Seattle, WA: Field Hearing on Debt Collection


Welcome to the Consumer Financial Protection
Bureau’s Field Hearing on Consumer Debt collection. The Consumer Financial Protection Bureau is
an independent federal agency whose mission is to help consumer finance markets work by
making rules more effectives, 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 Acting
Associate Director for External Affairs. Today’s field hearing is being live-streamed at ConsumerFinance.gov,
and you can follow CFPB on Twitter @CFPB to learn more about what the Bureau is doing. We will begin today’s Field Hearing with remarks
from some well-known Washington State luminaries. Then you will hear from CFPB’s Director, Richard
Cordray. This will be followed by a panel discussion on consumer debt collection that
will be led by the CFPB’s Deputy Director, Raj Date. After the panel discussion, audience
members will have an opportunity to tell us their stories. So let’s get started. Our first speaker is
Mayor Michael McGinn. Mayor McGinn is the 52nd Mayor of Seattle. Since taking office,
he has been an ardent supporter of those in need and consumer protections. He has passed
legislation to cap and curb predatory towing fees to ensure mandatory inspection of rental
housing to protect renters, and he is currently investigating what can be done locally to
limit predatory lending. Under his administration, Seattle is a founding member of the Cities
for Financial Empowerment Coalition. Please join me in welcoming Mayor McGinn. [Applause.] MAYOR MICHAEL McGINN: That’s great. Zixta
has used up most of my talking points, so that will move things along more quickly. First of all, I am really grateful to welcome
the CFPB Director Richard Cordray and his team to Seattle, and for folks here, I always
make it a point to welcome agency heads from the Obama administration at a time when the
financial markets had completely collapsed, a time when we were looking at huge unemployment
in this city, a lot of distress and financial need. Private capital markets were not lending.
Private construction was at a standstill, a lot of our resources for any new initiatives,
and our own budget had been hammered, of course, by the decline in the economy. So much of our money for new initiatives came
from the federal government and their investment, the stimulus, which has gotten a bad name,
but I’ll tell you, it’s helped us out here. We’re able to work on local roads. We started
our community power works program in which we’re doing energy efficiency retrofits for
homes, multifamily, commercial buildings, and we’ve managed to put together community
workforce agreements for that work, so that people who are most in need of work can be
connected to the workforce, can get connected. But it’s a number of things; whereas, really
it was the ray of hope on investment. So I welcome any member, any head of the Obama
administration here just as an appreciation. And, you know, if you’ve got any more of that
to send our way, you know, let us know. [Laughter.] MAYOR MICHAEL McGINN: I also want to acknowledge
Congressman McDermott, who has just been an incredible champion of Seattle in Washington,
D.C., and played a role in that. And, you know, we have a seawall project coming up,
and we appreciate Congressman McDermott’s help on that as well. We have to work with
the U.S. Army Corps of Engineers to make that work well. This is especially poignant coming here for
this hearing on debt collection and the mission of CFPB. I just came from our regional Committee
to End Homelessness, which is a very ambitious title of the committee with an extraordinarily
challenging goal, and what we know is that the needs for shelter have risen in the past
few years, despite deeper investments in the creation of new housing. We have successfully
created more housing for very low-income people, to move people out of shelter into housing,
but we have not been able to reduce the demand for shelter. So we’re looking at how do we
take people who are in desperate straits and lift them up and out, and the Consumer Financial
Protection Bureau is on the other side, how do we educate people, how do we support people,
how do we protect people from predatory practices and keep people in their homes and keep people
in a position to take care of themselves and their families if they have one. So we’ve looked at that role too. Zixta graciously
mentioned some of the things we’ve done. Predatory towing fees. Rental housing inspection. Right
now if you have bad rental housing and you call to complain, you’re going to worry about
retribution. We’re going to inspect all of the rental housing in the city over a period
of time, random inspections and mandatory inspections, to lift up the quality of housing
across the city. We have passed paid sick leave legislation as well, so that there’s
a minimum floor. We are going to take a look into predatory lending practices, see what
we can do locally. We have also had a tremendous partnership
with professionals in the City of Seattle who step forward. We do financial empowerment
seminars and conferences, and we have gotten professionals in the financial planning fields.
We could get 50 of them at a time. They will come up to North Seattle Community College.
They will be there all day, and people can come on in and get help. This library right
here during tax season, accountants will be upstairs here, and they will give help to
anybody who comes in with their tax form. So we know how critical it is that people
have information, have the tools, have the sport to make smart financial choices for
the future, and we also know how critical it is, the role the government plays, in holding
financial institutions accountable and holding ourselves accountable as a community to the
ideals we have about giving people opportunity. So, again, I’m very grateful to welcome CFPB
and Director Cordray here. Thank you. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Mayor McGinn. Our next speaker is Congressman Jim McDermott.
Congressman Jim McDermott, who represents Washington’s 7th District and most of Seattle,
has been a steadfast advocate for consumer protection and serves as the Ranking Member
of the Ways and Means Subcommittee on Trade. We thank him for being with us here today. Congressman McDermott? [Applause.] CONGRESSMAN JIM McDERMOTT: Good morning. We
welcome you, Mr. Cordray, to a typical Seattle day. [Laughter.] CONGRESSMAN JIM McDERMOTT: It’s good to be
inside right now, but the sun will come out a little later in the day. When I went to Congress 25 years ago, I was
on the Banking Committee. The Chairman was Henry Gonzalez, and we went through hearing
after hearing after hearing about the savings and loan mess. So I’ve been looking at this
issue of consumer protection for a very long time. Chairman Gonzalez wanted to have what
we now have with the CFPB. He wanted it then, but nobody would listen. It took the collapse
of 2007 for the Congress finally to pay attention and put this in place. And Henry realized
that lots of people received things and are offered things, and they don’t have the intellectual
or the background educationally or whatever to understand what’s being put in front of
them, and they buy and they need somebody to protect them. The free enterprise system is very simple,
according to anybody who looks at it. Make money. Make money any way you can. And the
government has a very important role, and that is protecting the public from the excesses
of the free enterprise system. It is very simple. And this agency is absolutely, has
been essential for 25 years. We have not had a functioning one. We saw the resistance to
it when Elizabeth Warren was proposed as the nominee, and the Congress went up in arms,
“We can’t have this stuff going on.” And when she stepped down, Richard Cordray was willing
to step up and take the job. It is not an easy job. It is a tough job, because you got
to stand against the whole free enterprise system and say, “Hey, look, you can make money.
It’s all right, but let’s be fair, and let’s be honest and transparent in what we’re doing.” Now, the agency has already had three successes
against credit card companies. Living in Washington, D.C., and opening my mail, every day I get
an offer from some bank wants me to have a credit card, and it’s got some wonderful glowing
offer that if I would just jump for it, I would be the richest man in the neighborhood.
Well, the fact is that it isn’t true, and it hasn’t been true. And this Bureau has brought
them to ground. It should be a message to the banking industry in this country to be
transparent and honest and stick to banking, not trying to make as much money as you can
off people’s inability to understand exactly what’s happening. So I’m pleased that you’re bringing this hearing
to Seattle. I did find out in talking with him a little earlier really why he’s here.
On his wedding, he came on his honeymoon trip to Seattle. So welcome back. Thank you. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Congressman
McDermott. Next is the Consumer Financial Protection
Bureau’s Richard Cordray. Richard Cordray is the CFPB’s first director. Director Cordray? [Applause.] RICHARD CORDRAY: Thank you, Zixta. And that’s
true what the Congressman said. On our honeymoon, my wife and I started in San Francisco and
drove up the coast to Seattle, and then she had the difficult experience of moving back
with me to Ohio, so — [Laughter.] RICHARD CORDRAY: Thank you for being here
with us in Seattle for this field hearing. I would also like to thank our colleagues
from the Federal Trade Commission for joining us today. Over this past year, we have come
to realize we could not have a better group of partners than they have been to us, standing
shoulder to shoulder to protect consumers across this country, and we enjoy every chance
to fight alongside them, on behalf of each of you. I found when I came into the world
that I was lucky in life because I already had a brother on the scene to work with me,
to help me and to look out for me, and the Federal Trade Commission has been that to
the Consumer Financial Protection Bureau. We are here today to talk about debt collection.
Because of my background in state and local government, it turns out that I have been
immersed in this topic for a long time. I started out as a county tax collector, making
a point to apply myself to collect tens of millions of dollars in property taxes, back
taxes that had gone unpaid, in some instances for many years. It seemed to me grossly unfair
to all the law-abiding taxpayers, who somehow managed to scrounge up their payments on time,
to know that others were shirking their obligations and getting away with it. We did not have any sophisticated methods,
so we just applied elbow grease and shoe leather and as much ingenuity as we could muster.
We reported scofflaw businesses to the Better Business Bureau, and if that did not work,
to the Dun & Bradstreet credit rating agency, and if that did not work, to the local banks.
We pursued them in court, including the bankruptcy courts, and we gradually moved ourselves up
their priority list to get paid what we were owed. But out of that work, I also learned some
very different and unexpected lessons. I came face to face with people who were in trouble,
individuals, many through no fault of their own, victims of disease, divorce, death in
the family, dislocation from job loss. My team and I called and visited seniors who
had never fallen behind on their taxes before, whose delinquency was a red flag and a cry
for help. We put people on payment plans to give them a chance to dig out of trouble.
Out of these experiences, I first sought to grasp the foreclosure crisis, and I became
convinced of the urgent need for greater financial knowhow and financial capability for every
citizen. Later I served as Ohio Attorney General, where
I found myself on both sides of the equation in debt collection. On the one hand, I was
the primary debt collector for the state government, marshaling an army that collected hundreds
of millions of dollars in unpaid fees, taxes, fines, and penalties each year. On the other
hand, I was charged with enforcing the law against every debt collector, big and small,
who was operating in the state. I know firsthand how hard this work can be, but I also know
that it can be done the right way, and I came to understand how hard it is on people when
it is done the wrong way. As we continue to emerge from the devastating
financial crisis of 2007 to 2008, we now find that debt collection is a central issue of
our times. Currently, about 30 million consumers, almost 1 out of every 10 Americans, are being
pursued by debt collectors for amounts that average about $1,500 apiece. Independent debt
collectors are in the business of collecting debts for others, and they conduct three main
types of activities. First, they collect defaulted debt owned by a creditor in return for a fee.
