persists. But I encourage you to talk to consumer attorneys
and nonprofits and also analyze your own information that you receive through the CFPB website
to see whether changes in California laws and other states have improved instances of
incorrect debt collection. Thank you, Ms. Terp. Julie Fellows? Patricia Quezada? Thank you. My name is Patricia Quezada. I’m the director of Collections at Progressive
Management Systems out of West Covina, California, and it’s interesting to hear everybody’s comments. And I have to say that although the CFPB helps
consumers and are out for agencies that are constantly violating, I work for a company
who’s been in business for over 30 years now, and we go to great lengths to ensure that
all collection efforts are compliance with all laws and regulations that govern the industry. Our collection efforts are done with respect
and dignity, and as a matter of fact, one of the things that we preach at our company
is PHD. It translates to “preserve human dignity.” All of our collectors are on the phone every
day trying to collect money that’s owed to our clients, legitimate money that’s owed
to them, and every day, we go to great length to communicate with these consumers and try
to teach them how to get their debts resolved, whether it’s going to be paying, disputing,
how to go about that. But I feel like we lack the responsibility
on the consumer, you know, who is regulating the consumer, who is teaching the consumer
what they need to do. And we talked about—I hear a lot of people
saying, you know, “Consumers need to also communicate with us.” We do everything to try to communicate with
them, but where’s the responsibility for them to communicate with us? We constantly get hit with frivolous complaints. A lot of times, they are valid debts, but
it’s so costly to go through with these that we just let go. So I’m just saying you talk about clarity
and you talk about regulations. Please keep our industry in mind when you’re
coming up with these. Thank you. Thank you, Ms. Quezada. Yvonne Garcia? Good morning. My name is Yvonne Garcia. I work for Progressive Management Systems
as well as my colleague, Patty, here. I’ve been in the debt collection industry
for 14 years now. I know that’s not a lot of time compared to
some of you all here, but I’ve seen a Lot of changes in that very short 14-year period
of time. I think like many of us in the industry, we’re
looking for clear rules and guidance. We want to do the right thing, and we do,
but with clear rules and guidance, we can do it so much better. Give us uniform rules. Give us clarity where there’s crossover, and
also require accountability, like my colleague said. That’s a big one. Consumers should also be required to do the
right thing, follow through with the processes in place, and let us know when we have it
wrong. We want to collect from the right people,
not the wrong people. Thank you. Thank you, Ms. Garcia. Molly Munson? Hi. I’m a current law student at the University
of Georgia, and I’ve been interning at the East Bay Community Law Center. Tangential to the debt collection of rules
that you are proposing today, I think there’s something that both debt buyers and that we
can agree on is the fact that there are fraudulent debt collection agencies out there or fraudulent
individuals and scams that are going on. So I think one suggestion for your website
and materials is that you include a listing of all the legitimate debt collectors as well
as alert consumers to all the scams that are out there. Just having like a one-pager in your sections
for consumer information would be extremely helpful, so consumers can know what are actually
legitimate debt collectors and what are not at the moment, because it’s difficult for
consumers to tell because the average consumer doesn’t know who Midland is, doesn’t know
who Encore is. They don’t know the names. So I think that’s one suggestion that we would
have for you. In addition, another section would be debt
consolidation. Oftentimes when consumers are facing four
to five credit cards that are in default, they don’t really know what to do, so they
try to go out to debt consolidation and debt settlement firms. Unfortunately, we’ve seen a very recent uptick
in the amount of debt consolidation and debt settlement firms that say, “Hey, we’ll settle
with your debt collectors. We’ll settle with your first-line creditors,
and we’ll do that for you in monthly payments,” but unfortunately, it’s frauds and scams. And these consumers end up paying the wrong
people and face catastrophic losses. So if you could pay more attention to debt
consolidation instead listing it under the other financial category of your consumer
complaint database, list it as its own separate category, and also just create a separate
page on your website so consumers can have the information to know what consolidation
and settlement scams are out there, so when they are dealing with debt buyers, debt collectors,
either first or third parties, they know what’s fraudulent, and then they know what’s actually
legitimate or what debt collectors are licensed within their state. Thank you, Ms. Munson. Amanda Griffith? Mark Ellis? You could have two of us for one. So I don’t have prepared remarks, but my name
is Mark Ellis. My law firm is Ellis Law Group, and I have
been defending debt collecting companies and agencies for 30 years here in California and
actually across the country. So I would say that I’ve probably defended
up to maybe 500 lawsuits by debtors against collection agencies or collection attorneys. So I think I have some sort of basis to make
the following remark, and that is, institutionally, when you’re putting these rules and regulations
together, please remember the old saw that—the doctrine of unintended consequences because
over the law 30 years, I’ve seen the FDCPA be amended. I’ve seen the FCRA be amended. I’ve seen the TCPA come into effect, and interestingly,
listening to the panel, I would ask that you folks also remember this. Often, the bad faith of debt collectors if
