Washington, DC – CAB Meeting on 10/27/2016 (session 2)

Welcome back everybody to our public session
of the CAB, the Consumer Advisory Board meeting. This morning we heard from the Bureau’s
Office of Students. This afternoon we’re going to shift gears
and focus on another aspect of debt collection. First hearing from Bureau staff about its
recent SBREFA proposal. Following this presentation, we’ll hear
from two of our CAB members, JoAnn Needlemen and Judith Fox. Judy and JoAnn will provide an overview of
emerging issues in debt collection; in particular, the roll of technology. Since the Consumer Advisory Board was established
in 2012, issues related to debt collection have been a featured discussion amongst the
group. Today marks a very important juncture in the
Bureau’s work on this topic. This will also be the first time the full
CAB will have an opportunity to weigh in on this recent proposal. To get todays discussion started we will hear
from Kristin McPartland, Senior Counsel in the Office, Regulations and John McNamara,
Acting Assistant Director in the Markets office. Again, after their presentation on debt collection,
the debt collections SBREFA proposal, we’ll turn to the CAB, have a discussion about the
proposal and discuss any themes that may have emerged. John and Kristin, thank you so much. Please feel free to jump in. Great. Thank you. We’ll start with a brief overview of where
we are in the rulemaking process as well some of the high-level summary of the ideas in
the outline of proposals under consideration. After that we will turn to John to lead a
discussion on the content. To begin, just a brief overview of the rulemaking
process in general. Rulemakings typically start with an Advance
Notice of Proposed Rulemaking, or ANPR. In fact, we did so in this case, issuing an
ANPR back in November of 2013. We then move on to a Small Business Regulatory
Enforcement Fairness Act process, or SBREFA, as you’ll hear it called. I’ll speak a little bit more in detail about
the SBREFA process in a moment. That is typically followed then by a Notice
of Proposed Rulemaking, or an NPRM, which is the first time that we put out the draft
proposed rules themselves with draft regulatory text. After a public Notice and Comment period we
then move on to a final rule. This typically is followed by an implementation
period. There’s an effective date, included in the
final rule, which allows for some period of time — again this is typical, not always,
but — allows for some period of time for companies to come into compliance with the
rule itself. To talk briefly about the SBREFA process,
it begins when we issue an outline, which we did in July of this year. The outline describes in relatively plain
language form what the Bureau is thinking about for the rulemaking at this time. As I mentioned, it’s not draft regulatory
text so it doesn’t go into the kind of detail that draft regulatory text would. But instead, it’s what is hopefully a plain-language
description of what our thoughts are about the current problems in the market as well
as the interventions that we are thinking about pursuing to alleviate those concerns. That’s followed by a panel meeting, which
we held in August of this year; where the small entity representations come in and provide
their feedback on how operationally the ideas that are under consideration might work. We’ve had that feedback and we were considering
it currently. Within 60 days, we finalize a report which
doesn’t typically become public until the NPRM is issued. It does incorporate the ideas and feedback
that we received to date. And throughout this all is the feedback period
where we meet with different stakeholders, industry, consumer advocates, groups like
yourself, and solicit and receive feedback on the ideas in the proposals under consideration. To move on to the content of the outline. It really falls into three buckets. The first one addresses information integrity. We’re aware that there are a number of concerns
about the integrity of information in the debt collection system. And that can continue throughout the debt
collection lifecycle. As many of you know, debts may often move
to one collector, go back to a creditor, be placed with another collector; sometimes they’re
bought and sold through different debt buyers. There’s a bit of a debt collection lifecycle
that can continue on. The Bureau is currently looking at providing
some clarity around the requirements for a debt collector to possess a reasonable basis
for claims of indebtedness. Those are the claims that are made typically
to a consumer about the amount that is owed, that the consumer owes it and should pay the
collector at issue. Specifically, in order to collect a reasonable
basis, a collector could take certain steps at three distinct periods of time. We’re focusing on the time before making
initial claims, essentially before reaching out to the consumer, after the receipt of
a consumer dispute, which doesn’t happen in every case, but does of course happen in
many. And before making claims in a litigation filing. In each step, the outline describes different
steps that a collector could take to make sure that they have a reasonable basis for
making the claims about the debt itself. Of course, much more information is provided
in the outline and I am moving somewhat quickly throughout this so that we could get to a
discussion. I think that it’s important to focus on
the idea that we’re providing guidance about the certain steps that collectors could take,
while also looking at potentially leaving some flexibility for collectors. So that if they did not take the steps that
are outlined, specifically, in some of the appendixes, they could potentially still have
a reasonable basis to make the claims under collection, but the burden of proof would
shift to a collector to show that in fact the steps they took were sufficient to obtain
that reasonable basis. Again, it’s a balance between providing
enough specificity to be clear for the industry as well as hopefully allowing for some flexibility
to accommodate different types of debt and the different information that may accompany
it. As part of our focus on information, we’re
also looking at information transfer and information forwarding requirements. Information transfer looks at the passing
on of information as debts move through that debt collection lifecycle. As I just spoke about, it may move from collector
to collector, from debt buyer to different collector, different debt buyer. Here we’re looking at requirements related
to passing on FDCPA-related information; that could be information such as a cease communication
request, information about consumer disputes or other information related to consumers
FDCPA rights. Other federal law information, such as interest
rates related to the SCRA or certain federal student loan rights, or additional information
that’s helpful to the collection process, like language preference or exempt income
information. These are the requirements as the debt moves
from collector back to creditor and is on to subsequent collectors that this information
must accompany the account. We’re also looking at information forwarding,
which would occur after debt has left the possession of a collector. But a collector may nevertheless still receive
certain information about the debt. For example, it could be payments submitted
by the consumer, bankruptcy discharge notices, identify theft reports, or disputes or exempted
income information. And here the obligations would be to go ahead
and forward that information on, even once the account has left their possession. Moving on to the second bucket which focuses
on consumer awareness. Here, we’re looking at two different potential
notices as well as some additional disclosures to help improve consumers understanding, both
of the debt that is under collection, as well as the collection process itself. The validation notice, which many of you know,
is already addressed in the FDCPA. It does include certain statutory requirements
about information on disputes and other information from the collector. But here, the Bureau is looking at providing
an enhanced and clarifying notice which would include more information about the debt, information
about the consumers’ rights, and a tear off to facilitate consumer response. Information about the debt can include additional
information, such as a breakdown of the amount due, including fees, interest and charges
after default, additional information about the type off debt under collections, such
as credit card or student loan, brand information as applicable. And information about the consumers’ rights
would be additional and hopefully more plain language description of a consumers right,
particularly the right to dispute the debt, if the consumer has a question or otherwise
thinks the information is incorrect. And that leads to the tear off at the bottom
of the page, which would allow consumers to more easily interact with their collectors
by simply tearing off the bottom of page, filling out a certain check box and sending
it back. I’ll show you in a minute, an example of
a model form that we put out with the validation notice as well as a statement of rights. That model form, of course, is still undergoing
further consideration and testing. But we thought it was important to put it
out so that people could see the type of information that we’re thinking about including in the
validation notice. The statement of rights would be an additional
and new requirement to send, most often, with the validation notice, offering a plain language
explanation of certain consumer rights. That could include the right to dispute a
debt, the right to stop communications or to determine how or when those communications
occur, and the right not to be harassed or abused or to have ones’ privacy violated
such as through a third-party disclosure of the debt. And again, although I’ll go to those in
a minute, these are model documents that even when issued with a rule we anticipate would
not be mandatory for their usage. But if a collector used the model forms then
they would be sure that they had met the requirements of the rule. Just to go very quickly — and I realize that
it’s difficult to do this on the screen. I did want to just touch on the potential
Validation Notice. And you can see, again, it really does divide
down into these three parts, with the first third being primarily information about the
debt itself; the second third being information about how to dispute the debt or other actions
that a consumer can take; and the bottom third being the tear off that a consumer could return. Similarly, we have on the screen now the potential
Statement of Rights. And again this is a plain language summary
of some federal rights that consumers have throughout the debt collection process. Including rights about communication as well
as your right to get a credit report on an annual basis, and information that certain
types of assets cannot be garnished. Moving on to other disclosures that are contemplated
in the proposals under consideration. We also have a potential litigation disclosure,
which would be required to provide in instances when a collector represents an intent to sue;
that the collection agency does intend to sue, that a court could rule against the consumer
if he/she fails to defend the suit. And the additional information about litigation
as well as contacts for legal services programs is available on the Bureaus website. This disclosure would be given by collectors
in the situation when they are saying to the consumer that they do intend to sue. We’re also looking at a disclosure regarding
time-barred debt collection. And here where collectors are seeking to collect
time-barred debt, they would be required to disclose in a fairly simply sentence that
the collector cannot sue to recover the debt. And we are also considering an additional
disclosure that if the debt is obsolete, then it cannot appear on a credit report. Obsolete we’re using as a term to mean generally
speaking, are older than seven years; although, we do understand there are some exceptions
to that under the FCRA. Part of this time-barred debt disclosure would
also be an obligation for collectors, who have given the time-barred debt disclosure,
to then weigh the right to sue on revived debt. Of course, under some state laws debt can
be revived if a consumer makes a partial payment or acknowledges the debt in writing. But the idea here, is that once a consumer
has received the representation that they cannot be sued on that debt, that they would
have that ongoing expectation and therefore should be able to rely on it. Likewise, subsequent collectors would be prohibited
from suing on a debt for which an earlier collector had provided the time-barred debt
disclosure, even if the subsequent collector evaluated the debt and felt that it was not
time barred. Once the consumer has received the time-barred
debt disclosure, it would essentially attach to the debt from there on. Moving on to our third and final bucket. We’ll talk a little bit about communication
practices. Of course, there’s much more detail in the
outline itself and I realize that I’m moving somewhat quickly through this. I’ll just hit on a few of the high-level
concepts here. The first being contact frequency. Here, we’re considering a limit on contacts
and attempts to contact consumers that would apply per week and per account. There would be different limits, depending
on whether the collector has what we call confirmed consumer contact or not. And confirmed consumer contact is the concept
that the collector has reached the consumer that they believe to be the debtor, so either
the debtor or the alleged debtor. Before the collector has confirmed consumer
contact, the limits would be three contacts per line/per week/per account. In other words, if you have two phone lines,
an email address and a mailing address, each one could potentially have three contacts. But those are subject to an overall cap of
six attempts per week/per account. A collector would have to decide — they could
use perhaps two or three on one phone line, one or two attempts on another phone line,
and then use the remainder on an email or mailing address. All subject to this overall cap of six attempts
a week per account. After confirmed consumer contact, those limits
drop to two attempts per line/ per week/ per account. With an overall cap of three per week/ per
account. And a limit of one live conversation per week. This goes hand-in-hand with addressing voicemails
and leaving other messages when collectors do outreach to find consumers. Here, the Bureau is looking at permitting
a certain limited content message that would not be a FDCPA communication, and therefore
not trigger what is commonly referred to as the Mini-Maranda Disclosure, that the communication
is from the debt collector and about a debt. This limited content message would be permitted
if it included only the individual debt collector’s name, the consumer’s name, and a toll-free
method that the consumer can use to reply to the collector. It’s a fairly straight-forward message with
just that limited information. In addition, to these communication proposals
under consideration, we’re also looking at a number of different elements related
to decedent debt, or the collection of debt for which the consumer has passed away. Here, among other interventions, we’re looking
at potentially a waiting period after the consumer’s death, for communication about
collection of that debt, considering both thirty days and sixty days as a waiting period. We have a number of proposals under consideration
regarding time, place and manner of communications, which is an issue that’s already addressed
to some extent by the FDCPA. But here we are looking to bring clarity to
a number of the issues, including some of those issues that are raised by newer technology
such as email or text messages. One aspect of this is thinking about when
a communication is sent, when we’re using this newer technology for the purposes of
determining whether it was an unusual or inconvenient time. As many of you know, the FDCPA says it is
presumptively convenient if a communication sent between 8:00 a.m. and 9:00 p.m. but that
can raise a question when you are not actually dialing a phone and instead, for instance,
sending an email. Here we are looking at clarifying that the
time at which a communication is sent would be the time at which it is generally available
for the consumer. So if an email is sent at 10:00 a.m., it would
be deemed to have been sent at a presumptively convenient time, even if the consumer didn’t
actually open it until, for instance, 10:00 p.m. that night. We also look at a variety of different aspects
of presumptively inconvenient places, considering a presumption that would include medical facilities,
places of worship, places of burial grieving or childcare facilities as presumptively inconvenient
for communications with consumers. And a clarification that employer email, when
a collector knows or should know that the email address does belong to the employer,