Second, they may buy debt in default and collect the proceeds for themselves. Third, they may
specialize in collecting debts through litigation. And they may engage in any or all of these
activities. We know that debt collectors represent a wide
spectrum of firms. Many play by the rules and are simply doing their jobs, trying to
collect what is legally owed. Indeed, the work they do is integral to the proper functioning
of the consumer credit market. But others cut corners and seek to gain an advantage
by ignoring the rules. Our job, and that of our partners at the FTC and elsewhere, is
to root out those bad actors. Not only do they hurt consumers, but they are also a detriment
to every debt collector who is faithfully following the law. In fact, a stated purpose for the Fair Debt
Collection Practices Act is that Congress wanted to ensure that those debt collectors
who refrain from using abusive debt collection practices are not competitively disadvantaged.
At the Consumer Bureau, we deeply believe that reasonable market oversight is critical
to fostering fair competition in consumer financial markets. We will be using both our
supervision authority and our enforcement authority to oversee the market and go after
bad actors who flout the law. What is supervision authority? It is the authority
to send a team of examiners to scrutinize a company’s business practices and determine
whether they are in accordance with the law. This broad authority is an effective tool,
a preventive tool, to prevent and correct any violations that are occurring and to find
ways to resolve matters that are causing harm to consumers. The Bureau is already supervising
the debt collection practices of many large banks and nonbank lenders to make sure they
are complying with federal consumer financial law. Now we are taking another step forward to
protect consumers against violations of the debt collection laws. The Consumer Bureau
is announcing today that we will be expanding our supervision program to cover the larger
firms that principally collect defaulted debts on behalf of creditors. We will be monitoring
these debt collectors just as we have been monitoring the large banks and nonbank lenders. Beginning in January, any firm that has more
than $10 million in annual receipts from consumer debt collection activities will be subject
to our supervisory authority. This authority will extend to about 175 debt collectors,
which account for over 60 percent of the industry’s annual receipts in the American consumer debt
collection market. This new federal authority will enable us both to protect consumers and
to support law-abiding debt collectors more effectively. We are also releasing examination
procedures in the field guide that our examiners will use to assess whether creditors and debt
collection firms are following the law. Through our ability to conduct on-site examinations,
the Consumer Bureau will be in a position to evaluate whether federal consumer laws
are being followed at every stage of the process, from credit origination to debt collection.
We will continue to exercise enforcement authority across the market to address problems after
they surface, but our supervisory authority will mean we can identify these problems and
root them out at an earlier stage in order to minimize harm to consumers. Above all,
we are concerned about the system-wide problems in the debt collection market that pose risks
to consumers, and we want to see good practices come to dominate the market. One system-wide problem we are concerned with
is the accuracy of the data that debt collectors are using to pursue consumers. After a debt
is charged off, it may be sold several times. One issue is whether a sufficient amount of
information about the debt is conveyed when the debt is first sold. A second issue is the extent to which the
accuracy of the information, including such fundamental facts as the consumer’s identity
and the amount of the debt, deteriorates as it gets passed down the line. If any piece
of that information is incorrect, the consumer might not recognize the debt, and it may not
even be theirs. So our examiners will be paying close attention to whether debt collectors
have accurate information when they are collecting debts. Consumers also need to be able to dispute
debts they believe to be incorrect. So we will look closely at how debt collectors process
consumer disputes and whether they do it in a timely manner. If the debt has been reported
to a credit reporting company, the collector needs to investigate all disputes and should
inform the company of any inaccuracies that are found. Given the impact that a credit
report can have on a consumer’s life, it is critical that the credit reporting companies
have accurate and up-to-date information. One noted tactic is for a debt collector to
pursue a default judgment in a court, sometimes by deliberately failing to notify the consumer.
The debt collector knows that the information in a credit report provides powerful influence
over the consumer’s access to credit, and this becomes the essential leverage for extracting
payment, regardless of whether it can be justified. As part of our approach to supervision, we
will encourage robust compliance programs. It is not enough for a debt collector to point
to policies and procedures as a means of justifying their collection practices. The policies and
procedures must be followed consistently. The best way to be sure of that is by having
sound monitoring systems in place. A good compliance program also closely analyzes complaints
to find patterns that may pose risks to consumers, such as whether the complaints stem from a
specific employee or from a certain type of account or certain kind of business practice.
We expect to see an effective and comprehensive process to address consumer complaints. The law also recognizes that debt collectors
can harm consumers significantly in many ways other than pure monetary harm. Much of the
law was deliberately crafted to protect the dignity of the individual consumer and to
ensure that he or she is treated with the respect we all deserve. So our examiners will
evaluate whether debt collectors treat consumers fairly and humanely in a manner consistent
with the law. Sometimes collection methods involve harassment
or deception, and they are typically illegal. Intimidation, abusive tactics, profane language,
or threats of arrest are widely known to be out of bounds. Even placing certain kinds
of calls, such as calls at unusual hours, is unacceptable and against the law. Wherever
we find unlawful practices, we will take steps to eliminate them, thereby helping to protect
consumers and, again, supporting those collectors that take care to comply with the law. Earlier this year, our colleagues at the FTC
were successful in halting an operation that involved calls about phantom payday loan debt.
The perpetrators somehow obtained contact information for consumers who had applied
online for payday loans. Then, posing as law enforcement or government officials, they
would call consumers and threaten to arrest them if they did not make good on their supposed
payday loan debt. We don’t need any fancy names for this kind of conduct. It is outright
fraud. The FTC established that the consumers did
not actually owe money to the callers, and they won a court order halting the conduct
and freezing the assets of the fraudulent operation. This kind of aggressive law enforcement
sends a strong warning to others that this kind of exploitation will be exposed and its
exposure will be made to hurt. Our allies among the state attorneys general and other
state officials likewise devote considerable time and effort to rooting out bogus debt
collection efforts, including improper practices, scams, and frauds. We have been initiating
our own efforts and working together with the FTC and state officials to enforce the
laws on debt collection, and we will continue to do that. At the Consumer Bureau, both supervision and
enforcement are key tools in our toolbox, but we have other tools as well. Another major
component of our mission is to empower and educate consumers, which we are doing in part
through Ask CFPB, an interactive online database that answers consumers’ most frequently asked
questions in plain language. Today we are rolling out more than 70 new
questions and answers about debt collection, covering such topics as the definitions of
key terms, what is legal and illegal, and the best ways to negotiate a settlement with
a collector. We want consumers to have an objective source of information on debt collection
and one that is easy to understand. You can find the Ask CFPB database on our website
at ConsumerFinance.gov. We also want to encourage participation in
our everyday work at the Bureau, and that is one of the reasons we are holding a field
hearing here today. We want to engage the entire public, including consumer groups,
industry, and local officials, because we need help from all of you to promote honest
practices in the consumer finance markets that will best protect consumers. What stands out most clearly in my mind today
is how important it is for us to succeed in our task of fixing the debt collection market.
Doing so is clearly in everyone’s best interest, at least everyone who intends to abide by
the law. When this market works as it should, consumers are treated fairly, they retain
their dignity, and they are prompted appropriately to pay their legitimate debts. We all have
the right to demand and expect as much. Thank you. [Applause.] ZIXTA Q. MARTINEZ: Thank you, Director Cordray. At this time, I would like to invite all panelists
to join the stage, please, and while the panelists are taking their seats, I will take a moment
to thank those joining us on Livestream at ConsumerFinance.gov. You can follow CFPB on
Twitter at @CFPB to learn more about what we are doing, and you can also follow us on
Facebook. The CFPB’s Deputy Director, Raj Date, will
lead the panel of experts through brief statements and a discussion about current trends and
themes in the debt collection market. Raj Date has had a long and varied career in and
around U.S. financial institutions as a strategy consultant, as a bank executive, and on Wall
Street. Previously, he served as the Special Advisor to the Secretary of the Treasury for
the CFPB and as the Associate Director for Research, Markets, and Regulations at the
CFPB. In 2009, Deputy Director Date founded and served as Chairman and Executive Director
of the Cambridge Winter Center for Financial Institutions Policy, a private non-profit
research and policy organization that supported reform for the U.S. financial system. Deputy Director Date, you have the floor. RAJ DATE: Thank you, Zixta, and good morning,
everyone, and thank you for being with us. At the CFPB, we aim to be a data-driven agency,
and that means a few different things. It means that we try to make sure that policy
decisions that we make are grounded in the best available evidence, and it also means
that we try to make sure that our policy agenda, as it is shaped and informed, is grounded
in the pragmatism of the market as it actually exists, and that it’s grounded in the actual
experience of real-live human beings in the consumer finance marketplace. There are a
variety of ways in which we can make sure that that policy agenda is grounded in that
way, and this hearing is a big part of that. We have the benefit today of having six panelists
who hopefully will be able to inform all of us with respect to the way in which this market
within debt collections actually works, how it is that from time to time it doesn’t work,
and what harms that may visit upon consumers over the course of time. Why don’t I do this. I’d like to introduce
both panels first, and then we will ask each one of the panelists to provide a brief opening
statement. And then I and my colleagues from the CFPB will take some time to ask some follow-up
questions, and then we will open things up for some audience questions and testimony
that Zixta will lead us through. So, first of all, why don’t I begin with some
introductions. Starting from the far end on my right-hand side is Carolyn Coffey, the
Supervising Attorney from MFY Legal Services in New York. Next to her is Susan Shin, Staff
Attorney from Neighborhood Economic Development Advocacy Project, also in New York. To Susan’s
left is Dick Rubin. He is a consumer law expert with a long-time, four-decade history of practice
out of Santa Fe, New Mexico. If I turn to my left, all the way at the end of the table,
we have Chad Benson, the Chief Operating Officer of CBE Group. Next to him is Bill Allen, the
Chief Executive Officer of ALW Sourcing, and then Carrie Finney, the President and CEO
of The CMI Group. With that, perhaps we could start with you,
Ms. Coffey, with a brief opening statement. CARRIE FINNEY: Sure. Thank you, and thank
you, Director Cordray and the CFPB, for holding this really important hearing today on debt
collection. I’m really pleased to be here, and I welcome the news that Director Cordray
just spoke about. I work at MFI Legal Services in New York City.