overstated, and the good faith of debtors is overstated. What California has done in its Rosenthal
Act, I think, which you will not find in the FDCPA, is a balance between responsibilities
between collectors and responsibilities of debtors. And I think that’s going to be important moving
forward. And maybe it’s just my experience over the
last 30 years in handling these cases, but I am going to be really interested in meeting
you folks again in 5 years, and we’re going to see with the new regulations whether your
complaints go down or go up or stay the same. Thank you all. Thank you, Mr. Ellis. Alice Wong? Sorry. Alice is sick, so she’s going to have me sick,
which might be a bad thing. Quick shout-out to Rodney Meeks. Haven’t seen you in 35 years. Salinas High School. We’ll talk afterwards. I haven’t seen him in 35 years. When you come to the meetings, you never know
what you find out. First of all, Director Cordray, I’ve met you
at conferences. You’re a fantastic person. What you do is fantastic, your team. We’ve got to get the bad actors out. There’s so many bad actors in the debt collection
world, and there’s a lot of great actors too. At NTCI, I run a company with 5,000 people
in the field. We’ve been in business over 20 years. We’ve very proud of the fact, Director Cordray,
we haven’t had a single complaint at the CFPB website, but what we wish to do is really
enlighten you on nontraditional debt collection. Whether you’re third party or first party,
we’re in the gray area. We don’t take assignment of debt. We don’t collect debts. We don’t have trust accounts. We don’t get paid a contingency fee. We actually go door to door and talk to borrowers
who are at risk that do loss mitigation work, help avoid foreclosure, help avoid auto repossession. Creditors, like many of the credit unions
we talked about here today, use our service to do this. We’re kind of caught in that niche area. We’re subject to FDCPA, which his great, because
we indirectly assist in the collection of the debt. But we talked about many different communication
tactics. We haven’t talked about good old-fashioned
in-person contact. FHA requires face-to-face visits. To elaborate, a very quick example, Director
Cordray would never be delinquent on an account. We know that, right? But if he was and had an FHA loan, more than
likely our—would come out. That he’d receive a letter first from bank,
say we’re going to come out. We’d come out, do a repayment plan on the
spot. And, Director Cordray, the reason why we’re
in business is 50 percent of the borrowers refuse to talk to their creditor as a background,
50 percent on average. So the need of phone calls and letters and
have someone like us go out and talk to them to try to help save the home or avoid foreclosure
is there. So we go out to Director Cordray’s house,
knock on the door, do a repayment plan, give him documentation, refer him to counseling. Three days later, he would get a debt disclosure
letter from us that might be confusing, but that’s what we do, and we’ve done this 2 million
times in the past 20 years, talked to thousands and thousands of borrowers. During the financial crisis, Fannie Mae had
us go out on tens of thousands of accounts to knock on the door and warn them, transfer
them to the service area to get help to avoid foreclosure. Thank you for your comments. Jay Lope? No, no. That’s not how it works, but thank you so
much for being here today. Amy Morris? Good afternoon. My name is Amy Morris. I’m an attorney and a debt collector. Usually, I’m attempting to collect a debt
by a lawsuit, perhaps. The first suggestion that I’ve been given
to voice here is perhaps there should be a box on the website that says “I have informed
the creditor of this dispute” and require them to go through, perhaps and first—to
send a form out to the creditor of the nature of their dispute, and whoever opens the mail,
possibly the stakeholder, can deal with it, thereby putting them on notice of their creditors
who are perhaps—or debt collectors who are perhaps not following the law and hopefully
to resolve the issue short of the action by this Bureau. The other thing is waiting 30 days to collect
against the dead person, is this really a problem? I can’t imagine it. If it is, how are we going to know that person
is debt? With budgetary crises going on, it takes forever
to get a death certificate, for things to happen. What exactly is going to put us on notice
that there is a dead person, and what is going to stop—I don’t know—debtors from saying
that person is dead and it not be the case? But it stops phone calls. Why not deal with how that’s going to happen? The other thing is 30 days. What if there is a statute of limitation issue? I know if there’s going to be a statute of
limitation issue, I am going to have to file a complaint. Is that going to be a problem during that
30-day tolling period? Also, the statute of limitations issues—and
I haven’t reserved the rules—what about servicemember statute of limitation tolling
periods? What about bankruptcy tolling periods? Is that going to be accounted for when you
deal with those provisions of the law? Thank you, Ms. Morris. Thank you. James Hughes? Thank you. My name is James Hughes. I’ve been a collectors attorney since 1988. There’s really not that much I could offer
after Ms. Coleman and Mr. Ellis. I do wish to caution the group, however, to
be careful in looking at the bad apple situation—there is a bad apple in every kind of industry—and
not making the rule based upon the acts of a few bad players. I’ve heard that quite a bit. Adding on the technology, I think it’s very
important that CFPB address the technology issue, as the FDCPA is so old, and the technology
issue, frankly, if handled correctly, could drive down prices involved in the collection
activity. When prices go down, settlements are easier
to obtain, and maybe the debtors will be able to benefit from that cost going down. Lastly, I would hope that there be some kind