would not be permitted without consent directly given to the collector. Here again probably many of us have the experience
of logging into our work computers and seeing that there is no privacy; and we have to waive
that, so we are concerned about communications going to workplace emails when a consumer
may not be able to expect that that email remains unread by their employer. And finally we have a section on consumer
consent. Which addresses the parameters for obtaining
consent from consumers for communications, particularly those that would otherwise be
restricted by the FDCPA. These include getting direct consent, so a
requirement that consent be obtained directly from a consumer, by the collector, whether
orally or in writing; clear disclosure to the consumer as to what they are consenting
to; and memorialization, so requirement to memorialize consent whether in writing by
preserving the written instrument or by oral, by recording, or otherwise notating that consent
in the account file. Finally, just moving on very quickly to two
additional proposals that we have. One would prohibited sale or placement debt
with those who are subject to judgment or orders or unlicensed collectors where that
is applicable. Of course, some but not all states have licensing
requirements. This would prohibit those for whom the consumer
resides in a state that does have a licensing requirement if the collector does not have
that license. And finally we look at record-keeping, where
we are looking to bring some clarity around the requirements for records that must be
kept for collectors, including that a collector be required to keep records documenting the
actions it took with respect to the debt. That a collector would be required to retain
those records for three years. And a clarification about recording calls,
where a collector would be required to keep the call recordings if they, in fact, do record,
although they would not be required to record if they don’t do so currently. I just want to touch very briefly and some
of the debt collection research that we been engaged on before turning this over to John. We have been looking at the model disclosures
including the two disclosures forms that we’ve discussed and that I showed earlier. Those are both qualitative testing and we’re
looking at doing some quantitative testing to help develop the model disclosures. We are engaged in a consumer survey and the
preliminary results were released as part of this SBREFA outlined in August, we do expect
to release those final results in the coming months. A collector operation survey that was also
released with the SBREFA outline. Where we surveyed third-party debt collectors
and their vendors about their current operations. We’ve obviously been engaged in a lot of work
and we really look forward to getting your feedback through this discussion. Thank you Kristin. At this time we would like to ask for some
input from the CAB members about some specific issues that we mentioned in the SBREFA. In that spirit we’ve got a number of discussion
questions. The first which is, what type of information
do consumers need to know about their debt, the collection process and their rights? What information would better help consumers
recognize their debt when contacted by a debt collector, recognize that the amount is correct,
and that the person calling is indeed owed that debt or is representing the person who
is owed that debt? We will start — thank you — with Josh. Thanks so much for all the work you’ve done. I want to focus — I think this is an opportunity,
I think, with this SBREFA process to make sure that we get this right. And this is a great opportunity, I think,
given that this is the first time that rules have been overlaid over the debt collection
industry under FDCPA. And that this is really an industry that has
been the Wild West for many years and has caused a great deal of harm to consumers and
to communities. I want to focus just on one peace which is
around substantiation of debts. Just for background, before starting my current
job this year I worked for many years at New Economy Project and we were doing a great
deal of work on this issue around third-party debt buyers. In fact, Susan Chen who is the Senior Attorney
at New Economy Project testified at the Sacramento hearings. And so we had, for many, many years going
back now about 10 years, a hotline where we took calls from low income New Yorkers on
financial justice issues and debt collection. It was overwhelmingly the biggest issue that
we got calls on. As I think has now been well substantiated,
it was around the third-party debt buying industry that really is buying debts for pennies
on the dollar based on very minimal information. And we actually then did a class-action lawsuit,
which we settled last year, and the CFPB did an amicus on that. It really give us an opportunity to learn
a lot about how this industry works. One of the things that we found out through
this whole process is that really the business model is based on handing over very little
information. A lot of these purchase and sale agreements
actually limit the amount of accounts for which that debt buyer can come back and request
information to a pretty minimal amount. Another thing that we found out through advising
borrowers, going in pro se in court, is that whatever they challenged these debts and the
debt buyers had to come up with substantiation of the debt, almost 100 percent of the time
or, I would say, 100 percent of the time the case was dismissed. We also worked closely with the New York State
court system which put out really groundbreaking rules. What was happening was that debt buyers were
going into court engaging in sewer service in many cases, so people weren’t showing
up in court. And then using robo-signed affidavits where
they were just stating that they had personal knowledge of the debt and, in fact, having
very little information about whether it was owed by that person and how much it was owed
and why and so forth. Getting default judgments and then freezing
people’s bank accounts and garnishing wages. We also did a study where we mapped where
these default judgments were and there was heavy concentration of these default judgments
in New York City and communities of color. Not only is it an issue that affects low-income
people, but also has a disproportionate impact on communities of color. These rules that the CFPB is working on promulgating
presents a really good opportunity to level the playing field in this industry so that
debt collectors, who are engaging in honest practices, may continue to collect debts. But to ensure that this third-party debt buyer
industry is not engaging in deceptive and fraudulent practices; and these were very,
very widespread. And so just to cut to the chase because I
don’t want to take up too much time here; there are opportunities here around the substantiation
of debts. I think it’s important to make sure are not
missed. We’re concerned that in this first cut that
there is too much leeway being given to third-party debt buyers to decide for themselves what
sort of information they’re comfortable with in providing at different stages of the
process. And just by way of example, New York State
issued rules through the Department of Financial Services that govern what sort of information
debt buyers must have and must provide to borrowers in the initial phase of the process,
that go deeper than this. And also provide through validation process
that actually documents themselves have to be provided to borrowers. Also in the New York State Court rules there
is a requirement that in order to obtain a default judgment, a debt buyer has to actually
have in hand review documents that can substantiate the debt and the breakdown of the debt, and
all sorts of information about the charge off amount and the post- charge-off interest
and fees, et cetera, full breakdown; and also provide an affidavit with a chain of title
in order to get a default judgment. There are these rules laid down in New York
and New York is not the only state. I know North Carolina has strong rules and
other states. I think it’s really, really critical for the
CFPB to build on the work that’s been done in the states around this because the state
courts, for example, have seen up close and personal what happens when this information
is not substantiated. To look at the history of the debt-buying
industry and how they’ve, I guess, taken it upon themselves — and maybe that’s the
wrong way to term it — but how they have determined their own reasonable basis, which
is very, very loosely. I think to look at providing rules that have
a stricter basis for substantiation of debts; so that debt buyers have to have, in hand,
actual account-level documents that can back up the debt to ensure that when they are collecting
against people at different stages of the process, that that debt is in fact owed and
how much. One other point is the OCC issued guidance
around the sale of debt by banks. A huge portion of the debt being sold at third-party
debt buyers is credit card debt from the banks. Under that guidance the debt buyers are supposed
to provide copies of account-level documents. I know that the CFPB is intending to address
original creditors and first party debt buyers in a separate rulemaking, but it’s very hard
to address one piece and not the other. Banks also have to be held accountable about
what kind of information or what these deals look like. So that when banks are selling charged-off
debt, that they’re accountable for providing substantiation for the debts. They should not be able to sell debts into
the market when there is insufficient backup to prove that they are owed. Thanks Josh. Sorry. That was kind of longwinded and I apologize. No. No. Thank you. Chi Chi has a comment on this question also. Yes. Thank you. Thanks very much. This was an area of critical importance when
the CFPB first opened a rulemaking into debt collection. We were very excited because obviously not
only it’s at the top source of complaints to the CFPB, but it had been to the FTC. And our experience is working with thousands
of private and legal services attorneys that represent debtors. And that, for many, many years, where the
primary source of enforcement with respect to the Fair Debt Collection Practices Act;
and still probably file the bulk of cases under the FDCPA. I wanted to give you a little bit maybe from
that perspective. The SBREFA outline, there are some very good
things in it. We were very pleased to see proposals such
as requiring transfer of information and prohibiting passive collection by placing debts on a credit
report without notifying the consumer. However, we too are very concerned about the
substantiation requirements and believe that it is a missed opportunity to require account-level
documentation before debt can be collected on. And this shouldn’t be a surprise to you; last
month we sent a letter to the Bureau, signed on by several dozen consumers’ civil rights
and advocacy groups, where the number one point was that we believe there should be
account-level documentation. And if you looked at your own survey you can
see some of things that consumers need that only can be provided by this account-level
documentation. The single biggest source of complaints is,
this is not my debt. How do you determine if it’s not someone’s
debt without account-level documentation? Having just a name, an address and a spreadsheet
isn’t going to show whose debt it really is. You know, 28 percent of your consumers said
this is not my debt. Twelve percent said it’s someone else in
my family’s debt. This gets to the issue of who’s liable in
the debt? The consumer cosigner, versus an authorized
user, versus just a family member, and again you can’t get to that without account-level
documentation. But going back to the point of the perspective
of the consumer attorneys who represent these folks with private and legal services. We had a presentation at our annual conference. We have about 800 people at our annual conference
and about half of them are private attorneys. And we presented on this. The comment we got back was, with respect
to the substantiation issue, this may be worse than not doing anything at all. This will make it harder for them to bring
cases. And it’s because over the decades of FDCPA
litigation, the mantra has always been the FDCPA is a strict liability statute. Okay? The debt collector collects against the wrong
consumer; the debt collector is liable. It doesn’t matter that the spreadsheet had
the wrong name or the wrong ID. But by introducing these standard saying you
can transfer a debt with just a spreadsheet, that, you know, if there’s representation
from accuracy from the creditor or the previous seller, that there are things you should look
for but are required to. That flexibility undermines the ability of
consumers to enforce this act themselves. Because you’re introducing this flexibility,
this reasonable procedure standard. Just to give you a little contract, my area
is actually the Fair Credit Reporting Act. And I know the Fair Credit Reporting Act,
that is not a strict liability statute; you find an error on your credit report, you can’t
sue right away. You have to establish lack of reasonable procedure
for maximum possible accuracy. As a result, that particular section of the
FCRA, the mantra is, do not sue under that. Unless you are like one of the top litigators. Because that’s a tough case. That’s a really — that’s a tough case. You’re going to have to pour a lot of resources
into that case. So those cases don’t get brought. Our concern, and I think the concern of the
folks who have been bringing these cases for decades, is that by having this level of flexibility
in your substantiation, that you’re going to undermine all those cases and you will
actually see less self-enforcement at the FDCPA. Maybe we should let somebody else in the conversation. We can always come back to you if you have
more. Okay? Oh. Okay. I just don’t — I want to make sure everybody
gets a word in here. Okay? Okay. Okay. Thank you very much for your comments Chi
Chi. Lisa? Just to echo the piece about making sure the
debt seller substantiates the debt. I also just wanted to say that I like the
ideas of the validation notice and the rights. I think those are great. The piece that I worry about a little bit
is making sure that, you know, it’s like that last mile problem, how do we know that the
consumer is going to read it, is going to get it, is really going to understand it? As part of my research I worked on the predatory
loan help hotline for a month, which is run by the Virginia Poverty Law Center. I would say the number one issue there and
what was interesting about Virginia, is that store-front payday loans, for example, are
legal, but not the online ones. And many, many of our callers were in trouble
with online loans and didn’t really understand that. That, to me, is just an example of a law,
a regulation being in place that people didn’t necessarily understand. Thinking about — I don’t have the answer
— but thinking about a way to make those two documents as effective as they could possibly
be. Joanne? Yeah. Thank you. Well, this may be one of the few times I might
agree with some of my advocates here. The issue of substantiation is really important. I said this to both of you before; I’m going
to say it again of the board. I think we missed a huge opportunity in SBREFA
and in this process to bring in the first parties. Because absolutely a consumer needs to recognize
what it is that you’re collecting. But third-party debt collectors, that is not
their information. Putting debt buyers aside for a second because
that’s almost a complete and different discussion. But traditional third-party debt collectors,
whether you’re in medical or auto or whatever, it’s not their information. They are getting it from their clients. And mandates on their clients to provide certain
information would really clear up this issue greatly. I agree. The more that we can provide up front I think
the better the communication is going to be, the more opportunities to understand and recognize
fraud, possibly recognize for resolution of debt. I would encourage the Bureau, let’s continue
to have this conversation. I know it’s on a separate track, but don’t
lose sight that at some point these two groups have to come together to figure out what is
going to be the best result. Thank you. Chris then Judy. To sort of pile on the substantiation piece
a little bit. I’ll add a little bit of color. I share a lot of the concerns that have already
been raised about substantiation. To add a little bit of additional color to
it, and I’m not our in-house expert on this issue, but our person who was, I think, I
can fairly characterize her reaction to the SBREFA package a surprise. And I think in large part because there’s
a fairly significant difference between the enforcement actions that preceded this SBREFA
package and the kind of requirements or substantiation that were included in those enforcement actions. And then the amount of flexibility or loopholes
that are in this package, and the difference in the way that it’s expressed, I think,