We provide free civil legal services to low-income New Yorkers, and we also engage in law reform,
impact litigation, and policy advocacy. I supervise our Consumer Rights Project, and
we have a weekly hotline that consumers call. And we’re also actively engaged in consumer
clinics in courthouses around New York City where we help pro se litigants. So we talk to consumers at every stage of
the debt collection process, from individuals who haven’t yet defaulted on, say, a credit
card debt, but they’re worried about paying next month’s bill, to people being harassed
by multiple debt collectors, to people facing debt collection lawsuits in court. Some of the recurring problems that we see,
especially with debt buyers, on a regular basis is unrelenting collection efforts against
people with exempt income, improper service of process of lawsuits, and meritless cases
brought by debt buyers who can’t show that they actually own the debt that they’re suing
on. So what does abusive debt collection look
like? I have sick and disabled clients who survive on supplemental security income, which
is only about $700 a month, not a lot to live on in any part of the country. They get calls
and letters from debt collectors who try to convince them to pay, even when they know
that they are disabled. Many of my clients want to repay their debts, but they barely
have enough to pay for food, medicine, and their rent. Someone like my client Charles, a veteran,
who’s mentally ill shouldn’t be coerced into working out a settlement plan with a debt
collector just to stop harassing phone calls and letters. Our client Karen, who’s had six surgeries
in the past 2 years and is unable to walk or work, she survives on Social Security,
and she notified a debt collector of her situation and her inability to repay a credit card debt.
Two weeks later, the debt buyer sued her anyway. We also constantly hear from consumers who
don’t know they’ve been sued until long after the debt collector has won its case and entered
a default judgment against them. These people find out they’ve been sued the hard way. Like
our client Sarah, who is unable to withdraw cash from the ATM to get home to Staten Island
from her job in New Jersey because her bank account was restrained due to a judgment on
a case that she didn’t even know about. Problems surrounding improper service of debt collection
cases exists around the country, and it really puts consumers in the worst possible position.
Many people will agree to pay a debt collector the money that’s restrained in a bank account
out of desperation rather than risk their next paycheck being frozen as well. We also see frivolous cases being brought
in court. We’ve got many clients who are victims of stolen and mistaken identity, whom the
collector can’t possibly prove their case against, but they pursue those claims anyway. My client Monique is a stay-at-home mom whose
husband is an electrician. She was sued for a debt she knew nothing about, and it didn’t
appear on her credit report. And the person who sued her, the debt buyer who sued her,
she never heard of, either. She asked for documentation repeatedly from the debt collector’s
lawyers. She appeared several times in court. They couldn’t provide anything to her. These
meritless cases are really drowning the country’s small claims courts, and we see this every
single day. These are not isolated problems or stories. They really exemplify this widespread
systemic problem that desperately needs reform. Thank you. RAJ DATE: Thank you, Ms. Coffey. Ms. Shin. SUSAN SHIN: Good morning, and thank you to
Director Cordray and the CFPB for inviting me here today. I’m a Staff Attorney at the Neighborhood Economic
Development Advocacy Project, or NEDAP, which works to promote economic justice in low-income
communities and communities of color in New York City, and at NEDAP, we convene a statewide
coalition called New Yorkers for Responsible Lending. We bring litigation to address abusive
debt collection practices and unfair bank practices, and we also run a legal hotline,
like MFY, where we hear from low-income New Yorkers on a range of financial justice issues. And at NEDAP, we are constantly flooded with
calls from people, often very low income, elderly, or disabled, whose lives are being
devastated by these abusive tactics that Carolyn just talked about. Because of frozen bank
accounts and wage garnishments, people can’t pay their rent. They can’t pay their bills.
Because of judgments appearing on credit reports, people are unable to find housing or increasingly
jobs, because more and more employers are checking people’s credit reports when they
apply for jobs. And the reason we work on debt collection
issues at NEDAP is that we see debt collection as one of the most abusive financial practices
that are harming entire communities, and we found that in a 2-1/2-year period, debt buyers
had actually extracted over $1 billion in judgments against New York City residents.
And we see that these lawsuits that Carolyn mentioned are overwhelmingly concentrated
in low-income communities and in communities of color. So we see this not just as a consumer protection
issue, but really as an economic justice issue that’s affecting entire communities and really
is an extension of the systemic predatory lending practices that have been draining
wealth from these communities for so many years. These problems are really happening
because the debt buyer industry has been able to operate in this environment of no accountability
for a really long time, and it’s a national problem. Industry-wide, perpetrated mostly
by these debt buyers and the debt collection law firms that they hire. These debt buyers include huge publicly traded
companies; for example, Encore Capital, Asset Acceptance, Asta Funding, Portfolio Recovery
Associates, as well as big and small private companies. And what they do, they have this
business model that relies on buying debts extremely cheaply, for pennies on the dollar,
and when they buy debts that cheaply, they are not actually buying any substantiating
documentation that would allow them to respond with verification of a debt when someone disputes
a debt or to provide any proof in court when someone is sued on a debt. And they aggressively
collect these debts anyway, even with all of these problems, and they have been getting
away with it for years. And the worst of it is that we found that
a lot of the debts that people are being harassed on or sued on aren’t even legitimate. There
are problems with the debts being the result of identity theft, mistaken identity debts
people are being pursued for that have actually been paid or settled already or discharged
in bankruptcy, debts that are too old to be sued on, and so on. It’s been widely reported in even industry
press the problems of accuracy that riddled the debts that are being sold by these banks
and other debt buyers down the chain to more and more debt buyers. Even when the buyers
and sellers both know that there are problems with inaccuracies about the balances, that
the portfolios include debts that were already paid or discharged in bankruptcy, they are
still going after people aggressively with these lawsuits and other tactics. So at NEDAP, we’re seeing these problems on
a daily basis, and we really urge the CFPB to take strong action to stop, to end this
environment of no accountability for debt buyers, and we really see this as a critical
opportunity for the CFPB to address these issues by writing strong rules and engaging
in very close supervision of the industry, and we would be happy to share our ideas with
the CFPB going forward. RAJ DATE: Thank you. Mr. Rubin. DICK RUBIN: Thank you. Thank you very much. I wanted to — when I was invited to come
here today, I wanted to talk about what I have seen over almost 40 years of working
in this area. I have been working in this abusive debt collection area so long that
I got started before the FDPCA even was adopted. And one of the things — there were two things
I wanted to talk about. One is something that has changed over that period of time. The
two greatest abuses I see are, one, the abuse of the court system. After I found out who
my colleagues were going to be on this panel, who have devoted their careers here to doing
the most extraordinary work, fighting the abuses of the debt buyer industry and the
abuses of our court system, that’s who ultimately is being abused here. What is being abused
here? Our court system. I don’t think I need to add to that. I want to go to the second one, which hasn’t
changed in — well, unfortunately, it has changed. It’s gotten worse over the 25 years
that the — even since the FDCPA was adopted, to top the practices, and that is the abuse
of consumers through the intrusion into their homes, the abuse of the privilege of calling
people on the telephone. You know, you want to know what are the abuses in this industry.
Well, the data have been collected for years by the FTC and now by the Bureau. There’s
a wonderful 2012 Fair Debt Collection Practices Summary that the Bureau — the Bureau’s first
summary that’s been done, will be doing every year, attaches the data, over 50 — the debt
collection, as the report points out, is the largest area of consumer disputes. The largest
number occur through debt collection, and the largest number, more than half of them,
involve telephone abuse of one sort or another. There’s really only three reasons why a debt
collector would ever telephone a person at their home. One is to inform the person they
owe the money, and they owe it to this person; two, to give them an opportunity to pay the
debt; and three, to advise them of what are the consequences, the realistic and actual
consequences and reasonable consequences of nonpayment. We’ve got records here of over 50,000 collection
calls. The topic area is repeated calls. Every one of those people who reports an abuse to
the FTC or to the Bureau tells virtually the same story, and that is, “I got a phone call.”
Yes, they go through the talk-off, “You owe the money. We own it now, because we’re a
third-party debt collector. Can you pay it?” If you don’t, sometimes they come up with
threats, almost always “We’re going to sue you.” If those threats are actual, legitimate,
and intended, there’s nothing wrong with making that threat. And then always, it ends the
same way. The consumer says, “I can’t pay you. I cannot pay you.” That is what we know
from the data also, that everybody, virtually everybody who owes, the 30 million people
that Director Cordray mentioned, they all would pay the debts if they had the money,
at least for those who have the right people and that they’re dunning the right person.
So it ends always with the commend, “I cannot pay you. We’re out of work. No one has worked
here for the last” — whatever, 3, 4, 5 years. A sickness is, of course, the second-largest
reason why people don’t pay debts, and that’s the end of the conversation. What happens next? The next day, you get another
call. The day after that, you get another call. Why are they calling? Except to annoy
and harass, because in those business models of those debt collectors who make the phone
calls, they have one objective, and that is to make people who have no money to pay the
debt, to make their lives so miserable, to motivate them this month to pay this debt
collector on these old debts they barely remember, rather than paying the electric bill, the
rent, the medical debt that’s owed, current debt. This is the business model. And let me close by saying on this portion
that, Director Cordray, you are absolutely right — mentioned in the introductory portion
that it’s so important, and that the auditing and examinations that the Bureau is about
to do is so welcome that we ensure that the collection industry follow its own policies
and procedures. In this group of predatory debt collectors that I’m speaking about, the
policies and procedures are exactly what I’m saying to force, to annoy, to harass. They
have no reason to call somebody. Now, if you pick up the paper, you’re a collection agent,
and you pick up the paper the next morning, and you see that so-and-so won the lottery.