of address of the elephant in the country, which is the Foti leaving messages, can you,
can you not leave messages. I would love to see some sort of address in
that are, seeing as how almost every division in the United States has its own little take
on the rule, making that very difficult to address. Thank you. Thank you, Mr. Hughes. William Bents? James Whitfield? Sean Escobar? Michael Hawkins? I’m sorry. Sean Escobar here. I’ve been in the industry for 31 years, and
just like Mr. Cadena, who I work for, I—although I may not look like it, I am a sibling from
an immigrant family. I was adopted by a Mexican who immigrated
in the 1940s. I come from a family of six kids. We were all adopted, and I was raised on welfare
and food stamps. I don’t have formal education, but I entered
this industry just by virtue of a friend of mine said, “Hey, why don’t you come out, and
I’ll get you a job in the office, get you out of the sun,” because my skin doesn’t work
well with the sun. And here I am today. I’m involved with an excellent company, and
we have 500 employees, and we’re primarily responsible for health care receivables. My job is involved with compliance, and I’ve
been doing it for about 4 years. I want to hit on—first of all, I do appreciate
the CFPB’s efforts. I think it’s important. I think a lot of people here have provided
some testimony on both sides of the issue, and I would like to hit a point that has not
yet really been raised, and it has to do with industry’s difficulties in complying with
the laws. We were hit with a class action lawsuit that
was—the root of it was a single phone call made to a cell phone that was provided to
us by our hospital. It was provided to our hospital by the patient. We made six phone call attempts, left messages,
only to discover that that phone number was no longer associated with the patient. We discovered this through a lawsuit. The lawsuit cost our company $250,000 to defend. We had insurance that paid out $1.2 million
on the settlement. The attorneys earned $800,000. The individual consumers got $42. I would urge the CFPB to please take this
issue up. If it was a smaller company—76 percent of
the industry is 10 employees or less. Any other company not of our size would have
been out of business. Those employees—good, hardworking Americans—would
have been out of work. Thank you. Thank you, Mr. Escobar. Michael Hawkins? Thank you. Good afternoon. I’m Michael Hawkins. I’m here on behalf of Tenet Healthcare. Tenet Healthcare would like to strongly encourage
the CFPB to recognize the uniqueness of health care debt in both the first- and third-party
situations. Thank you very much. Thank you, Mr. Hawkins. Charles Messer? I’m Charles Messer. I’m a lawyer in private practice in Los Angeles. I have represented debt collectors in civil
litigation for 30 years. I agree with all of the Bureau’s objectives,
but I respectfully submit that the Bureau’s proposals are misconceived and ineffective
and unfair, and the reason is that debt collectors are messengers for creditors, and cracking
down on collectors is like shooting messengers for bad messages. And the Bureau’s view on the debt collection
industry and the court’s views have been distorted by the Fair Debt Collection Practices Act
that imposes these obligations only on the messengers, only on the collectors. If the Bureau is genuinely interested in accurate
documentation, thorough documentation of debts, it’s the creditors who have the power to create
and keep those records. If the Bureau is generally interested in dispute
resolution regarding “I’m not the right person,” “It’s not the right amount,” it is the creditor
that has the information, not the messenger, not the collector. And the rules are unfair because—and I know
the Bureau’s proposal says, well, heck, collectors could just have contracts that require the
creditors to supply documentation. In my practice, I’ve seen hundreds of those
contracts. Not one has such a requirement. Creditors will never even warrant the accuracy
of the information, and when you look at the cram-down provisions on indemnity, you see
the great disparate power in the debt and collection industry. The creditors have power. The collectors have none. These are cram-down contracts, and so all
the risks get crammed down onto collectors. And so here we are saying let’s solve the
problem by shooting more messengers. It’s misconceived, and the Bureau is cracking
down on the weakest persons in the industry. Thank you, Mr. Messer. Thank you. Rosemary Shahan? Thank you. I’m Rosemary Shahan, president of Consumers
for Auto Reliability and Safety. We’re based in Sacramento, and we love the
CFPB and the work that you do and really appreciate that you’re helping our economy and consumers. And we especially appreciate the work that
you’re doing regarding Servicemembers Civil Relief Act and with the Department of Defense
to improve protections for members of our armed forces. California has the largest military population
in the nation, so we have about 220,000 troops who are either on active duty in California
or they are deployed from California to theaters around the world. And they and their families need all the protection
that they can get, and it goes beyond protecting them as individuals and as families to our
national protection. And one thing that we are painfully aware
of is that when they are subject to unfair practices, including unfair debt collection
practices, it can affect their ability to serve our nation and accomplish their essential
mission. And so I’m very grateful for the proposal
that you put forward and especially for the work you’re doing to protect our servicemembers
who protect all of us. Thank you. I want to thank all our commenters today. Thank you for taking time from your busy day
to be here with us. We appreciate it greatly. I want to thank the panelists and to all those
watching via live stream at This concludes the CFPB’s field hearing in
Sacramento, California. Have a great afternoon.

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