were surprising to us and we would love to talk to you more about that. A couple of additional pieces of color on
this. As Josh mentioned, North Carolina passed a
fairly strong law requiring substantiation in the context of debt buying requiring a
significant amount of proof which otherwise hadn’t really been required before. A couple notes with that; one is the debt
buyer said we’ll never be able to bring another case in North Carolina again. They definitely have. It was a little like the subprime mortgage
issue where we passed the anti-predatory lending laws and the lender said we’re not going
to do business anymore and then a year later there they were. But there was a series of debt buyer cases
recently in Charlotte in which a judge vacated ten — ten judgments that had already been
entered. In large part because the affidavits that
were filed to support those cases were false. In fact, we’ve got the audio of the judge
saying you lied to me about this. There were different reasons why those affidavits
were false. In some cases the affidavits said we have
itemized proof of the debt and they didn’t actually have it. Other cases it was, we’re well aware of
the business practices of the creditors and we can fully authenticate these business records,
and they actually hadn’t even looked at those records and didn’t know about this cases. So even in a state with some strong protections,
you still have this issue of affidavits being filed and certain circumstances that don’t
have the correct information. And what that requires then, thought, is that
this group of consumers has to get legal representation and bring these cases into court, turn their
lives upside down, right, to try to be able to defend these. The more flexibility, the more that we have
to rest on these reasonable standards, the more it means that we then have to try to
find a way to get these people into court. For most of these folks, and other folks have
brought this up as well, is that many of these cases are being filed in hopes that these
people will never show up in court. And in fact they don’t. In fact, in talking to one local debt attorney
who handles these cases, he’s actually taking the step of filing counterclaims with his
appearance. Because he’s so tired of the debt buyer
dismissing the case as soon as he shows up in court, that he wants to make them hang
around a little while longer. It’s the folks who don’t have the wherewithal
to be able to hire an attorney. They make too much money to qualify for legal
aid, which in North Carolina it is truly poverty wages to be able to get free legal assistance. In that case these folks, they’re not going
to bring that case. It’s actually cheaper for them just to pay
the debt, which is wrong on its face. There is plenty more, but I think those are
the highlights there. Judy had a comment if that’s okay. Another one on this question. I’m going to have a lot of time to say things
so I just want to talk briefly about a direct answer to your first question, what we need
to know or what consumers need to know. Because this is not something that I’m going
to talk about later. I have a filing cabinet in my basement of
my office that’s full of debt collection cases. Because the common experience that my clients
have is the debt gets charged-off, they’ve had some issue in their life. Maybe they’ll call the original creditor
and say, “Hey, I got a job now, I’d like to pay my debt.” And the response they get is, it’s charged-off;
which leads them to believe they don’t owe it anymore. Right at that level consumers need to know
what charge off actually means. It doesn’t mean you don’t owe the debt anymore. Whether it’s with a statement saying we’ve
charged this off but you still — some indication. And then what happened to it? So in my filing cabinet, in the basement,
are all my clients who I send out a validation notice usually with an affidavit of poverty;
look, this person is on Social Security or this person is on Disability, they’re never
going to be able pay you, forget it. The debt collector usually just goes way. But I don’t close the files. I put them in my little filing cabinet. Because six months, twelve months, eighteen
months later, they’re going to get a second collector who is going to call, and I have
to do the whole thing over and over again. It’s wonderful that you’re suggesting that
information has to be passed along. It would also be good for the consumer to
know when their debt is sold and to whom. So that when the debt collector calls and
says, you know, this is XYZ, they know, okay, yeah; I remember my debt was sold to XYZ. As opposed to, who are you, what are you talking
about? I did a small survey, not distinctly relevant
because we had low-income clients and more than half of them didn’t have a credit report
so couldn’t really look. But we ended up looking at about 75 actual
credit reports. And most of the time when the consumer told
me, that’s not my debt, when we checked it actually was. It was that they didn’t recognize the tradeline. And they didn’t recognized the tradeline
because they had no idea what was going on. I think those things are really important
in terms of what a consumer needs to know. Paulina? On disclosures, they can often be limited
in terms of how helpful they can be, especially for historically marginalized populations,
that have been marginalized from the financial services industry. I just wanted to make the point. For the disclosure on collecting on time-barred
debt, that’s especially a concerning piece. We’d rather see prohibiting collecting on
time-barred debt. This compounds a problem with the validation
notice. It can be especially confusing for populations
that might have some problem understanding this, but maybe anybody especially if it says
enclosing an amount; where you might feel like you might have to pay an amount in order
to even dispute. There might cause some confusion with this
validation notice and I just wanted to point that out. Can I toss in two cents? I love the notion of having — thought I love
Paulina’s comments, conversely I was also thinking, love the notion of having something
that attaches to the debt. Tagging it, catching in the wild, clipping
a tag on it, tracking its lifecycle. I think that’s great for the consumer and
I’m totally hearing from Joann that’s really actually great for third-party. And they’ve crossed my mind like, as long
as you’re going to have third-party debt buyers, it’s good for them too. To know what it is that they’ve got, is a
valid or not valid. But I’m wondering how you’re actually going
to be able to create a system that really truly tracks. Because absent that, it’s — stay tuned. Okay. Right. But that was the next thought. I just want to say kudos, I like the concept
and if we could build on that concept. Thank you. The next question. We heard a lot of feedback about the amount
and the quality of information that might be given to debt collectors and debt buyers. We’d like to hear from you if you have thoughts
on whether the amount and/or quality of data that moves, is there a difference between
contingency collectors who are collecting on behalf of another creditor and between
debt buyers in terms of that amount of data or quality of data? JoAnn? Sorry. I don’t want to steal the conversation here. I think it’s really about how far along you
are with debt. If it’s an eight-year-old debt, the quality
of information you’re going to have is going to be significantly less than if it was six
months to a year. I don’t necessarily know if it’s a debt buyer
third-party issue as much as it’s a timing issue. Interesting. Other comments on that question? Sorry. Josh? There are certainly difficulties as the debt
gets older in maintaining a file. But as a basic concept there is basic account-level
documentation that should travel with the debt when it’s sold. And the business model should not be based
upon having very little information and only digging back into the files when it’s challenged
by a lawyer. As Chris was saying, it’s a very small percentage
of people that actually challenge them and the model is built on just trying to push
all of this stuff through. We certainly believe that regardless of whether
it’s a third-party collector or a third-party debt buyer, there is that basic level of account-level
documentation that should travel with the debt. I did a study several years ago and looked
at thousands — now these are all cases that had gone to litigation so that might make
a difference in my results. But I looked at thousands and thousands of
files all throughout Indiana. And I would say that there was substantially
more documentation on a contingency collection then there was on the third-party debt. In fact, it was rare when they were contingency
lawyer for them not to have had the documentation. And it was rare, when they weren’t, for
them to have had documentation. Chris? I think following up on that I think that’s
fairly true. I think most of the worst cases we’re definitely
seeing are in the debt-buying industry. I think there’s also, obviously, a real
question of incentives as well. I think when you’re buying these debt at
pennies on the dollar and the way you make money is by collecting on this many of them
as possible, A: you’ve got this very incomplete information, but then also, sort of, what
do you do with it? There were at least ten guys name Chris Kukla
who were all born in the Chicago suburbs, around the same time that I was born. There’s one guy who keeps Facebook friending
all of us because he wants to know who we all are. It’s great. But it would be very easy if you had a spreadsheet
that said, you know, Chris Kukla who lived in Wheaton; well, I live close enough to Wheaton,
that makes sense. And, you know, we’ll go ahead and push this
through and hope that he doesn’t hire an attorney to prove that he didn’t actually
live in Wheaton, because, you know, I live close enough. If your incentive is that I can make money
by doing this, I will do that. There’s not only the issue of how incomplete
is the information, which is fairly incomplete; but then also is the information so incomplete
that it makes it easier for you to be able to push the debt onto somebody who actually
doesn’t owe it? Thank you. The next question. How and how well do creditors monitor the
behaviors of their debt collectors and the buyers of their debt to make sure that the
consumers are treated with dignity and respect? Joann? I know very little but I know something. A lot. Representing clients who go through audits,
I would say four/five years go clients would come in — and I’m talking major financial
institutions, not the dentist or the HVAC guy. But major financial institutions, whether
it be credit card, auto, student loan, would come in to, whether it be an agency or law
firm, once a year. Certainly, when the FTC started taking notice
of debt collection, and with the opening of the doors of the CFPB, that started becoming
twice a year, once a quarter. I have clients who represent major financial
institutions who come in once a month. The audits that my clients see from original
creditors is massive. I think data that we submitted in the AMPR
when I was President of NARCA, which is National Creditors Bar Association, is that compliance
costs; and those are cost of dealing with audits and having systems in place, had gone
up 329 percent. So there’s a significant amount of money
that’s being spent to this issue. I will tell you that creditors, the consumer
experience is the number one priority when they go into agencies and law firms about
how we’re treating consumers. More so I would say then recoveries. It all used to be about, you know, what was
your liquidation rate. Now, it’s how you’re treating the consumers,
the complaint logs that you have to submit. All calls are now recorded. So there is this incredible effort and money
and time being spent into trying to rectify, what we all know over the years has not been
a good experience. I can certainly report that that has changed. Sorry. Chi Chi? Did I see your hand? No. No. I think it depends on the creditor. I’ve heard hideously abusive recordings
in the mortgage servicing context. First party collections, collections on behalf
of some very large entities. What I’ve listened to on the recording mirrors
what other people, for whom I don’t have recordings, have reported has been their experience. I’m deeply concerned that it’s not actually
translating through in all instances, and that customer experience just may vary massively
by sector. And that perhaps that’s one way of trying
to make sense out of when it’s working, when is supervision good, when this training
good, when is there good oversight versus the exact opposite happening. Chi Chi? We’ll to your point about depending on sector. I wanted to bring up that there are other
statutory or regulatory schemes that require the original creditor to supervise the collector. Most importantly, being the new IRS rules
governing collection of nonprofit hospital debt. And that will make the hospital responsible. I don’t have any experiential information
to give because those recently took effect. I think it’s important that there be some
interplay between the two and if there’s violation of one, there be violation of the
FDCPA. Chris’s point reminded me of a couple things. Number one the issue of matching consumers
to the right debt or the right account is a big one in credit reporting as well. And here it is even worse because sometimes
you don’t have the social security number, which is the key piece of information. And matching criteria has got to be critical
in this as well. On credit reporting, just to remind folks
that all of these actors, both the original creditor and the debt buyers and that collectors,
also have obligations when they’re reporting to the credit reporting agencies under the
Fair Credit Reporting Act. Furnisher Accuracy and Integrity Guidelines,
which they themselves require substantiation of a debt so that if there is a direct dispute
to the furnisher, that furnisher can substantiate it. They already are under these obligations and
so it should be hard. For example, to Joann’s point, to require
the original creditors to provide this information because they should have it in the first place
when they were reporting it so they could respond to credit reporting disputes. And I’ll stop. Thank you. Chris, you had a question? A couple comments here. Builds a little bit on what we were saying
before. I think what everyone said is correct. I think it is dependent on there are some
folks who take this more seriously than others. I think, at least our experience has been
is that once it’s offloaded to a debt buyer, sort of all bets are off. For a couple of reasons. One is it’s a pool of debt that you haven’t
been able to collect on previously you want to get rid of it and you just want to make
a little bit of money on it. And then you can point fingers at the debt
buyer and say, we’ll they’re the ones who are doing it. I think some creditors are obviously taking
that pretty seriously. Some have stopped outright in selling their
debts to that buyers, but that has not at all stopped the industry; and there are plenty
of creditors who are selling that on. This fits into a lot of these questions but
I think the reason I made the comment about the difference between the settlements and
SBREFA packages, is that the settlements really establish sort of a baseline of proof. Right. And like, you know, like it or not, it really
gave a clear indication of this is what you’ve got to show. If you’re going to haul someone into court,
than this is what you’re going to have to show them. You’re going to have to proof you’ve got
— I think that’s pretty important. I think it makes it more difficult for consumers
to figure out what’s going on if there’s lots of different ways that different collectors,
or different debt buyers, can prove that information. And you think, well you should have to prove
this. Well, actually I don’t; I can prove it this
way instead. It creates a lot of difficulty, but also debt
buyers can hide behind that. When you ask about being treated with dignity
and respect, if you’re still able to play with the information, if you’re still able
to do these things and find loopholes and ways to do this, then you’ve got actors out
there who are going to do that. It reminds me of — there was a law firm in
North Carolina that was litigating these debt cases and it turns out that they had a series
of LLCs that were debt buyers. And funny enough there were all named after
bottom feeding fish. They knew what they were doing, they knew
what they were getting into and they were particularly aggressive in that state. And that’s even with pretty strong protections. It shows how imperative it is to have a strong
baseline of protections in this industry. Thank you. I think we have time for one more question. Have you observed any new approaches to collections
that struck you as more consumer friendly; or perhaps if not more consumer friendly,