“Oh, didn’t we call him yesterday? Okay, sure. Give another call. Maybe they can and want
to pay, or maybe they have some information that says for whatever reason, including the
consumer may have given, that says that I expect to start working, I found a new job.”
Yes, call back and give another opportunity to pay, because that’s a legitimate reason.
Every other call, every other call is only for the purpose to harass and annoy, and that’s
what I hope will be one of the results, and ending that behavior will be one of the results
of the initiative that you’re announcing today. RAJ DATE: Thank you, Mr. Rubin, and thank
you to each of our three consumer panelists for their opening statements. Perhaps we could move to you, Mr. Benson,
for your statement. CHAD W. BENSON: On behalf of the CBE Group,
I’d like to express our appreciation to the CFPB for conducting this very important public
service. I’d especially like to thank Director Cordray, Deputy Director Date, and the CFPB
staff for preparation and participation today. I’d also like to thank my fellow panelists
and those who have taken the time to attend. My name is Chad Benson. I’m the Chief Operating
Officer at the CBE Group based in Cedar Falls, Iowa. Today, CBE’s core business provides first-
and third-party collection or recovery work for a diverse group of clients nationally,
with nearly 1,000 dedicated associates. The size and scope of the debt collection industry
is substantial, substantially larger than most people realize. More than 4,000 collection
agencies are licensed to operate nationwide, ranging from small-owned businesses to large
globally run enterprises. An independent survey conducted by the ACA and Ernst & Young in
2011 revealed the debt collection industry provided over 3,000 direct and indirect jobs,
recovered 55 billion in gross collections, provide significant contributionable state
and federal tax receipts, and provided the leadership for creating 85,650,000 hours of
charitable giving. It is unfortunate it only takes a few unethical
industry participants to create an extremely negative image for the industry, which we
are working overly hard to correct. It goes without question, our industry has the opportunity
to deliver a better experience for the consumer through the leadership and action of every
individual, regardless of the role they may play in the process. The CFPB consumer advocacy group and collection
industry can create a win-win outcome by modernizing outdated laws, which govern the collection
of consumer debt. We need to put consumer protection in the forefront of our discussions
and find reasonable processes that will protect the best interest of the consumer. The FDCPA
was enacted in 1977 to provide a uniform set of regulations to govern the early evolution
of the collection industry. The guiding principles that led that creation some 35 years ago are
equally important today. However, over this time, the FDCPA has seen little to no change.
Over the past three-plus decades, consumer communication has gone through major change,
especially as it applies to technology. Technology has developed to a point where
call centers have the capability to systematically and efficiently provide the means to execute
compliance. Examples of this evolution have been call recordings, the utilization of speech
analytic technologies to monitor, review call compliance with regulations; compare consumer’s
area code to zip code to ensure that calls placed within these prescribed time frames
are adequate; limit the number of calls made to consumer phones over the same day, multiple
times a day or frequency within a day; and allow agencies to maintain internal do-not-call
distributions. These are just a few things that technology has brought to the capabilities
for debt collection and the call center business alike. The basic thought for improving clarity and
transparency to FDCPA can provide the catalyst for collection industry to continue to build
on accountability and responsibility it has to effectively execute. Harassment claims
have been the leading consumer complaint against debt collectors since 2008. 40.4 percent of
FDCPA or 47,362 complaints received by the Federal Trade Commission in 2011 claim debt
collectors harassed complainants by calling repeatedly or continuously. The FDCPA ambiguously
identifies how often a debt collector may attempt to contact the consumer related to
the delinquent obligation. The current definition of repeatedly or continuously does not provide
the adequate level of understanding nor protection for consumers while balancing responsibility
for the debt collection or debt collection industry to contact consumers for the unpaid
or delinquent monetary obligation. The facts are clear, we’ve reached an interesting interaction
where regulation and technology can provide consumer protection into the future. We are honored to participate in today’s panel,
and I would say personally that it would be a really good step forward if the CFPB, the
industry advocates, the collection industry could work hard to create a fair framework
that allows consistency, clarity, transparency, and measurability into the gaps that exist
today in the FDCPA. Thank you. RAJ DATE: Thank you, Mr. Benson. Mr. Allen. BILL ALLEN: Good morning. My name is Bill
Allen, and I’m pleased to be able to contribute to this important forum. So let’s first say,
let me say thank you. Thank you to the wonderful City of Seattle. Thank you to the Congressman
and the Mayor that has come here in this forum and is openly and willingly to talk to us
in this type of discussion; ACA for your guidance and making sure that we are consistent in
our insights into how we can all do a better job for our consumer as well as our customer
and, yes, even me as a constituent. Thank you, my fellow panelists. Thank you for bringing
out the information that you have, but more importantly for your expertise, in my opinion,
is very vital in showing that members of our industry. Large that has been mentioned earlier,
small as myself, have been putting a strong advocacy group, so that we can have strong
ties to the community and to the consumer. But most of all, thank you to audience, the
folks here in Seattle that has taken the time out of their busy schedule today to come here.
But what I’m mostly important and what I’m very concerned and what I’m very interested
in is that I want your input. I really want to understand your concerns and how we can
do a better job. My primary goal. “Well, Bill, what is your
primary goal?” Thanks for asking. [Laughter.] BILL ALLEN: For this exchange, my primary
goal is to listen. I really want to listen and understand. I’ve heard the experts on
this side of the panel, but I really want to hear you. I want to understand what we
can do in the industry to make a difference, so that you can understand a little bit about
my perspective, why I may say certain things and why I may act and why I may move certain
ways. I’m the founder and the Chief Executive Officer of a relatively small collection agency
based and headquartered out of Maryland called ALW Sourcing. We are happily to say that we
make a difference in our community, we make a difference in our charities, and we also
make a difference in the economy. Our clients are quite simple. They are in
five different verticals. They’re in the banking industry, the telecommunication industry,
the utility space, as well as the education sector. You may ask also, “Well, what do you
do?” Well, in each case, we offer and provide services to collect rightfully owned debt
and provide customer service in all of our customer contact centers. Even as a relatively
small agency, we have seen and continue to see an ever-increasing emphasis on customer
experience. In my centers, it’s quite clear, we’re measured
on three factors. One, CSAT, that’s the Customer Satisfaction Score that is very dear to us
to make sure that your satisfaction is done. Two, AHT in the industry, better known as
average handle time, we want to make sure that we handle your call properly. Third and
final, one-call resolution. Did we solve your problem? Did we handle your problem accordingly? Our clients, your creditors, like many are
looking for the same thing. They want to make sure that they preserve their customer. They
want to make sure that they have opportunity to expand their customers, and they want to
protect their brand as well. The things I learn here today, we will have the opportunity
to take back and have a clear understanding how we can better serve their goal. It is
important for businesses that we provide the goods and services not just to my customer,
but also to you in the community. It is important for the businesses in our industry that so
much is part of this sea-change, and I repeat, this sea-change towards a focus on the customer
experience. It is important for the growth of small businesses, like mine, that we are
seeking here to educate the consumer on how we can best balance — key word is “balance”
— their obligations with their rights. I think we can do it. I really do. I think
that by having open forums like this, I know that a forum like this is one start. It is
always a step in the right direction. Thank you, and I’m Bill Allen. RAJ DATE: Thank you, Mr. Allen. Ms. Finney. CARRIE FINNEY: Good morning, and thank you
for the opportunity to speak about some of the topics that are very important in the
industry. My name is Carrie Finney, and I’m the President and CFO of The CMI Group. It’s
located in Carrollton, Texas, and we employ 287 people. I’ve been involved in the collection
industry for 14 years now, and over that time, I have witnessed a number of changes in the
laws and regulations governing our industry that have greatly altered the way that we
do business. While many of these changes have been good, both for the consumers and the
creditors alike, others have created greater confusion over what collectors can and cannot
do in the pursuit of a just debt. At present, the debt collection industry is
regulated by a number of laws. We are also forced to contend with 50 states’ legislators,
50 different state regulators, and 56 different attorneys general, and while they all have
the public and the economy’s best interest at heart, they do not always provide clear
and consistent rules for our industry on how to operate in a compliant manner. Fortunately, members of the industry have
organized in order to pool their collective knowledge on regulations from one state to
the next. Trade association, like ACA International, have even created training materials and continuing
education programs to help its members navigate the complexities of an ever-changing legal
landscape. Conflicting and confusing laws make our job
more difficult at times, but the creation of the CFPB may alleviate some of our concerns
if it uses its powers to modernize the laws that govern us and to create some uniformity
across the patchwork of laws that we currently have to contend with. Thank you for your time. RAJ DATE: Thank you very much. We’d like to take some time now to follow
up on some of the issues that were raised in the opening statements through a Q&A period,
and helping me do that are some of my colleagues from the CFPB. You have already met our Director,
Rich Cordray, and our head of External Affairs, Zixta Martinez, and we also introduced our
Assistant Director for Nonbank Supervision, Peggy Twohig. And despite the fact that I
have all this assistance, I will nonetheless take the liberty of asking the first question. Specifically directed to our consumer panelists,
each of you laid out a taxonomy of practices that may be problematic because they may be
not fair, they may be not equitable, they may be — they may visit unexpected or unnecessary
harm, but a different way to think about some of these problems is with a vision for the
future. In other words, what would a functioning, more appropriate debt collection marketplace
look like? What should we be working backwards from? If each of you could just briefly address
that question. SUSAN SHIN: Well, I would say that the whole
business model of the industry requires some fundamental changes, and I think the CFPB
can go, can play a big role in enacting strong rules that, for instance, require debt buyers
to have and provide much more information about the debt. Currently, people are being
contacted about debts and just may not even know what it’s all about, how much they really
owe. So I think that would go a long way. I think another thing is that when people
are entering into settlement agreements, sometimes we’ve heard from people who can’t even confirm
what their current balances are. They can’t even confirm that their payments have been
received and credited correctly. So I think enacting rules that address those kinds of
issues would also help. DICK RUBIN: You know, this is, as it has been,
for 35 years, the reason that Congress federalized debt collection. It’s actually an extraordinary
step if you think about it in terms of the normal relationship between Congress and the
states. The culture of the debt collection industry
35 years ago and today remains one of noncompliance with law. Not every participant, of course,
but the culture is noncompliance. The culture is to take — is to devise strategies that
go as close to the line as possible, supposedly without passing over that line, and employing
them to get a competitive advantage on the next debt collector. Whether it’s a third-party
debt collector, as I mentioned earlier, just the everyday bills that people have to pay,
that culture has to change. The norm in this industry needs to be compliance with the law.