maybe less adversarial than the traditional collection approaches that you have experienced? And if so, what are they? Joanne? Please. We love hearing from you. Come on. Yeah. No. I’m sure you don’t. Yeah. I think I told you about this. There’s a series of meetings that go across
the country with collection professionals, and we get together and we call them compliance
forums. We just get together and talk about issues
and compliance and new techniques and things like that. One of them is chat. I had asked the question — I always ask the
question when I go to these meetings, who does chat? Finally, in one meeting, somebody raised their
hand. To me, I think Amazon is — I’m sorry Max
— I think Amazon is just like the coolest thing. And I think the way that they handle your
purchasing, your returns, is wonderful. I don’t know if anybody has return on Amazon. It’s the easiest thing. You log on, you get a little pop-up thing,
you have a little conversation. I get a little code, I return it. And then what I am done I get an e-mail that
just has my whole conversation. This one particular agency said that have
chat. And they have spent a lot of resources in
training. There’s only three people in the entire
agency. I think there’s probably over 200 collectors
they have, but only three people have gone through the process and are doing the training. They are doing chat and it is working out
wonderfully. They can have a conversation. Every time they’re done, they get an email
of the conversation, they keep a record. We’re going to talk about this a little
more, but the industry has been very slow to adopt technology. And we’ll talk about that. But here’s one example where I think technology
could really — especially as an outreach to consumers, where it really works. Thank you. Arjan did have a comment? Largely, but absence of a comment. I kind of feel like this question is one I
should have a long answer to, given that my day to day job is to find kind of Next-Gen
technologically-motivated solutions that are more consumer friendly. The only one that I know of really, you’re
already aware of as well, TrueAccord, which is trying a number of new things. Getting into the chat vein and using machine
learning and using, kind of, multi-model, more informal ways of communicating without
humans. I think it’s worth noting the drift of solutions
here and that’s unfortunate. I don’t have a good example, but I do have
kind of a question. Sorry. I see you Brian. One quickie. I’m wondering whether or not the information
that’s housed within the first party creditor is not the platform from which information
is being drawn. Joann, you may know this. It’s not the platform being used to shoot
information over to the third-party debt buyer. And so if you’ve got stuff operating off of
two different platforms, you by definition, have established a structural problem that
has to be examined — understood, examined and addressed. And I see Joanne nodding her head so that
sounds like that’s correct. Pardon. Awesome. Brian. Just quickly to pile onto Joann’s comment. It’s the same thing as marketing, same thing
as service. A digital collection experience is going to
reach many consumers in a more friendly manner; and it will actually reach some consumers
that won’t talk to you over the phone, that don’t like to talk over the phone. People have preferred modes of communication. A digital experience can be very good for
accommodating those consumers. Great. Last one. Jim. Thank you. Just a comment that this is very, very early
stage so I think it would be difficult to implement this soon. But when we talk about the challenge of having
a common record, and especially a record that could follow one around, the person that’s
being collected upon, and the people doing the collecting. The thing that popped in my mind, again, very
early stage was blockchain now. That’s what it does; you have a ledger assigned
to a record and everybody that is on it has the same copy of that record. Now the challenge of blockchain, at this stage,
is like — the same problem you had with the first people who got a fax machine or walkie-talkie,
is that until the other party has one, it doesn’t do any good. But it’s likely to be coming and essentially
there will be some first application. So it could be worth looking into. Great. Thank you. John and Kristin, I’m sorry but I think we
have to wrap up. Appreciate the work that you’re doing tremendously. Thank you for taking the time to come and
present to us. And get feedback from us. And hope that we can be of further service
in your process. Great. Thanks for having us. Thank you so much. We’re going to shift to a presentation from
a couple of our CAB members. The Trends and Theme presentation. And let me go ahead and introduce them formally. This Trends and Theme issue is going to be
on — more on debt collection, but particularly on the role of technology and the need for
modernization in the debt collection space. Judith Fox is a Clinical Professor of Law
at the Notre Dame Law School where she teaches and practices Consumer Law. She joined the faculty in 1997, and teaches
courses in Consumer Law and Negotiation. She also direct the Economic Justice Project,
a low income clinic specializing in foreclosure and debt collection defense. She’s a member of the Indiana Mortgage Foreclosure
Task Force and co-chairs AALS Clinical Section Standing Committee on Lawyering in the public
interest. Before law school she was a bank manager and
a loan officer, very diverse experiences. MS. Fox has authored a number of publications
and those publications also address issues of foreclosure and debt collection. To her left is JoAnn Needleman, a member of
the law firm, Clark Hill PLC, where she leads the Consumer Financial Services Regulatory
and Compliance Practice Group. JoAnn has extensive litigation experience
in state and federal courts, successfully defending creditors against claims brought
under the Federal Fair Debt Collection Practices Act, Fair Credit Reporting Act, and the Telephone
Consumer Protection Act as well as the state consumer protection statutes. She provides regulatory counsel and consultation
to numerous financial institutions throughout the country. JoAnn is the immediate past present of the
National Creditors Bar Association or NARCA. Thank you both so much for putting together
this presentation. Please take it away. Thank you for having us. And we’re hoping this is going to be a bit
unusual in that we’re going to be having a conversation as opposed to a —
We found that we get along really well. We agree more than we disagree, which is good. Which is good. And we’ll try not to be repetitive. We really certainly want your comments as
we talked through these issues. So again, thanks for giving us the opportunity. We’re trying to figure out how to change
the slide here, which is hard. Yeah. Oh, I got is. So, you know, we’re talking a lot about
technology and in this slide I really made a mistake here. It should be technology (the lack thereof). There really is very little technology going
on in the debt collection space. And why is that? Several reasons. As we all know — and just for brief background,
I will tell you — and Director Cordray is not here, but I’ll say to CFPB staff, industry
is really happy that you’re thinking about regulations. Because this has been an industry that has
been — I wouldn’t say unregulated, we have been regulated. We have state regulators and there’s been
numerous court cases that have set policy about how the industry does their business. But for some reason in 1977, when they enacted
the FDCPA, Congress had a beef with the FTC; for what reason, I don’t know. And they specifically did not give them rulemaking
authority. They gave them some enforcement authority
but no rulemaking authority. You look at other agencies, this was a critical
mistake. So thankfully when they CFPB came around,
that FDCPA rulemaking authority was transferred over to the Bureau. I think we’re obviously heading in the right
direction. But we have a statute from 1977. Think about 1977, we had no faxes, we had
no phones. Well as I was joking, we were talking about
this; in 1977 my grandmother still had a party line. And I’m sure some of the young folks sitting
here don’t even know what that is. Exactly. Right. So I mean, there was just no conception of
how people talk to one another so we’re really dealing in the dark ages here. And as you can imagine, the Act itself does
not address technology, alternative ways to communicate, other than a letter or phone
call. And in this day and age nobody really sends
letters anymore. If they do, who knows if they’re reading them. I have a landline and the only reason that
I have a landline is because I want to get my Comcast triple play so I can have my internet
and my cable. But I never use my landline. I use my cellphone. And cellphones are particularly not addressed
in the Act. As I said, we have all these changing modes
of communication. The question has always been, as the Act is
developed, and certainly as we’re walking through these rules, what is the appropriate
ways to communicate with consumers? I think that the outline makes some interesting
overarching themes; and I think some important themes, and that the intent of some of the
proposals is the control to the consumer of the rhythm of how the communications is going
to be made. And how the consumer can control how they
want to communicate with debt collectors. I think that’s a really important discussion
to have. I think it works both ways, but I think that
is the important discussion. But I will say about the outline, while it
talks about emails and it talks about text, there really is no regulatory scheme on how
to do that. And an industry that has been really fraught
with a lot of litigation and a lot of potential liability, we are really looking for, what’s
going to be the regulatory scheme to move us into the 21st Century. One of the things we talked about a lot is
just the very notion of what’s a communication and what’s a writing? You know, is it text; is it Twitter? Right. There will be some that we haven’t thought
of that will come out in five or six years. And currently, the state of law is made on
a case by case basis, jurisdiction by jurisdiction, and a lot of conflicts. There is understandable trepidation by the
industry to jump into technology, not quite knowing what is going to happen in this state
or this federal court or related to that. There really needs to be some guidance here,
and some guidance that isn’t already obsolete, about how you define these kinds of communications. I agree. I meet with clients all the time who are looking
at technology, looking at texting, looking at emails. I have to be very conservative in my approach
a lot of times because I say to them, do you want to be the test case for Class Action? You know, look what the potential exposures
is. With all the money that they’re spending
on compliance, that is a real consideration. Some data from DBA international, which is
the largest association of debt buyers; when they did a survey in 2003, I believe, leading
up to the AMPR, that 68 percent of their responders indicated they don’t use technology, as
I said, because of uncertainty as to compliance with applicable laws. So it is a big issue. Here’s just data from ACA International,
which is American Collectors Association. We submitted this in SBREFA, some of our comments
in SBREFA. As you can see, letters and telephone calls
are almost 100 percent of how the industry communicates with consumers. Email is at 31.7 percent, and I will tell
you that is because if there’s some talk with the consumer, and they say yes you can
email me. It’s getting better and better, but there
has to be that letter and phone call first to get to that point. Text is minimal. I think the issue of text is addressed in
the SBREFA because of usage issues and what it could potentially cost the consumer. So that’s a big issues. It has not been embraced by the industry whatsoever. At this point, I should say. In preparing for SBREFA and some of the folks
that I work with, we’ve talked a lot about technology in our preparation. And I was always interested to know how is
technology being used today. And a lot of companies are developing portals. And they’re using portals in a lot of different
ways. Obviously, I think one of the best ways to
use a portal would be to dispute. A consumer could come on explicitly say what
the dispute is. You have a record of it. It helps keeps the dispute logs. It could also show, you know, if the dispute
has been resolved. I think the CFPB has used technology for their
dispute portal and it’s doing very well. But about 40 percent of the, at least, ACA
members have portals; 60 percent do not. I think that is a factor of the size of the
agency and the amount of resources that they want use. And then related to that then is to find ways
— and Jim just mentioned maybe one possible way. But to find ways of when you have that portal
you have that trail of information. If this debt gets sold, that information can
easily go with it. And right now we have various platforms and
technologies that can’t speak to each other, which makes the transfer of information incredibly
difficult. Exactly. I will tell you some members of ACA and industry
participants are using portals for payments, obviously. One agency, who was actually a sir, talked
about the portal that he used for his agency. He just has a portal and the consumer can
log on once a week, once a month, once a year. Any payment that they want to make, assuming
that there’s no dispute, assuming that they acknowledge the debt, they can make a payment. They make their own payment terms. They want to pay $5, they want to pay $100,
but he has that capability. And he said it has worked very, very well. So there are people thinking of ways of doing
differently, but there’s so much trepidation and hopefully we can encourage more of it. I will just note that the Bureau has not been
very encouraging for technology. Obviously in the student loan services best
practices that was a big issue. There are just a couple quotes from the Bureau
at certain field hearings, acknowledging that technology is important. It’s just, you know, we’re using technology
to get a loan. We’re using technology to buy a car. We’re using technology for mortgages. Somehow, the minute the loan goes bad the
technology somehow is going away. Not quite sure why. This is kind of my laundry list of issues,
not meaning to be any solutions. But things that consumer groups have thought
of and things we’re concerned about. We really acknowledge that one of the major
issues with the Act is — to bring it into the 20st century, not even in the 21st, but
— is modernization. We also know that it comes with a whole lot
of concern. The Bureau has acknowledged the fact that
many people’s emails are their work emails, and clearly you don’t own your work email
and that’s a privacy issue. But from the standpoint of industry, it might
not always be obvious, but also people use each other’s emails. It creates that kind of concern with kind
of data banking, data trolling and all those words I don’t know. Who can get access to that? What things get triggered by an email to my
account about a debt? Does that cause me problems somewhere else? Do I start getting other kinds of spam? That kind of information. Clearly, while most of my clients use cellphones,
their lives are there cell phones; I have always advised my students if they want to
reach their client they need to do it in the first two weeks of the month, because the
prepaid money runs out in the last two weeks of the month, and then we start over. There’s a real concern calls to cellphones
and those things costing money. Or remotely access checks and those kinds
of things automatically going into accounts causing problems. And then the flipside of technology. This will probably go away at some point in
time, but right now if everything is tech base, if all your resolution solutions are
tech base, you’ve leave out a lot of my clients. A lot of my clients still don’t have Internet
access. I’ve talked about my mother numerous times. My mother can no longer access her bank account
essentially because she refuses to even pick up a computer. So now I have to check her bank because she
can only now get things online. She still goes to the bank and withdraws all
her money and walks around with cash. There are elderly people like that who won’t
ever access things that way. The other problem we have is accountability
on both sides of the issue, right. How in this medium does the consumer know
that this collector is legitimate? You know, we’ve all had emails from the Saudi
Prince and whatever. And how do the collectors know that this is
who they say they are in medians where pretending to be somebody else is almost the norm. We’re not really trying to raise solutions
here; so just to bring up all the complicated problems we see with going into technology
era even though we think this is where we have to go. I would like to add to that. I think that’s where the regulatory scheme
really is helpful because when you set the best practices and you say this is the right