That will be success. The normative behaviors need to reflect compliance with each provision
of the law. Right now it is the opposite. It is absolutely the opposite, and that, I
think, is what it needs to look like. How will you know, how will we know when we’ve
reached that goal and when you’ve reached that goal? When debt collection complaints are not 150,000
a year to the Federal Trade Commission but the handful that we get, that the Federal
Trade Commission, the Federal Reserve Board gets on Truth in Lending, for example, there’s
a successful consumer initiative. Truth in Lending, over 40 years ago, it was adopted. There are problems, of course, in the credit
marketplace, too, but the disclosure, mis-disclosure, nondisclosure of terms of credit is not a
problem to speak of. It’s not anything anyone is going to prioritize right now. That’s been
the result of 40-some years of truth in lending, compliance, auditing, et cetera. When that
day comes with debt collection, then we’ll know that we had success. RAJ DATE: Thank you. Ms. Coffey, what does success look like? CAROLYN COFFEY: I would agree with my colleagues.
I think advocates have been really chipping away at the problems that we see in debt collection
across the country, but there really is a regulatory void, and I think this is a great
time for the CFPB to fill that void and really rein in debt collection abuses and really
just ensure that legitimate debts are collected and that the people collecting the debts are
the proper owners of those debts. And I think real rules and regulations would go a long
ways as well as strong supervision. RAJ DATE: Peggy? PEGGY TWOHIG: Thank you, Raj. We’ve already heard from Carolyn and Susan
in particular this morning about the issue of inaccurate and incomplete information that
flows through the debt collection system, and I thought — I’ll come back to you, but
I thought, could we hear from the industry panelists what your perspective is on this
issue? Do you think inaccurate and incomplete information in terms of making sure that the
information can show who owes the debt, that it’s the right amount, that it can be verified,
is that a problem, how much of a problem, and what are the possible solutions? Chad,
if you — CHAD W. BENSON: Yeah. So I think that the
most part, if you start from the origination of credit and you think about the process
of credit moving through to, you know, a point where it’s delinquent and then charged off,
I think that we’ve seen over the course of the last decade a substantial improvement
in the amount of information that is flowing to the debt collection industry as it relates
to account-level information. I think, like any system or process, that
it’s not perfect, and I think that when you look at how today we would go about processing
things like disputes or discrepancy in data, I think those processes are the things that
are most important to look at, is we certainly would not want to collect on a debt that somebody
is disputing and by matter of fact is not theirs. I think the industry is clearly not
signing up for that. I think the evolution has come a long way
over the last 10 years, but we still have room to go. PEGGY TWOHIG: And do you have ideas for how
to prod the further evolution along? CHAD W. BENSON: Well, I think it’s choice,
right? So I think as much as you have the choice to say yes or no as to who you would
do business with, and I think that’s kind of a novelty. But if you are knowingly getting
information that’s not correct, then I would suggest that people just stop dealing with
those individuals, frankly. In the case where information is changing
and more information is being made available, I think good dialogue with creditors and issuers
related to things that are coming up and being able to capture more information is something
that just having a good collaborative environment where that information is flowing, because
for the most part, people are good. They want to get you the information that is needed,
and they want to put the processes in place that are going to allow for consumers to have
things like final billing statements and information that would help validate the information they
may be looking for in a timely manner. PEGGY TWOHIG: Bill or Carrie, do you want
to add to that? CARRIE FINNEY: Just that we take the — we
take it seriously to ensure that we have the correct information when we are collecting
on a debt, and we do have to rely on the information initially that’s provided by the creditor,
our client. And when we do get disputes, we work seriously with our clients to resolve
them and come to a resolution and get the right information. PEGGY TWOHIG: Bill? BILL ALLEN: Real brief. Just to piggyback
on what Chad said, I too have had 25-plus years in this space, but the good news about
that is I spent time with the credit reporting industry where I worked for Equifax as well
as TransUnion, and I think that piece is probably part of the key, is your origination of the
information that we get up front must be accurate at that time. Is there room for improvement?
Absolutely. How can we do it? I think by having a Bureau like CFPB, I think that’s going to
make a huge difference, so that we can all get together, gather the information up front,
and make sure the information is accurate by the time we receive it on the back when. PEGGY TWOHIG: Thank you. Carolyn or Susan, you’ve already talked about
this. Do you want to add more and talk about what you see as possible solutions to the
issue of data accuracy and completeness? CAROLYN COFFEY: Sure. I mean, I’m happy to
hear what my colleagues are saying. I think, you know, in a real-world practicality, I
mean, we have clients — I have a client, Josephina, who had one credit card. She was
a Spanish-speaking immigrant. She paid her credit card religiously, regularly every month,
and one month, there were charges on it from Bangkok, jewelry, luxury goods. These were
clearly not purchases she had made. She disputed with the bank. That debt was — regardless
of the fact that she had disputed it, that debt was sold to a debt buyer who tried to
collect on it, and then ultimately sued her on the debt, even though this was clearly
not her debt. It was not a lawsuit that ever should have been brought. It wasn’t an account
that should have been sold. That’s not an isolated incident, and I think we see it in
the purchase and sale agreements that we’ve reviewed from companies that buy debts from
original creditors. And there are clauses that say that we have no — you know, we don’t
have any proof or we make no assurance that the information we are selling is correct. We have seen clauses that say that you have
no right to go back and request additional documentation or proof or evidence of the
accounts, and I think that’s really troubling. Anything you want to add to that? SUSAN SHIN: I would just add that even when,
for instance, in litigation when defendants are asking for documentation, sometimes these
debt buyers and their law firms are providing documentation they purpose to be proof but
in fact may include account agreements, for instance, that actually postdate the date
when the person opened the account. And we’ve even seen and heard of account statements
being produced where the person’s most recent address was printed on the statement, even
though the statement predated when the person moved to that address. So these documents
are — even when they’re presented are really being manufactured and being presented as
purported proof of these debts. PEGGY TWOHIG: So, in terms of possible solutions,
the FTC has recommended in the past that media or certain types of media and quantum of media
be included in the sale of debt when it’s first sold. Do you think that’s part of the
answer, or what are the solutions here? CAROLYN COFFEY: Yeah. I think that that would
be great. I think, you know, rules that say that if you’re collecting on a debt, you have
to have — if you’re collecting on a credit card debt, you have to have a copy of the
contract, for example, before you can actually try and contact someone. So you know it’s
that person that they signed a contract and their name is on it, so that you have — if
you have proof of how the amount that’s being collected on was calculated, if you can show
that this is the principal balance, these are the fees, this is the interest, I think,
you know, requiring those things at the beginning will help in terms of collecting, right? You’re
actually collecting legitimate debt and you have those things in hand when you’re collecting.
Then when you file a lawsuit, you have your proof right there. Right now it’s just a free-for-all. DICK RUBIN: One thing I would mention that
I think is very important, Ms. Finney mentioned that we want to ensure that the information
is accurate. No one knows if this information is accurate. The creditors don’t even know
the information is accurate, and as was just mentioned, when they sell the portfolios,
they normally, normally disclaim the accuracy and reliability of the information. That’s,
again, normative behavior. One thing that we all ought to keep in mind
and why we can’t ensure the accuracy of the information is what is the value of these
portfolios, what is it really worth. The market has determined that a penny on the dollar,
2 cents on the dollar is what the market has determined is the value of a portfolio of
debt that’s worth millions, tens and hundreds of millions of dollars. If the market thinks
it’s worth a penny — some of it’s less than a penny a dollar if it’s old enough. I haven’t
seen anything in years more than 4 or 5 cents on the dollar, even for first-generation debt. The market, the people that sell and buy this
information know it’s unreliable, and the price paid is an indication of that. That
defines the problem we have right now, and the idea that when you have these agreements
that the credits say that not only are you buying this portfolio, but you agree and your
assignee and the assignee after will never come back and ask us for more information,
this helps explain what the problem is. I hope that a — technology will in fact make
a difference. It’s one of the few areas that I think technology has exacerbated many of
the harassment problems, but it may solve this problem. SUSAN SHIN: And just quickly, I think one
concrete solution would be for the CFPB to write very strong rules around the verification
requirement under the FDCPA since that has been so dramatically watered down by the courts. RAJ DATE: By the way, I should note — I don’t
know if you can hear it over the video or not, but as we talk about some problematic
practices and tales of human misery, you — we can hear, anyway, peals of laughter. It is
not because the audience has a bizarrely inappropriate sense of humor. It is because there must be
delighted children somewhere behind this wall. [Laughter.] PEGGY TWOHIG: They’ve been crying too, Raj. RAJ DATE: Because children rarely owe anything,
Rich is pointing out. [Laughter.] RAJ DATE: Let’s pick up on this notion of
technology and technological change. Mr. Benson, you mentioned it through two — let me just
paraphrase. You had mentioned two aspects of it. One is sort of the notion of conducting
the core business in a more efficient way, but also the notion of allowing better compliance
or control over operations over time. Could you just elaborate more on that? And particularly,
in light of, you know, you have a multi-decade-old regulatory framework, presumably that regulatory
framework has not kept up in some places. What would you call out in particular? CHAD W. BENSON: Yes. I think one of the issues
that I think was brought up and is probably relevant is this whole notion of, you know,
repeatedly and continuously, and I think when you look at the FDPCA and you step back and
ask, okay, would you put five consumers in a room and could they clearly define what
“repeatedly” and “continuously” means and how that applies to what they could or couldn’t
expect and now transpose that to an industry with over 4,000 collection agencies and now
ask those 4,000 agencies to interpret that and get it right, I think that’s pretty daunting. I do think the technology has allowed for
the industry to do a number of things over the course of time as it relates to telecommunications,
but it’s also given way to the ability to protect nonpublic information. You know, the
evolution of the databases and the collection systems have gotten better and stronger as
it relates to processing and the different things you can do at that level. So I think,
you know, we’ve got to address the idea that the FDPCA does fall short when it comes to
“repeatedly” and “continuously” and figure out how we can eliminate and bring clarity
and transparency to that for not only consumers, but for the industry, because I think most
good people, we want to figure it out and make sure we get that right. RAJ DATE: Mr. Allen or Ms. Finney? CARRIE FINNEY: Well, technology, the laws
have not kept up with technology, and we need to update those laws, so they’re consistent
with what’s out there, the means that we can communicate with customers now and the means
that they want to be communicated with. So we need to revamp those laws a little. RAJ DATE: What are the — just to follow up
on this notion of small claims courts being kind of inundated by volumes, et cetera, you’ve
pointed to ways in which technology has changed. Dialer technologies are different than multiple
decades ago. Telephony just generally is much cheaper than it used to be, but presumably,
multiple decades ago, there were state courts, and there are state courts now. What is it,
to your mind, has changed sort of the contours of the demand for state court filings and
litigation? What has been driving that? CHAD W. BENSON: Well, I would say that, obviously,
you know, the ability for the evolution of the debt sale environment, the creditors have
increased litigation processes on their accounts as they’ve flowed through charge-off. You know, I can’t speak specifically to how
other folks would go about making decisions relative to whether they — what makes them
decide whether they sue somebody or whether they try to communicate with them effectively
on the phone before they go through that process, but obviously, the increases in that process
have made a big impact. I think in some ways, too, where information
is valid and there is situations where consumers do choose not to want to pay and they have
the means to pay, that is an effective opportunity for creditors, issues, debt purchasers that
own the chain of title and all of the relevant information to process a legitimate suit to
be able to do that, and so it’s not like it’s not an effective process, practice. It’s just
it needs to be done right. RAJ DATE: Why don’t we — I’ve found over
time that it’s best to make sure that Zixta has the last word on things. So, Zixta, I
literally have been hogging your microphone, so — ZIXTA Q. MARTINEZ: Thanks, Raj. This is a question for all the panelists.