way to do it, it will help consumers identify that when they do get that email or that text
it is coming from a fraudster. And there is — admittedly, I mean, a year
ago, there was some of us who were at a FTC symposium down in Texas, and they were raising
the issue of fraudster in debt collection. I was like, “I don’t have any idea what
you’re talking about.” Well, within that last year it’s become
well aware. There is this — you know, I don’t know whether
it’s coming from another country, but there is a lot of electronic fraud information in
the debt collection space that we’re really starting to see. Delineating what’s good and what’s bad is
going to be very very helpful for both legitimate debt collectors and consumers. Again, it goes back to that issue of a consumer
knowing what debt is being collected and sort of having some chain of the information of
who has it. That way when the guy calls with the fake
payday loan and says, you have to pay us back immediately, you have some sense. And that’s one of the most common ones that
we’re seeing, is the fake payday loan. They have some sense of, wait, I don’t have
a payday loan with you. Yeah. Recordkeeping. And we talked a lot about this so we’re
not going to go to this. I think it’s fair to say we both share the
concerns that there needs to be away to substantiate the debt and keep the train of title in all
of those things. But that the debt collector can only pass
on what they’re given. And if you don’t focus on requiring them to
be given information, they can’t pass information on. I think again we talked a lot about it. We can maybe in the discussion so people —
Maeve, getting back to your point from before and transfer information, conceptually I think
we can all agree on that. I think facilitating and executed on that
is going to be tremendous because, again, you have so many different players. Bank of America system is different than Discovery
system which is different than somebody else. How are all these institutions and companies
going to be able to talk to each other? I know there’s been discussions about having
one — almost like an MLS type of, you know. When mortgages are transferred, I mean, they’re
in one — and that created problems too. All I can remember is MERS. Right. Well. That’s true too. But, I mean, it is such a broad discussion
and is going to require an infrastructure that we absolutely do not have now. And that’s how we have to figure out what’s
that infrastructure going to look at. Maybe, I never even thought about blockchain,
but maybe that’s a step in the right direction. Yeah. We wanted to move on to talk about — actually
I put down two areas that I think are going to be sort of a growing concern. I have to say that Chi Chi reminded me of
a third yesterday, so I will just throw that out to begin with. But I think just sort of as an introduction,
it’s been mentioned before, but debt collection continues. I took this from your wonderful report before
I knew you were going to be sharing it with everybody. Debt collection is one of the largest areas
of complaints, both for the CFPB and FTC. I think if you check most Attorney General’s
websites you find that’s the same. But when you look at the aggregation of mortgage
and student loans and debt collection, you see that together they are huge. We really wanted to talk a little bit about
student loans, mortgage and then the third that I’m just going throw out there is recently
the IRS has authorized third-party debt collection of IRS debts. Some of the same issues that we’re going
to be facing with student loans, we’re going to be facing with the IRS debt. Consumers have certain rights like Offer in
Compromise. For Offer and Compromise they won’t be able
to do in the system, but things like being able to fill out a form to say they are currently
uncollectible; which there’s questions about will debt collectors be informing people of
that and letting them know where they can find these forms. Some of these reasons we picked these two
areas, first of all, we see them as growing concerns. But also they’re frighteningly similar. In both areas of the mortgage and the student
loan, we all know that the paperwork is very confusing. Tracking who owns your debt and how much your
debt is, is very confusing. There are different options to cure your debt
and solve the problem. And this is where I say it may become similar
to this IRS debt, but there is not a comprehensive scheme about how to do that. And there’s concern that when someone is in
debt collection, is that debt collector motivated to say you, hey, you can go into income-based
repayment. Or, hey wait, you should be able to get a
loan mod here, or something. Especially — again, we’re thinking of this
future driven, which would be post HAMP, which is expiring at the end of this year. There’s a lack of adequate paper trail, we
all know that. And then there has been massive servicer misconduct
and abuse that’s been well-documented. I don’t need to talk about it, but that’s
why we see these two as big areas of concern. Taking from — and I don’t think I cited you
guys, but this is coming from the CFPB report. There was a 75 percent increase in complaints
about student loan collection in the period between June and August 2015, to June and
August 2016. The Department of Education is reporting more
than 8 million federal loans in default, and you can see this information. And as we talked about earlier today, it’s
very difficult to get information about your loan. It’s very hard to get information about
the identity of your lender. And you can often have multiple loans with
multiple players. In other words, you get a loan every semester;
you take a semester off so you might have three loans with this lender and two loans
with this lender. I remember when my son graduated. And now it’s been ten years ago. Just trying to figure out who all his loans
were with was massively confusing. The kinds of complaints that come in on student
loans, again, thanks to CFPB for this research. Most of the them relate to not being able
to get income-based repayment. And that’s really where we have a concern
about these as they go into collection. Because what all of the research is showing
is that the servicers — and then again some of these do end up actually with debt collectors,
especially the state ones — but don’t pass on that information. Or don’t know that information or don’t quite
know how to do it correctly. And again, we had the same issue with mortgages,
right. We have some servicers with a lot of information
and some servicers with bad information. They give incorrect information. I’ve had many clients being told that they
can’t get income-based repayment or incorrect data. I think that’s really a training issue. It’s a real problem on both sides. First of all it’s a complicated process that
needs to be simplified. I think the Bureau has identified that. You’re looking at servicers. There’s high turnover rates in servicers. You go through a period of training for whether
it be a call center or whomever, and then you’re coming back four months later and
it’s a whole new group of people again. And so there’s a lot that needs to be developed
in the income-driven repayment, which I think is really the answer to all of this but, again,
it’s an implementation problem as I see it. Can I ask a quick, clarifying question? Sure. When you talk about the number of the complaints
increasing, I’m just wondering can you give us a sense of the magnitude of the problem. What was the number of complaints in 2015? I should note there were some changes in the
methodology of the kinds of complaints that were submitted. So that would need to be taken into account
as you think about these numbers. What kind of numbers are we talking about
in terms of — It’s actually in the materials that we were
given before, for these meetings. It’s in the binder? It’s in the binder. Okay. Great. I don’t off-the-top of my head remember what
the numbers were. I think the point we wanted to make, though,
is that they have been steadily increasing. That’s why we’re seeing this as sort of
the looming problem going forward when it comes to debt collection. We can go kind of quickly. My own perspective on that is my sense is
that some of the changes in complaints volumes, at this point in time, would be attributable
to increasing awareness of the CFPB brand. It doesn’t necessarily indicate that there
has been a deterioration in practices in some particular sector. It may mean that, but it doesn’t necessarily
mean that at all. We are seeing certain spikes and trends in
complaints and we can identify problems from those. But I would caution whether an increase in
complaints in a particular market necessarily means that things are getting worse there,
as opposed to just we’re hearing more about what is already problematic. I may have misspoken. What I was saying is there’s been an increase
in delinquencies, which may or may not — yeah. Exactly. That’s a different thing. There has been an increase in delinquencies
going forward too as well. This is just for those who might not understand
with the student loan issues that there are ways that you could cure default. And then after you do that, if you rehabilitate
the loan, it goes to a servicer and you might be able to go to income-driven repayment. Part of the concerns are that people are not
either being told this or mid process maybe gets transferred or something. Again, with the similarities to mortgages,
you get transferred and start all over. That kind of thing happening is things we
are concerned about. So in other words, if it gets transferred
to a debt collector and your half way through this process, have you lost everything you
did? Do they even know that they’re supposed to
continue? Do you even have those options or is that
point its collection or nothing so. Can I ask a question? And maybe it’s more of a comment. Either way I apologize. But wondering about just the training issues. So Joann, you mentioned training issue, I
absolutely get that. Then I’m wondering about — I mean, this section
of our day is also to talk about technology in this field. And some of that technology could be made
available for becoming a required part of training or triage. I agree. On the mortgage side of the house we have
dealt with folks in one department — because department names keep changing — who tell
us that they cannot see a variety of screens much less can they input changes into a client’s
file, given the level of approval. It’s like calling the CIA. Do you have security clearance to make this
change for my client on their debt? So I’m thinking about CFPB as credential regulator,
seeing how operations are done in figuring out how they could be done better for the
collections piece. And I’m wondering if you have examples of
good triaging, innovations in triaging software or approaches to it. Well there’s a couple things going on here. Especially from the student loan servicing,
mortgage servicing, original creditor. A lot of when you say, do I get the clearance,
that’s client driven. There’s got to be some sort of connection
between the servicer and the client to agree on what access they can have that. Well, I’m talking about first party creditors. Right. But a lot of first parties use servicers. They may not necessarily be a debt collector
because they’re just servicing the loan and it may not be in default. But there’s not always an equal playing field
between the servicer and the creditor so that’s where you get into that problem. Technology-wise, it’s hard. Because, again, you have privacy issues. That’s the biggest concern. I think in some ways, aside from not a lot
of clarity in the regulations, is the privacy issues. Cyber security, you’re dealing with — Will’s
shaking his head. I mean, there’s a lot of constraints on what
we can do. I think that the industry is trying to work
through them, but also terrified of potential liability if we get it wrong. Interesting thought. I don’t have an answer to that question. I think it’s the tech people really need to
— because again, this is something we saw in the mortgage world as you well know. Right. It wasn’t even just if you were in default
you had to talk to different people, but if you’re in default and wanted Option A, you
have to talk to this group of people, and if you want Option B you have to talk to this
group of people. And people in Group A don’t talk to people
in Group B. And we’re in some sense talking about first part, but we are seeing more and
more student loans being sold off to third parties, or at least contingency collection
kind of things. That’s really what could be an increasing
problem. They tend to be state issues. One last question and then Kathleen. Sorry, I didn’t mean to take a turn at hogging
here. I think I’m hearing — and maybe this question
for both Joann and Will. Is it externalization of the collections process
that’s creating a regulatory privacy problem? Is that what I’m hearing? Because it’s not something — you don’t
have in-house collections pursuing something so whatever coverage you have as to liability. I’m trying to understand what the privacy
issue is in this collection space a tiny bit more. When we are talking to people who are contractors
for the first party creditor versus in-house staff for. I think it’s a problem on both ends. I’m sorry, Will. Go ahead. No. It is. It frankly cuts across the data security piece
around what, kind of, the requirements and what we need to do to safeguard what’s going. And how we create that data is, frankly, a
concern and something that we’ve had to work through. That’s clearly a challenge in how we deal
with it in an obligation that obviously we have. I think this could be a little bit of a red
herring when we’re talking about student loans. Because my understanding — and I wish Seth
was still here — is that as soon as the loans go into default, they’re pulled from the
servicer and they go back to DOE and then they go into collections. Unlike in the mortgage context where the servicer
has a relationship all the way through. With the federal loans the servicer who’s
doing the collection of the monthly payments doesn’t have the files anymore once they go
into default. In which case and maybe even —
But that’s the federal ones, but we’re talking broader than that. Yeah. I realize that. But the great bulk of student loans are federal. I’m only talking about federal. I think it’s a red herring for that. If indeed DOE is putting in place this platform
that where it sort of one place that borrowers will go to get information, and it will, supposedly,
streamline things, there’s no reason — I can’t imagine — that they can’t tie on the
collections piece to that as well. On the federal level in terms of technology. You would think. Moving onto the foreclosure issues. I think about three to five years ago the
buying of deficiency judgments and nonperforming loans was one of the hottest markets out there. That may have died down a bit, but you figured
these people have bought these now and not they’re going to start trying to collect
them. I know that I have seen a big uptick in the
collections on deficiencies. Now deficiencies aren’t available everywhere. Interestingly, though, people don’t know this;
a debt collector that I work with often, who I have great deal of respect for, told me
he would not accept a deficiency mortgage judgment for collection because, “the number
I’m being asked to collect bears no resemblance to what’s actually owed.” I think part of the reason for that is that
in many, many states there is no actual record of what’s owed. Some states, after you get a mortgage foreclosure
and there’s a sale, if there’s a deficiency judgment, you go back to the court and confirm
it. But in many states, like mine, the sheriffs
do the sales. You know, they have a sale price, there’s
a judgment price, they never get reconciled together, so the consumer doesn’t know what’s
owed. And in my experience dealing with loan servicers,
there seems to be an extreme lack of understanding that once a judgment is a judgment, you don’t
get to keep adding things to it. So there’ll be a judgment amount from the
court and then they’ll decide to wait two years to sell the property. And suddenly they’ve added inspection fees
and maintenance. I mentioned yesterday that my client got a
letter yesterday from a house that was foreclosed on six years ago that had sold. And he’s actually moved into a new house. The servicer of the loan, that actually is
now owned by the bank, was sending him a bill for maintenance. The house was foreclosed on six years ago. There’s this ongoing lack of understanding
on these things. There’s a lot of confusion in the market between
judicial and non-judicial, when you can get deficiencies and when you can’t. Many people were told not to worry about deficiencies
and told by lawyers representing consumers. Oh, don’t worry about deficiency judgments
nobody ever collects them. And agreed to things where there are deficiencies
where now people are collecting them. And many people never understood. There were some short sales done for periods
of time there where there actually are deficiencies attach to them and consumers didn’t realize
that. I think there’s a whole area out there where
there’s an awful lot of confusion on that is going to start to rear its ugly head, that
has a lot of the problems that we’ve been talking about. All right. We just want to talk about a couple other
issues of concern that we see that are tied in both to the industry as a whole and some
of the outline of proposal. And this is probably where we disagree the
most. Not really. Yeah. Some. That’s true. And we did. We had our hottest conversation. That is true. From the standpoint of consumers, me personally,
I think it’s very, very important when we’re doing rulemaking to look at deceptive litigation
practices. I know that many in the industry feel that
this is beyond the scope, and I’m going to let Joann speak for herself on this. But I do think that because that’s becoming
a preferred method of collecting, that this needs to be really looked at. Some of the practices that I’ve seen that
I think are deceptive — obviously robo-signing, I think people have talked about that. One of my favorite is what I call the secret
account number. I actually have an affidavit from a very big
bank that they submitted into court. Because we were questioning how the account
number, for what they were collecting, my client had never seen that account number,
she never had an account that — and we were told it’s a secret account number because
once the account gets charged off they change the account number. And we can’t tell you what the original account
numbers was for privacy reasons. Now I don’t understand why you can’t tell
the alleged owner of the original account number. So there’s no way for the consumer to match
their account this account because the account number is secret. And they actually did an affidavit that they
submitted to the court that this is our practice. The account numbers or secret from the account
holder. So how do you ever know if it’s legitimate
or not? One of the huge issues that we have a problem
with — and I know the Bureau can’t regulate what happens in the court per se. But I do think, just as they’ve done with
mortgages, where we’ve said there’s certain procedures you have to follow before you can
file to foreclose, I think that they can say there’s certain things you need to do before
you proceed to sue. Such as making sure there’s evidence that
this is the right person and this is the right debt for that person. And that there’s some way to substantiate
ownership. We were talking briefly about disclosing on
the statute of limitations. Well, my personal preference would be — as
Paulina said — that you could never collect on a debt that is beyond the statute of limitations. At the very least we should be sure that — I
think the proposals currently would have you to be able to wave the reinstatement of the
debt — revive. Sorry. We do still have many consumers being told,
you know, pay me $5, good faith, just to show it, and not realizing the reviving the statute
of limitations. I worry about disclosures, you know, written
disclosures all over. Because at some point you get so many disclosures
that you’re not disclosing anything because it goes over people’s heads. You’d think the act in even asking someone
to do that should be considered deceptive. Because really the only reason you’re asking
them to do that is to revive a debt that is no longer able to be revived. I guess with deceased borrowed, from a consumer
standpoint, what I’m very concerned about is, the waiting period is fine, but if — again,
you go back to that, if the widow doesn’t owe the debt they shouldn’t be contacting
her at all. And I say widows because it’s usually widows
that we deal with this. I think that in some sense by the waiting
period almost implies that after that’s over it’s a free-for-all. I guess it’s going to depend on the careful
wording of that. These are just some of the issues that, as
a consumer advocate, I flagged. And I’m sure there’s many more, but just
to get the discussion going. Go ahead. Thank you. You know, litigation, I think, is a slippery
slope when it comes to debt collection because remember that lawyers are state licensed. You know, I get my bar from a particular state. And I follow particular rules of civil procedure. And there may be instances what the rules
of civil procedure may conflict with federal law. There are many states — Pennsylvania is one
of them — where they have FDCPA-type statues. There’s one of eighteen where they have a
FDCPA-type statue that applies to first parties, applies to creditors. So all the FDCPA requirements of harassment
and abuse are there. However, the minute a complaint gets filed,
or pleading, or discovery or settlement starts, those statutes exempt attorneys because that’s
when the states kick in. I’ve been a believer that that is the appropriate
way to do that. Because I think we are licensed, we have to
answer to our judiciary. There’s been a lot of caselaw out there that
says — there was actually a case in Georgia, there was actually a case in Pennsylvania
— that went after an attorney for unfair trade practices. And they found that they could not do that
because that was up to the judiciary, who are the supervisors of their license. As an attorney, not only do we have to apply
the laws of the state and federal government, but we also have our Rules of Professional
Conduct that we have to abide by. And one of them is we have to be a zealous
advocate for our client. That gets a little muddled when we have to
also care about our adversary. And in this case our adversary is consumers. So when we talk much statute of limitations
disclosures, it’s going to be very hard for attorneys — I would say if an attorney
gives a statute of limitation disclosure to their adversary, in a way they have given
their adversary a defense. That would technically be malpractice if you
want to take it to the next step. I think there’s very, very blurred lines that
we have to think about. Way of historical background. In 1977, when they enacted the FDCPA, attorneys
were exempt. They were not included in the Act. In 1985, they were put back into the Act without
changing any other aspect of the Act; treating attorneys exactly like debt collectors, which
they’re not. I will tell you that when we make a call or
send a letter, or communicate with the consumer before we file suit, absolutely have to comply
with the FDCPA. But the minute we then — I mean, I think
we can even argue, when we are retained, there could be a difference. But putting that aside, consumers need to
be treated in a certain way and the FDCPA mandates that. But the minute a pleading is filed or we enter
it into the court, I would say there are different circumstances there. So when we talk about litigation disclosures,
that also too may present itself to be a problem; because there’s usually a conversation going
on with the attorney and their client about whether they want to sue. But as we all know, when we all clients, clients
change their mind. Things happen. People go into bankruptcy, they die or maybe
they decide, you know, I just don’t have the stomach to file a lawsuit. Things change. I think it puts the attorney in somewhat of
a difficult situation of those disclosures are mandated. I agree with Judith about the deceased barrowers. I think that has to —
I will say, we have seen a lot of abuse of the legal license by attorneys around the
country in this area. A shocking amount of it from my standpoint. I just want to make sort of my counterpoint
is, the fact is that at this point in time attorneys are covered, so I think it’s fair
for the Bureau to consider activities of an attorney, even if they’re acting as an attorney,
in the active litigation. Obviously, that’s for them to decide. But it is in the black letter of the law right
now. Josh has two cents to throw in on what’s
an interesting point and counterpoint. Is it all right to jump in here with a comment? The next slide is questions, I think. I just want to say a couple of things on this. Certainly from our long experience we’ve
also observed a lot of abuse by attorneys using the courts to collect in a fraudulent
manner. There is — and, in fact, this is in this
class action that the CFPB weighed in an amicus brief. It found that attorneys filing with the court,
false affidavits about a debt, could potentially violate the FDCPA. But just coming back to a comment that Judith
made in terms of thinking about the rulemaking going forward. Even though it gets complicated once you get
into the rules in the courts, and state-by-state, certainly the CFPB should consider a strong
rule that goes to what kind of account-level information an attorney, or I should say a
third-party debt buyer, must possess at the point of filing litigation. Because we’ve seen over and over and over
again that attorneys, many of which are in joint ventures with the debt collector, so
they’re not operating really as independent attorneys, or filing false affidavits with
the court and using the court system, when in fact they’re not having that information. So it’s really, really critical. I have to say, as an attorney, filing lawsuits
— which in most other areas of the law, attorneys would never file lawsuits based on the information
that a lot of these attorneys have, that are filing for third-party debt buyers. It’s pretty shocking, as an attorney, to see
the lack of information that they have in filing lawsuit. It’s all to say that I think it’s an area
where a strong rule about documentation substantiation could go a long way. Because a lot of the state courts are not
like the New York courts; it can be an old boys network. And when an attorney who’s coming in every
day, into the court and filing papers, usually that’s not questioned. So without interfering in the state-by-state
court process, the CFPB could go a long way in assuring that at least that attorney must
have, on hand, the kind of information before filing a lawsuit that an attorney that files
a lawsuit in any other area of the law would be expected to have. Let me just comment on that for one second. I agree with you and I think a lot of states
have changed their laws, especially New York, as to what is the sufficient amount before
filing a pleading. But there are still a lot of states out there
that it’s just notice pleading. Strong rules are going to be important for
substantiation. I don’t know if the Bureau is going to be
able to dictate how pleadings are going to look, or what information can be included
in a pleading, certainly about what they should review before a lawsuit is filed. Maybe that. But I think that we get into the nitty-gritty
of the pleading, that’s going to be up to the states. And I think states are looking to New York,
California, North Carolina, New Mexico. There’s a ton of states right now where there
has been changes in rules where the requirement for substantiation, even at the pleading stage,
has been there. I think that was my point. The Bureau is not going to be able to regulate,
and shouldn’t regulate, how many days after you file you do XYZ. You know, the rules of proceeding. But they can, just like they’ve done with
mortgages, regulate what happens before you file; and what information you have and notices
you give and that kind of thing. Let me thank you both are working on this
presentation, putting this together and getting this conversation out there, really informative. Before I take a question, I just want to thank
you guys. Okay. Chris and then Kathleen. I want to thank you for taking the time to
turn it into a conversational piece instead of a presentation by presentation. I enjoyed the way you did that. Just a couple of quick things. One, on the time-barred debt issue, that was
another piece that North Carolina dealt with, with the debt-buyer law. It was not just the substantiation, which
was very important, but what it did was it said that filing a lawsuit — it turned — sorry,
I’m stumbling over this. Prior to the law, the time bar was a defense
to the claim. They made it a bar to the claim. So basically showed up at the courthouse and
said if it’s time-barred don’t even bring it. Recognizing that, and still the vast majority
of these cases end up with a default judgment. Most of these folks aren’t going into court
with an attorney to be able to adjudicate the rights. The reason for all these protections, for
having strong substantiation rules, for having it change from it being a defense to the suit
to having it be a bar to the suit, was recognizing that most of these folks are not going to
be able to get representation to actually be able to effectively litigate their rights. The more we put in that requires people to
have to be able to fight through that and show a court, hey this was a reasonable or
this didn’t work, is going to make it more difficult. The courts are looking for some of that same
kind of certainty. They want to know what’s a reasonable level
of substantiation that we need to have. So certainly, the courts in North Carolina
looked to the statute and then worked to try to figure out how to implement that. But they wanted to be able to be pretty specific. The more that there’s this sort of like,
if this, then this, but then this and then this, the court sort of throw up their hands
and say, you know what, we’re going to have this real short baseline here and then anything
else we’ll figure it out as we go along. Again, presuming that people are going to
be able to actually go into court and make those arguments, and they’re just not. Because they can’t get representation to
do it. Kathleen? I’m sorry. I’m sorry. If I could just interject for one moment. I didn’t touch on this when we were talking
about time-barred debt, focusing instead on the disclosure. But one element of the proposal under consideration
would actually ban suit or threats of suit on time-barred debt similar to the North Carolina
statute. That would be great. Just thought I should mention that. Thank you. Kathleen. I have a couple of quick thoughts. One is that there’s an article by a professor
at Southern Methodist University, Mary Spector. Are you aware of it? Okay. She had her students go and look at the filings
and saw exactly what Director was talking about. The other thing is — and this, I know, can
be kind of tricky and separation of powers issues and all that. But the judiciary bears some responsibility
here. I know in Massachusetts we have a huge problem
where the courts are just entering the default judgments when people don’t show up. And there isn’t adequate documentation in
the material to support any kind of judgment. I don’t know if this is a place where CFPB
could, once the new rules are out, sort of do presentations at judicial conferences. Just thinking that the judges might want to
know what the new regs are as a way of sort of goosing them. But they need to make sure that before they’re
entering default judgment that the attorneys have complied with the law. We have done some of that; we could do more. Your old friend, former CAB member, Judge
Rizzo, is eager to help us with that. And we’ve had discussions with the states
in terms of some of the reforms that they have developed that I think have been informative. Let me just say as a general principle line
behind this whole project that our team has embarked on, and I think it’s implicit in
what both of you had to say about the background of your presentation; one of the flaws in
the FDCPA was that for forty years there was a, sort of, hardwired statutory set of provisions;
where all the further development and nuance around those provisions had to be developed
through litigation in courts, and really could hardly be done anywhere else; except sometimes
for the FTC could — actually they did a fair amount. What that inevitably means is you’re going
to have a lot of issues that are tough issues, close issues; where different courts are going
to decide things differently. And suddenly there’s kind of a mess on your
hands in terms of what guidance do you give to clients. When I was Attorney General I saw the worst
situations where courts were now in disagreement and it’s going to take a while for that
to resolve itself. And it’s very hard to describe what the
right answer should be in the meantime. And the whole premise of doing a rulemaking
is that we should be able to nail down, with specificity, a lot of those things so that
at least now is going to be clear. And it’s going to be one way rather than
another and everyone will know it. Now whether we’ll get those answers right
is another big question. Everybody always says they would rather have
an answer either way, but sometimes they don’t really mean it. We’ll work on that and figure that out. But if I’m hearing — and I’m hearing in echoed
in your comments here. If we deal with a lot of these issues with
mushiness and not specificity, we’re not necessarily advancing the ball much beyond
where it may be now on those issues. For us to push through to get to more definitive
answers is part of the whole reason to be doing this. Now again, degrees of confidence around those
right answers are always a hard thing to work through. But I think we’re recognizing that to some