It would be interesting to hear from you all, what are the two things that consumers should
know about debt collection, and why don’t we start on this end with Ms. Coffey. CAROLYN COFFEY: I think one important thing
that consumers should know is that some consumers’ income is exempt from collection, things like
Social Security, disability, veterans’ benefits, and so I think that that information is really
reassuring to consumers when they know that that worst-case scenario, even if they are
sued on a debt that they may or may not owe, their sole source of income can’t be taken
from them. And then I think that the consumers should
really know — they should know that they do have rights. They don’t have to change
their phone number to escape harassing phone calls. They don’t have to feel victimized
by debt collectors. I think those — the laws that protect them could certainly be strengthened,
but even now, there are some protections, and people are now aware of that. And I think
it’s important for people to know that they don’t have to feel abused by the debt collection
industry. SUSAN SHIN: I would echo what Carolyn said,
and I might add that I would want to also tell people about their — about filing complaints
with government agencies, especially the CFPB, and I will certainly be referring our clients
to the website, the Ask CFPB module. So I think that’s really important to raise awareness
among the enforcement agencies about who these entities are. And I really think, you know, there was some
illusion to this being a bad apples kind of problem, but we at NEDAP and MFY — and we’ve
heard from advocates all across the country — this is really pervading the whole industry.
So I just wanted to make that point. DICK RUBIN: You know, there’s one thing that
consumers need to know that, unfortunately, the FDCPA does not require disclosure of,
and that is the cease communication rights. Again, people do not have to put up with these
phone calls. All they have to do is write a letter, under the FDCPA, under federal law,
that says, “I refuse to pay this debt,” “I can’t pay the debt,” “I dispute the debt.”
Any of these things means they have to stop calling, have to stop. And then last year, the FTC received 5,922
complaints from consumers who sent these communication letters, and they still got phone calls. It’s
a chilling statistic, but that is the most important right that you have. And I hope
that when the regulation writing comes by the Bureau, that needs to be an addition.
That right needs to be disclosed in every communication. Congressman Frank introduced a bill earlier
this year that apparently isn’t going anywhere with everything else in Washington that has
a directive to the Bureau as part of dealing with the phone calls issue. It directs the
Bureau to adopt regulations that will require the disclosure by a debt collector and every
communication with a consumer, the right to cease communication. That is the most important
right people have. They don’t know about it, most of them, and the ones that do, the industry
still doesn’t comply with, apparently. There are so many rights, but that’s the one that
I would say is number one. ZIXTA Q. MARTINEZ: Chad? CHAD W. BENSON: Yeah. Thank you. So I think that one of the things that would
be important is that, you know, there are a lot of good people out there that are trying
to help consumers who have fallen on tough times, that have legitimate debts, that are
trying to help them get back on their feet. And so the opportunity for them to engage
in that process in the affected way, I think, is important for any consumer to know and
understand. I think the other thing is that, you know,
the FDPCA, as I said, falls short on many ways from a clarity and transparency perspective,
and I think it’s time for their perspective that we are protecting them through the opportunity
to work together to clear that whole process up, so that we can all be effective, and they
understand their rights and so forth. BILL ALLEN: The notion that collection agencies
or call centers, period, wants to take the expense and continue to call you over and
over and over again when you’re not going to pay is mind-boggling to me. No one wants
to call consistently and consistently, not to suggest they don’t, because they do. Those
complaints wasn’t just dreamed up. They actually happened. Those were some bad actors, and
we need to get rid of those bad actors. And I think by having the CFPB here, I think we
can eliminate those, at least reduce them tremendously. And I think what you’ll find
there is I think we will find that those numbers will reduce that we’ve just heard. The second part of that is no question in
my mind that when you do have the opportunity to speak with a customer — and I refer to
them as a customer — that if they have what I call a “W/A Formula,” the willingness and
the ability to pay, then that is the call. If they do not have one of those two, the
call should cease immediately, because without the willingness as well as the ability is
there or the ability without the willingness, we do not want to continue the conversation.
The calls should cease immediately. So the piece is I think we should do a better
job in educating our consumers and our customers on the laws to make sure they understand the
cease law that we just heard. I think that’s absolutely a good point, and the second piece
is make sure they understand what their rights are, so that they do have the willingness
and the ability to pay. Most of our customers are good people. They either had one of the
three D’s, you know? They either had a divorce, they either has one of the disability or they
now have sickness and they can’t do it, or they’ve been disbanded. They’re unemployed.
There is some fraud, but for the most part, we know that fraud is minimal, because there
are good people, and we just want to have the ability to make sure there’s a good balance,
the balance of the ability to pay the debt and the ability to understand their right. CARRIE FINNEY: I think that balance is key.
Collection industries, we would like to partner in the solution to find that balance where
consumer protection is taken care of, but it also allows for us to collect on rightfully
owed debts. And we’d like to be at the table in those solutions when collaborating with
the CFPB, the FTC, Congress, all those things. RAJ DATE: Thank you very much. I’d like to
draw to a close this phase of our hearing, and I hope that all of you will join me in
thanking our panelists. I mean it quite sincerely. [Applause.] RAJ DATE: You are all quite busy people. You
come from every corner of the country, and it is really quite core to our work to be
able to make sure that our efforts in this area and others are grounded in the reality
of the marketplace and what consumers are seeing day to day. So thank you again. Zixta? ZIXTA Q. MARTINEZ: At this time, our guests
panelists, could you please rejoin the audience. Now it’s time to hear from participants who
are here with us today. I am told in our audience, we have community leaders, advocates, industry
representatives, residents, consumers, and perhaps a few additional elected officials.
We appreciate that you took the time to be here this morning and to participate at this
field hearing. I thank you in advance for that, and I also apologize in advance if I
inadvertently mispronounce your name. So the open mic portion of today’s field hearing
is really an opportunity for the CFPB to hear about your experience with consumer debt collection,
to hear about what is working well in the market and what is not. Each person has 2
minutes to tell us their story and experience with debt collection market and practices.
What we hear from you is invaluable, and we’d like to hear from as many of you as possible.
So I encourage you to observe the 2-minute limit, so that everyone who signed up to tell
us their story has the opportunity to do so. Our first witness is Sally Mary de Leon. SALLY MARY de LEON: Hello, and thank you,
CFPB, for putting this forum together and for allowing me to share my story. My name
is Sally Mary de Leon, and I am a single mother with two children. And we live in Bellevue,
Washington, under the HUD-VASH program, which is the Veteran Affairs and Homelessness Program. I am here today because I am someone that
has been directly impacted by debt collection, and I feel that it is important to speak up.
I would ultimately like to see debt collectors to stop taking advantage of poor people like
me. My story starts when I went through a divorce with my abusive husband. I went from
a two-person income down to one, and at the same time, because I had a 3/1 ARM mortgage,
my loan payments went from $1,600 a month up to $2,600 a month in less than 3 years.
I had no idea what a 3/1 ARM was and what was happening. As a result, I couldn’t catch
up with the payments. I ended up being deeply in debt and had to file for a Chapter 11 bankruptcy. Then came up all other problems. All my debts,
including the bankruptcy, were not collectable anymore, but the debt collectors kept calling
me and trying to collect on old debts. I would tell them that I had filed for bankruptcy
and I didn’t owe them this money anymore, but they would still call. Three months later,
a different agency would call for the same debt, and it just wouldn’t stop. I had an attorney that was helping me. He
told me that under the XYZ law, you know, it’s been discharged under Chapter 11, and
if I needed a letter, he would write the letter for me, and it would cost me $50. This harassment
by debt collectors happened for over a year and a half, and I was harassed by three different
creditors under the same debt for money I didn’t owe. This whole experience has been — has negatively
impacted my personal progress and self-esteem. Every time the phone rang, I felt like I was,
you know, either doing something wrong or I’m being abused over again, that I needed
to cower and hide. I just wanted to put the whole thing, you know, the whole mess behind
me, but I couldn’t because of the repeated harassing phone calls. My hope, my hope today is that we can — we
can start holding debt collectors and creditors accountable. They continue to hold consumers
and people like me accountable for our debts. We are doing the right thing. So why shouldn’t
they? Thank you for taking the time to listen to
my story. ZIXTA Q. MARTINEZ: Thank you for sharing that
with us. I know it’s not easy to share such personal experiences. We greatly appreciate
that you did. Our next witness is Brian Fare [ph]. ATTENDEE: I’m going to pass. ZIXTA Q. MARTINEZ: Nice to see you, Brian. Matt Mavstat [ph]? [No response.] ZIXTA Q. MARTINEZ: Marcy Bowers. MARCY BOWERS: Good morning. Thank you so much
for taking the time to hear from us. My name is Marcy Bowers. I’m the Director of the Statewide
Poverty Action Network. We’re a statewide advocacy group dedicated to ending the root
causes of poverty in Washington State. As a statewide organization, it’s essential
for us to know what issues people living on low incomes are facing in their communities.