degree. And the fact that you see the outline of proposals
for the SBREFA, that is by definition a less specific document because it’s more preliminary;
but by the time we finish with this, we should be much more specific and clear if it’s
going to succeed in part of the aim. Other questions, comments? I want to circle back. Opps. Sorry. Who did I miss? I’m feeling a need to get her in the conversation
because I cut her off earlier. Sorry. Chi Chi. Thank you Director. I wasn’t actually planning to speak. But since Judith raised my name with respect
to the IRS issue, I thought I’d throw it out there because I think this will be an
important trend. The legislation from, of all things, the highway
bill from last December, not only allows, but mandates that IRS placed all inactive
tax receivables, which is defined in the statute as basically anything older than three years,
if an IRS collector is not assigned to it or if there hasn’t been a contact for over
a year, mandates those debts be placed with private collectors. That’s a huge number of accounts. Those private collectors, one of the ones
selected by IRS had been fired by the Department of Education for lying to borrowers. So we have some concerns about how this is
going to be implemented. About 79 percent of the borrowers, according
to IRS data, are going to be under 250 percent of federal poverty. If you think about it, these collectors are
going to be calling consumers — I bet if we took a survey in this room, at least a
third of the people have gotten those scam calls. Where they say this is the IRS and you owe
us money and please go down to Western Union. Well now you’re going to have real collectors
calling about IRS debt. And this is just going to increase the confusion
and difficulty out there. Chi Chi this is after I’ve told everyone
the IRS never calls you. And after the FTC. Is it clear that they will be calling? Maybe they’ll be writing letters. They’ll be calling and using cellphones. Yes. And they’re allowed to robo-call under the
law. And we actually ask the IRS just not to allow
robo-calls. Not phone calls, just robo-calls and they
gave us a big fat no. Let me ask a different question, and I’ve
been asking about it internally. I had some background in debt collection myself. I was with the county treasurer; we went to
collect delinquent property taxes and we were working with businesses. I was aggravated by businesses that had not
paid their property taxes. It didn’t feel right to me. I didn’t know much about debt collection
back then; I know a bit more now. And we were the government so we weren’t
necessarily constrained by all of this law. But what we sort of understood as a sort of
homely matter of principle was, if we were going to threaten to do things to collect
debt we needed to follow through on it. Everything we could think of to do we would
do and then we would follow through on it. We would tell them we were going to contact
the Better Business Bureau if they didn’t pay their debts; some of them paid, others
didn’t. We would tell the Better Business Bureau and
that would be whatever it would be. We said we were going to let Dun & Bradstreet
know that they weren’t paying their debts. Some of them paid because that mattered to
them, others didn’t and we would follow through. We said we were going to tell all the local
banks, et cetera. One of the things that I find that debt collectors
will do, is if they have an option to do something to people that people might care about, they
will then tell them they’re going to do that. And that will be a mechanism for leveraging
collection. And there’s nothing wrong with that. So they’ll threaten that they’re going
to bring suit against you. Or they’ll threaten they’re going to report
it to credit Bureaus. One of the things I’m not clear on is, there
seems to be a further threat that lies behind all of this, I’m now understanding; which
is that if you still have a debt that they think you owe, and they’re no longer going
to collect on it, they could potentially tell you, and maybe they are correct, that they
will have an obligation to report it to the IRS on a 1099 and you will then get a tax
bill on that debt. Is that correct? Are they required to do that with the IRS? To report a 1099? And under what circumstances, if anybody knows
offhand? If a debt is uncollectible or the client doesn’t
choose to collect anymore, there’s no more communication, if it’s over $600 the debts
forgiven. And there could be a 1099 issued to that debt
collector. Are they required to do it? It’s up to the creditor to make the decision. For a third-party debt collectors, it’s
not their debt. They don’t issue the 1099. It would be up to the creditor to make that
decision. So they would have to push it back? A debt buyer would be the creditor? Right. The debt buyer, they would ultimately make
the decision. So won’t debt collector use this as a collection
mechanism? Won’t they always want to say that they’re
going to do it? It’s interesting that you say that. Maybe City and Discover and some of the other
banks that are here might disagree with me; but for my clients who represent financial
institutions, they’re making them say that in the letters. Personally, I don’t think it’s a great idea. Who is making who? The creditors are making the third-party debt
collectors put that in their letters. I have had fights with my clients to say,
don’t do that. They’re like, no that’s what the client
tells me to do. Because it’s not their decision to make. It’s the creditors’ decision to make. But if the creditor is telling them to put
that in the letters, the creditor is making that decision, aren’t they? I don’t know whether they’re ultimately
doing it or not. I don’t know. They’re saying that’s what they want to
do. But I don’t know when the account goes back
that’s what the creditor is going to do. So you’re saying the debt collector is telling
you that the creditor is telling them to put it in their letters, but you’re not sure the
debt collector is accurate on that? I’m not sure that the creditor is accurate
that when the account comes back that they’ll ultimately issue the 1099. I see. You understand what I’m saying? Yeah. Could I just add that an additional problem
there is that — and we’re seeing this in mortgages quite a bit. Issuing the 1099 doesn’t mean that they
can’t continue to collect. So we’ll have somebody who go a 1099 — I
actually have somebody like this — you get a 1099, you declare the forgiveness of debt,
you do the whole tax thing. And then a year later it’s been sold to a
debt buyer so it’s no longer forgiven. Then the burden is on the consumer to go back
and do an amended return. Again, I don’t know if there’s any authority
here to do this. That’s quite pathetic. It’s very pathetic. But I mean, to me they shouldn’t be able
to issue the 1099, unless in fact they’re forgiving this debt and it’s gone. But that is not what happens. I’ll tell you what’s interesting, Director,
is there has been cases where the language has been in that letter and it’s found to
be a violation of the FDCPA. There was a recent case where the language
wasn’t in the letter, and the court found that that was deceptive because the debt collector
should’ve said that possibly it could have been. What’s occurring to me is that you can have
debt that is beyond the statute of limitations, beyond the ability to report it or have it
stay on your credit report; and yet you still, as a debt collector, you would have one more
mechanism of leverage over the consumer that sounds quite severe. We’re going to report it to the IRS and
they will make you pay tax on this. Which if your bracket is 30 percent then you
might well be persuaded to pay 20 percent on the debt to settle it. So they have one more round of getting at
you beyond all the rest of those protections that supposedly were going to kick in. That feels off to me. Maybe you can help us think more about that. Just related to the issue, now that you brought
it up. I’m seeing more and more 1099s which I do
think is a change. And there’s a real problem with accuracy and
a bigger problem with getting it corrected when it’s not. That is really becoming a problem. As I said, the ones I’m seeing are mostly
related to mortgages but I’m seeing actually —
I can imagine the nightmare. The creditor then reports it to the IRS. They’ve tacked some extra fees on just for
the heck of it. They’re aggravated by that former customer
anyway. Now the IRS has a number. In order to fix it, now you’ve got a triangle
conversation that has to go on; and I can’t imagine it’s a very easy conversation. Because, the IRS, their budget has been cut,
they can’t answer their phone these days. Also the original creditor’s response — because
I’ve had these conversations — the original creditor’s response is, well we charged
that off, we don’t have any documents. When you try to find out, like, you know,
the number I have is this and the number your reporting is this. The original creditor’s response is, well
we charged it off, we don’t have any. Which goes back to, again, my point that there
should be some record from the charge-off. I have a technology-based collections tool
that’s being used that seems to be problematic, which is remotely-created checks. Something that I think was intended perhaps
to facilitate collections in a positive way, perhaps for both the consumer and the collections
entity. We are working something — we have learned
that what happens can be that a remotely created check can go ahead and pass through somebody’s
bank account, and it’s hard for the bank to even identify that this is coming from an
entity who is no longer authorized to collect. Because the way that it’s coded when it
hits the bank, it’s impossible to identify it, except as being — they would have to
look at what’s coming through apparently, pull things up one by one, which they’re
loafed to do. The other problem we’re finding is — as
we’re drilling down in a particular case — is that everybody’s disclaiming responsibility
for having issued the RCC. This is a mortgage servicing case. So homeowner originally gave permission to
go ahead and make electronic withdrawals from the account. Cancel that permission and then was making
payments on his own. Made payments and then got hit with the RCC
repeatedly — repeatedly — even though he actually was up to date. So double payments basically happening. He’s paying and then then the RCC was hitting. Servicer is saying we didn’t do it. We have no idea where that came from. How is that possible? We’re still learning about this. But when we think about technology and collections,
I think about tracking and accountability for all people in the chain of collections;
including the consumer’s bank to be able to have easily identify who in the heck it is
that’s trying to access the account seems to be fundamentally problematic. Sorry, John. Go ahead. Maeve, are you being purposeful in excluding
ACHs? Yes. Thanks. I have a different question because the RCC,
remotely-created check, has come up in different context for us a couple times in the last
couple of years. I have a question for the bankers in this
room, if you know. Is there any current purpose really served
by remotely created checks? Are they an outmoded item that doesn’t really
— is there any reason for remotely-created checks to be sanctioned and to continue to
exist? Anybody? I will find out. I’m not clear that there is. But the one thing that I’ve seen is that remotely-created
checks are reserved as an option by entities that want to get you to agree to pay through
automatic withdraws electronically. And they are aware that they can’t, under
the EFTA, require you to do that as a condition of extending credit. But they say that because the remotely-created
check is the alternative. It gives them the argument, they aren’t actually
requiring you to do this because there’s options here. But it’s not clear to me it’s really a
meaningful option. It feels like a vestige of a bygone era. I see Neil and then Jim. Like earlier I was thinking that the educational
credit score may be a vestige of the bygone era too. I would like to hear more about that from
any of you who know. Okay sorry. Neil’s foregoing. Yeah? You’re going to go? I don’t understand — I can’t think of a
purpose right now that would be a commercial purpose that would make any sense. Helpful to know. It did at one time, but perhaps not anymore. I’ll also check to see. There was a question around the ability to
actually track what was coming through, who was doing it. Surely we can so let me — I’ll check on
that as well. Interesting. Thank you. Jim? Let me just give my point of view on that. I do quite a bit of advisory work for one
of the vendors. The check conversion or check electrification
space is actually quite a big market. I would respectively give a counter view,
which is, I could imagine quite a few scenarios under which that would be useful. Because unique to the US, and we have so many
— we are way behind in the US in electronic payments. There is great difficulty in simply getting
money from one willing payor to another payee today. But at the same token, a paper check is not
always convenient. I can imagine a lot of scenarios in which
you want to give — have an electronic document that has all the routing information of a
paper check, but it’s just in electronic form. I know several cases where those are used
today. Because people can simply say, look, use this. It’s like the equivalent of a template,
but it looks like a check and you just fill in the spaces. But then it has everything recognizable to
both parties. It does bring up that issue, though, that
you started out with, Maeve, which is, if you don’t attach the memo information in there,
or somebody doesn’t read it, then the whole system goes haywire. But the point is that there are a number of
use cases. And it’s really not dissimilar to what goes
on in a Walmart today, for example. It’s called check conversion. Where somebody walks in, pays with the paper
check, and the person says okay I’m going to just convert this into —
That doesn’t sound like the same thing as a remotely-created check. Does it? I thought a remotely-created check would be
something that could be created without your involvement. I think what you’re talking about — and I
see this sometimes with some of my bills — you write a check to someone, they convert it
to an electronic payment and then it’s cashed in that manner. I was using an analogy there. My sense was that it — I could’ve been misunderstanding
you. But my sense was if somebody was issuing — sent
you a template, then somebody on the other end would fill out that template, ordering
the money to come out of your account. ACH-like. No. Different thing. No? Okay. Sorry. Yeah. Yeah. Which leads to another thought I have, a question
I have when we think about making debt collection a little more fair, is just transparency. If what this mortgage servicer is telling
us is true, there’s another vendor in the mix. And we are being told there’s another vendor
in the mix, but they won’t disclose the name. So if you don’t know who the players are,
how can you correct the problem? You end up exacerbating the situation. And I have a highly sophisticated client who
has documented the heck out of everything. Where we’ve actually had genteel conversations,
which we always do before we go to court. And said can we fix this? We are sure this is a mistake. This consumer tried to fix this. That raises more questions for me also about
the ability on the backend of the collections operation to actually control what’s going
on. Because you’ve got intentionality sometimes,
but then you also have just lack of oversight, inability to control your vendor. More questions about, at some point, a little
more transparency if you’re going to outsource the collections function. So not just even the documentation, but who
the parties are who are actually involved in the transaction. Yeah, Judy. One of the things — and I didn’t go into
in a lot of detail because I wanted to see where the conversation was going. But when we were talking about sort of having
a chain of title, that’s one of the concerns, I think, we have in debt collection is because
there is no transparency. So you as a consumer have no idea where in
this chain your debt is. I’m not going to say it’s the common thing
to happen, but it has happened. I’ll give you an example of my client. You have two people collecting on the same
debt. It is common if you’re representing the kinds
of clients I do for the client to come in with a paper bag full of stuff. I have a client who just did that, full of
stuff, right? So we’ve got multiple medical bills, multiple
debt collectors; multiple debt collectors, collecting the same medical bill. Probably one of them is no longer collecting
it, right? It’s been sold to the other. But all the client can see and all we can
see is, okay well these all look like the same. Then you try to get validations from everybody,
which is incredibly time-consuming and silly and you sometimes get responses and you sometimes
don’t. In my experience when a validation goes out