Every year, we travel across the state to hear from community members, and for the past
3 years, we have heard stories, many stories in fact, about family debt and debt collection.
Many of the people and families we interviewed were in debt simply because they had the unfortunate
luck to get sick. For example, this summer, we met Melanie,
a 23-year-old, also from Bellevue, who owed $73,000 in medical bills at the age of 23.
As if getting sick and owing more than you could hope to repay isn’t challenging enough,
predatory debt collectors are exploiting already-struggling Washingtonians like Melanie, often leaving
them in worse financial situations. Time and again, we hear stories from people who have
been trapped by high fees and deceptive practices. For-profit debt-related businesses have seen
rapid growth over the last 5 to 10 years in our state, and protections for consumers simply
have not kept pace. I will focus today on one particular subset
of the industry, debt settlement companies or debt adjusters. These companies charge
people large amounts of money to purportedly help people pay off their existing debt and
offer to negotiate on their behalf. The debt settlement model usually requires that people
stop paying their creditors. Unfortunately, this model of settling debt rarely works.
An audit conducted by the FTC of nearly 45,000 records from a single debt settlement company
revealed that less than 2 percent, or just 638 customers, completed the program. Instead,
consumers are usually suffering reduced credit scores, the escalation of collection actions
by creditors, wage garnishments, collection lawsuits, and even bankruptcy. Last month, we spoke to Jennie, a low-income
woman in Walla Walla, which is in southeastern Washington, about as far away from here as
you can, who told us her heartbreaking story of getting involved with a debt settlement
company. She owed $15,000 in medical bills. In order to help settle her debt, she emptied
any savings she had and over time paid $8,000 to a third-party debt adjuster. Only later
did she find out that not a penny of it was applied to her debt. She wanted to get a lawyer
to fight it, but she couldn’t afford it, both because of her debt and because of the sum
she had just paid to the settlement company. She lost everything, all $8,000. She is now
homeless and intermittently lives out of her car with her disabled husband and two children,
and still she owes that $15,000 in medical debt. ZIXTA Q. MARTINEZ: Thank you, Ms. Bowers. MARCY BOWERS: I actually had one more question.
I just had to move my page. One more comment. Can I just finish up real quick? ZIXTA Q. MARTINEZ: Sure. MARCY BOWERS: And finally, we hear from people
across the state that they are harassed and trapped by debt collectors, including on time-barred
debt. This year, this coming legislative session starting in January, will make consumer protections
for debt collection and debt buying a priority in our state legislative session. What we’re
fighting on a state level, we are urging you to help us by enacting strong policies around
debt collection practices at the federal level that will help people keep more of their hard-earned
income and give them a way out of debt, rather than creating more debt for them. Thank you. ZIXTA Q. MARTINEZ: Thank you. Mr. Brian Moore? BRIAN MOORE: Hi. My name is Brian Moore. I
am an executive director and industry practice leader at Varolii Corporation, a Seattle-based
company that provides a platform for companies to interact with their customers through electronic
digital means. We’ve heard a lot today about how our courts
are being clogged by debt collections, lawsuits. There’s another type of lawsuit that is also
clogging our courts, and it has to do with enforcement of the FDCPA and another Federal
law, the Telephone Consumer Protection Act, the TCPA. And both of these laws need to be
updated, modernized to reflect the current state of technology. A most recent CDC survey — it’s called the
National Health Interview Survey — found that 34 percent of Americans are mobile only;
in other words, the only type of telephone communication they possess is a mobile phone.
However, the Telephone Consumer Protection Act, the TCPA, has a sort of interesting provision
within it that makes it difficult for companies to communicate with their customers on their
mobile phone in a legal and efficient manner. Lawsuits are being brought against these companies
for technical violations of this act , when in fact the communication was desired by consumers,
such things as potential fraud notifications on their credit card, flight delay notifications
by airlines, and in fact past-due account notifications by creditors. So I urge the Bureau and our elected representatives
to look at these acts and need for their update and modernization to reflect the current state
of our society. Thank you. ZIXTA Q. MARTINEZ: Thank you, Mr. Moore. Julia Kellison. JULIA KELLISON: Thank you for allowing us
this opportunity for public input. My name is Julia Kellison. I’m a staff attorney at
Northwest Justice Project. Northwest Justice Project, or NJP, is a civil
legal services organization that serves thousands of low-income people each year, from 13 offices
across the state and through our statewide intake line. I practice out of NJP’s King
County office here in Seattle, and about a year and a half ago, we started debt collection
defense clinic pattern much on our legal aide colleagues in New York and Chicago. We started
here in Seattle to help people respond to debt collection lawsuits. We started because
we knew thousands of people a year were facing debt collection lawsuits without representation.
It did not take long for us to see the patterns of bad debt collection practices. Each week, we assist low-wage workers who
are hanging on by their fingernails financially, trying to lift themselves out of poverty and
working at jobs at which they are being garnished for debts that they don’t owe or have been
inflated exorbitantly by collection fees and costs tacked on by debt collectors. Many of
these people tell us that before the lawsuit was filed, debt collectors refused to enter
into reasonable payment plans and instead demands lump-sum payments of thousands of
dollars. We are seeing an explosion of lawsuits brought
by debt buyers who further harm consumers’ credit by suing them for old debt, the company
bought on the market for pennies on the dollars, we’ve heard, and that they can’t prove because
their evidence is horribly deficient. We see people victimized by debt settlement companies
that promise to help consumers negotiate down their debt, but then in reality just take
their money and leave the consumer exposed to lawsuits from those creditors. We see people pushed to the brink of bankruptcy
or wrongfully garnished for medical debt that they don’t owe. Consumers eligible for charity
care don’t know about the program, because some hospitals are not publicizing this program
adequately to people in need. Once that debt goes to collections and the consumer gets
sued, it can be very difficult for the unrepresented consumer to enforce their right to suspend
the lawsuit and to be considered for charity care assistance on the underlying debt. ZIXTA Q. MARTINEZ: Thank you, Ms. Kellison. JULIA KELLISON: I have one more point, one
more quick point. We see seniors in tears because of the stress
that debt collectors place on them to pay debt, even though their low fixed income is
exempt from garnishment. The power imbalance, the corporate debt collection industry, and
stressed-out low-income consumers is apparent every day in our country’s court system. We
are pleased that the CFPB will be working to help curb illegal debt collection practices.
Thank you. ZIXTA Q. MARTINEZ: Gina McNaughton. GINA McNAUGHTON: Thank you, and I wanted to
thank you for this opportunity to speak. My name is Gina McNaughton. I’m a subject-matter
expert in debt collection, also partner at the McNaughton Group. And I’m actually a neutral party. I grew up
at the world’s largest collection agency for over 16 years. Currently, I have a consulting
firm. I feel like I have my back to you. I’m not sure where to turn to. Currently, I have
a consulting firm, and I actually audit collection agencies. I just had a statement, not really a question,
and the first statement is about the FDCPA. This is not something that we’re hearing for
the first time. This question has been out there for a very long time, and it’s something
that really, hopefully, will be addressed at this meeting. And when you take this information
back, that its’ something that we can really get to the bottom of, and instead of talking
about the subject over and over, that we can actually start to put that process in place. And having the ACA here and also members of
the California Association of Collectors, I would hope that those meetings could get
off the ground and start to work forward with updating the FDCPA. And also, I also wanted to talk about standardizing
of templates. As a person that actually audits collection agencies, one of the things I have
a problem with is — unless you’re in this business, you would understand — that there’s
several different platforms that collection agencies are using, which makes data different
at different locations. So one suggestion I would make is that you start to work on
some type of a standardized template, not only for the placement of accounts, so that
we’re all on the same page, but also for the legal process. If you were to put that system
in place, I think we could reduce a good amount of the complaints. Thank you for this opportunity. ZIXTA Q. MARTINEZ: Thank you, Ms. McNaughton. Scott Kinkley? SCOTT KINKLEY: Thank you. I’m Scott Kinkley.
I’m a lawyer in private practice on the other side of the state in Spokane, Washington,
and our courts, like I assume most of the courts around this country, are just overburdened
with these collection lawsuits that are coming in. And we’ve had a unique program there that
I wanted to share with you folks at the CFPB. The way that our court treats the collection
lawsuits is not like any other regular lawsuit. They bundle them all together, and they don’t
assign them to a judge. And I think it’s the same way around the country. They have a collection
docket once a week where all the summary judgments are heard. And what we did in Spokane County with the
blessing of our judges and our Spokane County Bar Association is created a volunteer lawyer
program where a number of us go in and we sit in the back of the courtroom during the
collection docket, and the judge will announce to all of the pro ses who have showed up that
day, which is often maybe one of 12 on the docket, sometimes none. And the judge will
give us the opportunity to meet with them, review the file out in the hallway for 5 minutes
or 10 minutes, and then come back into the courtroom and argue the case for them. And what I wanted to share is, in the over
one year that we’ve had this program, we’ve only lost two cases, and the way that we are
winning is we are looking at the evidence that is actually bring brought to court by
the collection agencies and the debt buyers. We are looking at the credit card statements
that are dated later or have, as was pointed out, addresses that shouldn’t be there for
the date that’s on the statement, credit card contracts that postdate the debt, amounts
that don’t match from the complaint to the affidavit, irregularities in the affidavit.
I know we have seen things with robo-signers and other things like that, but other than
that, there are also other regularities. We point these out to the judge in just 5 minutes
of coming through the file, and in the hundreds of cases that we have appeared on, only two
judgments have been entered. And I think both of those were entered incorrectly, but of
course, I would. [Laughter.] SCOTT KINKLEY: But it just speaks to the lack
of quality and the lack of credibility in the evidence that is being manufactured for
these lawsuits, and it’s the same stuff in my county that it is in every county in the
state and every county in every other state. And I would urge the CFPB to take a hard look
at the creation of these documents, where they’re coming from, how they’re being generated,
and I’m not sure what you do about it, but look closely at it and put an end to this
practice, because if they’re bringing hundreds of lawsuits that we’re appearing on and only
two judgments get entered, what about the other thousand people who don’t show up to
court that day or are not in our county? And I thank you for your consideration. ZIXTA Q. MARTINEZ: Thank you, Mr. Kinkley. RICHARD CORDRAY: What court was that in Spokane?
Is that a small claims court, or is that a common pleas court? SCOTT KINKLEY: It was Spokane County District
Court as well as the Superior Court. ZIXTA Q. MARTINEZ: Andrew Schaeffer? ANDREW SCHAEFFER: I’ll pass. ZIXTA Q. MARTINEZ: Judy Paston? JUDY POSTON: Poston. ZIXTA Q. MARTINEZ: Poston. Sorry. JUDY POSTON: Hi. Good morning. My name is
Judy Poston, and I am the program coordinator for Solid Grounds Financial Fitness Boot Camp
here in Seattle, Washington. In my role at work, I work with many folks
who have medical debt or credit card debt resulting from loss of job, being underemployed,
victim of domestic violence, death of a family member, et cetera. Many of these folks wish
to be in a position of having enough income to repay their debt. Some folks in good faith
have negotiated repayment plans with a debt settlement company, only to later find out
that that of the thousands of dollars that they paid to the debt company, only a small
percentage of the dollars went to the actual debt. These predatory tactics used by debt settlement
companies send already-financially struggling folks further into debt, which can lead to
emotional and physical health issues, thoughts of suicide, as well as homelessness, and further
negatively impacts their credit history. It is really expensive to be poor, and there
should be legal protection for people who get caught in the trap of predatory and unfair
debt collection tactics. I want to share a quick true life story about
one of my clients who went to a debt settlement company to have them negotiate lower interest
rates and compile her entire debt, the debt that she had that was in collections and debt
that was not in collections. After she paid the company the start-up fee
plus went into agreement with them, they contacted the collection company, made arrangements,
and they came up with this huge monthly fee for her to begin paying, which she did. Much
later, she found out that of all the thousands of dollars that she had paid, none had went
to repay any of her old debt. So this was a client who, in all good faith, wanted to
repay all of her debt, so then she had to consider the option of filing bankruptcy. I thank you for listening, and I thank you
for working to change laws to protect already-financially struggling individuals and families. ZIXTA Q. MARTINEZ: Thank you, Ms. Poston. Charlie Helms? CHARLIE HELMS: Yeah. Hi. I’m Charlie Helms.
I’m Director of National Affairs for Apprisen, and it’s a non-profit housing and financial
counseling agency, and we get about 60,000 calls a year from people in distress, people
in financial distress, and a lot of them now have been for getting on to time-barred debt
and ghosting of accounts. People are getting called after they moved three or four times
with new jobs to different states and are really getting hounded and harassed by collectors.
That’s something that we’re really seeing a lot of, and I appreciate the CFPB taking
time to find out about this. And maybe under the CFPB’s guidance, we could get clear and
transparent rules for the collectors, so that this can’t be done. It’s a cause of great emotional distress,
and I’m just backing everything that the Consumer Affairs folks have said and the other testimony.
Thanks for doing this, and we really hope something happens to help our clients. Thank
you. ZIXTA Q. MARTINEZ: Thank you, Mr. Helms. Oscar Eason, Jr. OSCAR EASON, JR.: Thank you very much. My
name is Oscar Eason, Jr., and I’m President of the Alaska, Oregon, and Washington State
Area Conference of the National Association for the Advancement of Colored People, and
I want to thank you very much for holding this hearing today, mainly because a great
impact — I think a serious impact has prevailed over the community of people of color during
the ’08-’09 downturn. And the impact itself really has been tremendous
in this regards. Well, we had just been told that there are 4,000 collecting agencies that
are in business collecting debt. Of that 4,000, I would imagine — well, the question I would
ask is how many of the 4,000 just went into business during the ’07 or ’08 downturn. Some
of the practices that were described by the panel are really not being adhered to. I can tell you, quite frankly, that when a
collector called — and this, of course, is a common problem with our members and some
of the people across the country. When a collector calls, you have to assume, first of all, that
a debt collector is trying to collect a debt. I mean, otherwise, you’d think otherwise you’d
be dumb or completely out of contact with reality. But one of the practices of the debt collector,
remember, is that the first thing they do is they leave their name, first name, and
they’ll leave an extension. You don’t understand. You don’t know who the company is. They don’t
give you that information. You don’t know what company it is they’re working for. Number
two, they don’t only call you to collect the debt, as was indicated here, they call also
to get information on who may be the person who might be the real debtor. And of course,
God help you if you’ve got a suffix, if your name is Jr. or if your name is the IV or if
you are Sr. And one of the things that might arise during that conversation, it may be
repeated over and over, if you are not the person, they want the name of the true person,
and generally, if you know the name of a relative who might have the very same name, you’d be
very reluctant if you were to otherwise have the same sense of relationship, family relationship.
You’d want to know — you would be very reluctant to call that name. The other thing I’d like to mention is the
fact that the credit report companies, I think there are about three major references that
is commonly used by these credit report companies. That information sometime is not very good
information, and the person on the other end of the line winds up saying, “Well, that’s
not me. That’s not me.” And I’ll tell you, I’ve had the experience of being called by
the — by my own credit union, and they said, “Well, we’re going to give you three questions,”
and I can tell you, quite frankly, none of the questions applied to me. They all applied,
of course, to my son, who happens to be Oscar Eason IV. But those are some of the common
things that do occur during these conversations with the collecting agencies. And the NAACP is on the forefront of this.
We’d certainly want whatever that is being done on the federal level on this — we certainly
appreciate what is being done, and we’d ask to have a little more done, just so that our
people can enjoy life a little better. ZIXTA Q. MARTINEZ: Thank you, Mr. Eason, Jr. Mike Kinkley? MIKE KINKLEY: Good afternoon. I’m an attorney
in private practice in Spokane, Washington. I’ve successfully brought dozens of class
actions against debt collectors. When you hear the debt collection industry
talk about modernization of the FDCPA, what they’re talking about is the ability to contact
you by your cell phone. They’re talking about harassing you in your electronic neighborhood
by getting into your social media. They’re talking about leaving messages, because they
have a problem under the law as to how they’re leaving messages, and they’re talking about
contacting employer and third parties. That’s the modernization they want, but that’s a
political problem. Just a quick point there. The CF — you folks can do something for me
that I can’t do. The debt buying industry has a really odd model that nobody seems to
know about. Through discovery, we’ve deposed many of the robo-signers, the 400 to 600 a
day. We’ve been involved in the Vassalle case that you guys at least through the FTC spoke
out about. The banks, because they have to charge off
the debt, sell the debt to the debt buyers, the billion-dollar-per-year companies that
you’re now starting to look at. But the banks finance those sales. Then the banks — of
curse, then the debt buyers securitize and break up just like they did in the mortgage
industry, the debt itself, or they put it in securitized trusts. Well, the banks or
the investors, the very banks that sold the debt, finance the sale of the debt, are now
securitizing and making profit from the collection of that same debt. Now, I can’t afford to take the debt positions
and hire the experts to figure out why that’s a tax benefit, why that’s an accounting boon
to them. I don’t know what they’re doing and why they’re doing it, but it’s part of the
corruption of the system. And I think it was in 2009 that the FTC — I
was on a panel in San Francisco that, ultimately, the FTC came out with the very nice paper
that — a Broken System, debt collection. I’m sure you’re all familiar with it. It’s
still broken in the same way because it’s a systemic problem. The problem is this. There is no such thing
under the law as a cause of action for a collection action. It is not. It is a contract action,
and a contract action has discrete elements of proof that have to be made. The problem
is when people buy debt in the volume they buy it for the price that they buy it, they
don’t and can’t afford to buy the proper documentation, and often at times, it doesn’t exist. So they
have a hole in their case. They have a proof hole of the existence of the terms and conditions
of the contract and the proof of the interest rates. As you guys have shown recently with the $200
million against Disovery, Discover Bank and others, unlawful charges, they have a huge
hole in the presentation of that case to the court. So how do they fill that hole? They
fill that hole with fraud. They have people sign affidavits who don’t have personal knowledge.
They have documents that aren’t attached by the affiant. It’s a complete fraud on the
courts, and the courts haven’t known this, and the judges still are having trouble accepting
this fact. The fact is that each and every one of these contract cases, not collection
cases — that’s a nice term we use to say “collection cases” to talk about this area,
but it’s in fact a contract case. They lack the proof because their proof is hearsay,
unless it’s the exception, which is the business records. It’s all documentary proof, which
starts out as hearsay, unless it’s an exception. So they try to pretend it’s an exception to
hearsay — ZIXTA Q. MARTINEZ: Thank you, Mr. Kinkley. MIKE KINKLEY: — with this false affidavit,
and that’s our problem. It has to be addressed and can’t be fixed by us case by case. ZIXTA Q. MARTINEZ: Steve Broe [ph]? [No response.] STEVE BROE: I pass. ZIXTA Q. MARTINEZ: Matt Marstad [ph]. [No response.] ZIXTA Q. MARTINEZ: Okay. That concludes the
field hearing in Seattle, Washington, today. Thank you all for attending, and thank you
to all those who watched Livestream. [Applause.]

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