from a legal aid office, I would say more than 80 percent of the time they just don’t
respond to me. I think logically there’re thinking, oh,
we’re not going to get any money, forget it. So here I am with my client’s paper bag
full of stuff. He actually would like to pay on some of these,
believe it or not. We don’t even know who to pay. Because there is no chain of title; you don’t
know where it is now. I think you also told us that you then keep
all these files even after. So you must have multiple storage units that
you rent, I assume. I have an entire basement full. I see Josh and Chris. Very briefly on the chain of title. Just to point out that in the New York state
rules and the court rules, a chain of title affidavit is required in order to secure a
default judgment. And also, under the New York State rules at
Department of Financial Services, when somebody is seeking to verify a debt, is challenging
the validity of the debt, the debt buyer has to provide a chain of title information. So just a couple of models maybe to look at
in thinking this through. Thank you. Chris. This may both be a question of what information
should the consumer have and what action should the original — in this case it was a medical
issue. But just a couple of examples to think about
that popped in my head as we thought about this. One is, I had a family member who went to
a medical clinic and was sent two bills for the exact same amount. One was for the doctor’s office and one
was for the hospital. They both had identical charges, but they
were separate charges. You pay one because you think, well, he must
have been sending me two bills for the same amount. It turns out that you owed the other. It gets sent to collection and you’re told
you owe $35. And of course you say, no I don’t because
I paid that $35. But it wasn’t that $35, it was the other
$35 you had to pay. So trying to figure out how you explain that. I wish that were routine, but oftentimes there
are identical charges for the same medical procedure that are charged by two different
entities with the same name. And how do you differentiate between the two. The other was a series of cases that we got
turned on to. One lender, a car lender, sold their portfolio
of car loans to a second lender. The second lender realized that the first
lender had foregone late fees. When people would pay late they would just
say, you know what, we’re going to give you a break on this, just pay us when you
can. The second lender went back and recalculated
the loans and said, under the contract we’re allowed to charge you the late fees. So they went back, recast the loans and then
sent them a bill saying you owe us somewhere in the neighborhood, usually between $600
and $1000; which is small enough that no attorney would take the case, but big enough that you
could make some money on it. The difficulty — and we talked to the Attorney
General’s Office in North Carolina about it — the difficulty was that most of these
folks were paying by money order. Unless you have somebody, who was keeping
very consistent records of the money orders that they were sending, which most people
weren’t, that sort of proof of payment, that ability to say this isn’t right, was
very difficult. The other piece was that what they were getting
was just a spreadsheet that anybody could have created saying this is the amount you
owe. Certainly, there would be, you know, pleadings
and things like that. But I think in thinking about how people will
defend themselves on these issues, is thinking about how most people, you know, in some cases
makes these payments and it’s not always through their bank account where it’s easy enough
for them to be able to go back in and look at their account statements and say, yes I
made these payments, on time every time. They had one lady who did. She kept every single stub of every single
money order. But they had 75 other cases where they weren’t
able to do much. You know, yeah, I mean, fault on the person
for not keeping every single stub of every single payment they made. Then they move a few times in their life? I mean, it’s get —
I mean you know, five-year car loan. Some of these were coming after they had paid
off the loan. And coming back and saying you still owe us
money. So it could’ve been seven years after that
initial purchase. Which at that time you think, I’m done, I’ve
paid it off, I’ve got the title. I don’t need to keep this anymore. I actually did have a client who had a mortgage
collection and he came in with 15 years of checks to prove that he’d made every single
payment. It’s rare. Nice. That is rare Judy. Other questions or observations, for the broad
range of ground that we’ve covered here in debt collection? I have a question about the privacy issue. It’s just bothering me. I’m not sure who the right person is to ask
this question of. I think I’m hearing that the privacy concern
ends when the first party creditor sells somebody’s information to a third-party debt collector. But that there’s a privacy issue as long
as the first-party creditor has contracted with somebody to engage in loss mitigation. Did I totally misunderstand this? Because I heard from you, Will, about privacy
issue in the collection space that I still have not quite wrapped my head around and
truly want to understand. Because I know I do not know all of the —
What privacy issue? What are you talking about? This came up when I was asking about a question
this afternoon about why it is that you can talk to one set of mortgage servicing staff
and have them tell you that they can only see limited information in one set of screens. I call one number and I’m told I can only
see X, I can’t do these other things for your client. I can’t even offer these other options. You’ll have to talk to somebody else. I call another number for supposedly the same
creditor. Call this number. Okay. I call it. Oh, this other person can see more screens. I was asking earlier about my concern about
people not being given full access to loss mitigation options to the extent that they
exist. And questioned whether there were structural
problems in the way in which the collections is set up. I think I understood from Will that they were
set up that way for privacy reasons. I think the question was also internal versus
external. So who’s seeing the first part and who’s
seeing the second. Obviously, there’s going to be different
degrees of information that someone who works for the bank is going to have versus not. As far as the different — I’ve actually sent
a note, after the conversation a second ago, to someone within the mortgage office to get
a clear understanding around why that would be internally, to answer that question first. I don’t understand that as well. Within the bank, why you would have two different
sets — which I’m still trying to figure out who the secret number is. Let me check on that as far as what we would
give to someone from a third-party standpoint versus internal. You obviously know why there would be different
screens that would be seen. Yeah. Could I ask onto that? Maybe I’m misunderstanding it. To me those privacy issues should end if you’ve
sold the account, right? Because if you’ve sold the account then
you are the first party creditor. You’ve sold the account so there shouldn’t
be any privacy reasons that you can’t send all the information with it. That’s a different issue. Different question from my mine. Mine is about getting full access to loss
mitigation options. And I see Neil with two fingers up in the
air saying ask me, I know the answer. I’m not sure I know the answer. But, Maeve, what you’re suggesting is that
in the same institution you’re getting somebody saying that there’s one person that can
handle it than another. This is something particularly during the
heyday of the mortgage servicing crisis that I did see a lot of. Some of it is just frankly internal process
breakdown. But to Will’s point, I think that what you
also have is you’ve got certain functions and the way I describe mortgage servicing
into collections, it’s kind of like a handoff. I’m not apologizing for it or rationalizing
it, it’s just the way it is. I think that what happens is, is that you’ve
got certain functions in that chain that have more access to customer information for purposes
of security and privacy than others. In other words, it’s not like anybody who
picks up the phone can have full access to all of your records for your own protection. I would say that I don’t think that there’s
any like legal thing, I think it’s more frankly probably something that you ran into in terms
of an internal protocol process that may or may not be efficient. But I’ve seen it a lot in terms of customer
complaints that we did get during that period of time, where there were people, you know
— I have massively and it’s been 11 years. It’s been 11 years of the same stuff. It does seem to be a fundamental — thank
you so much for your response. The reason why I’m raising it is because
we talked about loss mitigation versus collection. We talked about it and in some ways it’s very
compelling, certainly, in the student loan context. We talked about people being able to make
that phone call and being told, pay this money whether you qualify for a discharge or not. And so I’m going back to the mortgage contacts. I personally know better. My staff work on student loans a great deal. I have not. But to highlight the question of how much
loss mitigation issues should be a concern when the Bureau is looking at collections? Because if collections is about not lying
to somebody, but just straight up saying, you owe this. This is where you racked up the debt, this
is how much you owe, here is why. Shouldn’t options related to loss mitigation
— and I think that was built into your presentation, Kristin, when you are talking; is about at
least having general information that would go out to the consumer as a possibility saying
you might have loss mitigation option or did I miss —
We are not looking specifically at loss mitigation since that’s subject to a number of other
regulations. Okay. And I’m using loss mitigation as a term
— basically I mean non — I should say ways of —
They’re negotiating payments. Negotiating payments. Right. Payment options. Payment options. You raised a really good point. Unfortunately, we are talking about semantics. But the way the mortgage servicing rules work,
after it’s gotten through, is important. Maybe we can — whoever may have said it — how
can we learn from that? What should be — you want to call it loss
mitigation, you want to call it payment plan? Should there be — especially in the student
loan space — should there be times in that process where there is a way to look at what
your loss mitigation are? And that should be mandated. Right now there isn’t. And it’s too fragmented for the industry
to know. And payment plan is a semantic, but the words
matter. So I will say to tag onto that, modification
of the loan is really what you’re talking about. Whether it’s in the mortgage context or student
loan context, where you’re changing the interest rate or payment amount due. Yada, yada. So yeah. Maybe there’s something to be drawn from
that that’s appropriate for the work that you’re doing. I saw Kathleen and then Raul. Just to add — I’m not understanding that. I would’ve thought that a debt collector always
is given some set of instructions about what their latitude is in terms of payment options. And often, I would assume, they have a lot
of latitude. And then they follow that. But isn’t that part of the conversation? I don’t quite understand how this is being
separated. One of the problems we’ve had — and I think
it’s particularly HUD loans that were sold off, right. The contract gives you certain loss mitigation
rights. But the buyers of those are now claiming that
because we bought them, you no longer have those rights. I think this is one of the things we are concerned
about. If you’ve got certain contractual rights,
under your mortgage contract, under your student loan contract, if it gets sold to a debt buyer,
those rights need to continue. We have seen that with some of the loans that
have been sold off where the debt buyer is claiming, no, there are no rules because now
it’s ours and we get to do whatever we want. I do think that there needs to be some consistency
as we go down the line. If I could just add to that quickly. I do think there is — and the comment was
made earlier — it is not just semantics. I think intentions can also be very different. I know right now we’re talking about third-party
collections, but you’ve also — and this has been beneficial, I think, to hear you
signal that eventually you’re going to move towards first-party collections. The behaviors are very different; the incentives
are very different. For us it’s not just a question of payment
plans, it is truly trying to mitigate a loss. It is trying to contact someone to understand,
did something happen. Max did a very nice job, I think, earlier
today, articulating the way to think about what can happen during the lifecycle. And even as you think about number of times
that someone can be contacted, we tried to reach someone just to understand what happened. And depending on what happened, there are
different things that we can do. I only bring that up because I know right
now we’re having a conversation in the context of third-party collections. But given you’re signaling of first party,
I do think the language matters. But I think more importantly, the intentions
of a particular party can differ greatly if you’re a third-party that, in some case — especially
if you bought the debt, as it’s been pointed out, there is not an element of brand involved. For a first party company that is doing their
own collections, brand matters a lot. The relationship with the customer matters
a lot. I only want to bring that up because, again,
I’m very cognizant of the fact that this is probably informing your thinking about what
you might want to do later. And as Joann mentioned, I’d certainly ask
you to involve some, as many as you think makes sense, first-party collectors, so that
you can get that perspective as well. Thanks Raul. Kathleen, did you still have a question as
well? It’s really a question. The problem that you described, Maeve Elise,
I’ve seen as well. I think most people here have. Could the distinction be between servicing
loans that are held in portfolio and servicing loans as a servicer who is contracted with
an investment bank as part of a securitization deal to service? I guess that’s really a question for the bankers. I’m referring now to the inability to access
full information. My understanding is under the statute it can
vary depending on whether the loans are placed with a collector before they default or go
into whatever the verbiage is, or after. Even though they may then go into that even
while they’re with the collector. It feels a little bit arbitrary to me. And some of the definitions aren’t entirely
clear to me, although John and Kristin have a better sense of it. Okay. Ruhi, you’re going to close this out. Last comment. Judy, I will give you a much longer answer
to your question. But there were certain hard rules when they
first sold their distressed asset portfolio. I, along with a whole bunch of other folks,
really pushed and the rules changed. It depends on when the loan was sold. And then FHFA has placed additional requirements
and actually did a presentation on that. I have information on that. We probably have a webinar on that as well. It is very, very confusing. I’ve tried to talk to the attorneys who are
collecting and tried to make them understand. But if you think they’re violating the rules
— and I can give you all the information — there’s a whole bunch of us working on
this, and we’re taking it back and we’re definitely documenting it. Because we know that they aren’t following
the rules. They got the loans at a discount and they’re
essentially, you know, trying to kick the folks out and make money on the purchase when
the point was to stabilize the community and the loan. Maeve, the reason I brought that up, though,
is I think when you’re making rules one of the things that needs to be clear is that
selling the debt to a third-party does not change the contractual — the loss mitigation
options that were in a contract, it still the same contract. To me, if you try to change that, that should
be a violation. If you trying to say, hey, your contract says
you’ve got X, Y, and Z rights; now we just gave it to somebody else, you don’t have those
rights anymore. As a third-party, I shouldn’t be able to
negotiate away Joann’s contract rights just because I sold it to Maeve. It gets very complex with the Distressed Asset
Program actually. It’s a whole different ball of wax; but we
can talk about that. Thank you so much for your energy, your focus. Thank you to the public. Thank you very much to the director and the
staff, John, Kristin, Delicia, for your time and the great energy of CAB Members. This concludes the public part of our meeting
today. Thank you again for your time and engagement. Have a great rest of the day.

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