New federal protection against debt collectors

By Jack Chien

Thirty million Americans owe at least $1,500 or more and are actually being actively pursued by debt collectors. The thing is, not all of these people actually owe the debts being claimed. This is part of the reasoning behind the Dodd-Frank Financial Reform Act that has recently stepped into the spotlight as a true "consumer watchdog".

Under the provisions of the act, the federal agents can literally walk into any of the major collection bureaus and evaluate tactics, records, and behaviors. What would this do? Consider a recent example:

A consumer struggling with debt used a debt settlement service to help them negotiate a lump sum payment of an outstanding debt. They received notice that around 60 percent of the amount owed was accepted as payment in full and that the account was closed. Oddly enough, that consumer kept getting messages about the outstanding balance. When they looked at their credit report (90 days after the account was closed) there was a debt collection service still seeking the sum. Clearly, this was fraudulent and yet the group was still seeking to collect the sum that had already been resolved.

Federal guidelines for debt collectors

The new federal guidelines would not only help that consumer to get a cease and desist against the group, but the risks to the debt collection agency would be so substantial that they would hesitate to use this behavior in the future.

Unfortunately, there are more than four thousand debt collection groups in the U.S., and the new guidelines give federal authority only where the company has over $10 million in receipts. So, this leaves a huge number of "un-policed" groups, but it doesn't leave consumers out in the cold. They can directly contact the CFPB (ConsumerFinance.gov) to log complaints, seek help, and get answers.

This means that anyone who has a debt that which has been considered a default (usually a debt that is more than 120 days delinquent) and is sold to a collection agency that actually "buys" the debt and seeks the proceeds as a profit; or handed over to a collection agency who receives a fee if the debt is resolved; or in the hands of an attorney who is collecting through litigation, is protected.

It should be noted that the CFPB is also the agency behind the recent multimillion-dollar settlement that Capital One, Discover card, and American Express must repay to clients as well. This is money that is to be returned to customers due to deceptive marketing and "add on" fees that were fraudulent and misleading.

Thus, it pays for a consumer to consider this agency as a true ally and resource when something unexpected or seemingly unfair is occurring with their personal credit. The group is seeking to make it wiser and easier for credit issuers and debt collectors to simply operate within the law. Using words like "fairness" and "transparency" the agency seeks to turn the tables on would-be fraudsters and instead make the marketplace a more equitable location.

So, if you are one of the many tens of millions of American consumers carrying debt that is under collection, don't feel that your credit report is open to blatant abuse and that you must accept the behaviors of the collection agencies. There are guidelines and standards, and these groups are held accountable for working outside of the established laws.

The steps you must take include getting updated copies of your credit reports as debts are resolved, contacting the debt collectors directly when you know that they are in error or behaving in a way that is doubtful, and then contacting the CFPB when you know you are the victim of illegal practices.

Jack Chien is a money expert, author and personal finance journalist who specializes in explaining complex subjects in an accessible and engaging way. He is the cofounder of PersonalFinanceNews.com, an aggregator of the top personal finance news, stories and advice. You can find more articles by Jack on the Personal Finance News Blog. He contributes regularly there.

Steps for filing a class action lawsuit

By Christina Sanders

Filing a class action suit is a common way for plaintiffs to seek redress without having to dedicate the time and money of an individual lawsuit. These suits often seek to force a corporation to change an illegal or unethical practice that has affected many people. For example, a class action lawsuit was brought against Unum for illegal practices within its disability insurance claims process.

Unfortunately, class action suits can also be lengthy and complicated. To simplify this process, here are the basic steps a class action suit will take according to Class Action America.

1. The attorney or firm representing the plaintiffs files a suit with the court.
2. The defendant is then given time to respond to the filing. Often they will try to have the case dismissed or offer some other kind of legal pleading.
3. After both sides have filed, they spend time collecting evidence supporting their claims. The sides usually share this evidence with each other in order to convince the opposing side that they won’t win the case.
4. In order to qualify as a class action suit, the plaintiffs must apply for certification with the courts. The defendants can also file evidence opposing the certification. If the courts approve the certification, the lawsuit proceeds. If the certification is not approved, the lawsuit must continue on as an individual suit.
5. Once a class action lawsuit is approved, potential plaintiffs are notified of the opportunity to participate in the suit or are given the option to file an individual complaint. This is the step most of us are aware of because we receive a letter in the mail or see ads on TV asking us to seek compensation for damages.
6. If a court rules in favor of the plaintiffs at trial, the cases are almost always appealed to a higher court.
7. Sometime during the court process a deadline is set for plaintiffs to join the class action suit.
8. Once a case is ruled on, plaintiffs are rewarded damages. The amount usually varies based on who was affected the most, the total sum of money and the number of people participating in the case.
9. Of course, anytime during these proceedings a case may be dismissed. Plaintiffs may decide to drop the case, or the courts may order the case to be dismissed based on the evidence presented. Occasionally, a suit may be filed at a later time depending on the circumstances of the dismissal.

Christina Sanders writes for several blogs nationwide. To learn more about Unum Class Action Lawsuit visit here.

Businesses' regulatory sore thumb

Doing business with the government is not quite like doing business with businesses. The creation of the Dodd-Frank Consumer Protection Act is supposed to make regulators the 'better of two evils' according to proponents.  This is because this particular legislative act allows government entities such as the Consumer Protection Agency to "autonomously write rules for consumer protections..." and prevent a future financial crisis. 

Image source: Kosta Kostov

To do business now requires businesses to deal with the government's regulatory sore thumb. No longer does the government want the kind of systemic failure that emerged with 2008's financial crisis. According to Geoff Colvin of CNN Money regulations such as ObamaCare are scary to corporations uncertain of what will be required of them. They fear doing business in accordance with the government's lead will involve higher taxes and future rules that will stifle business activity.

Regardless of whether it is business or government overseeing financial decisions, ultimately one or the other would be fallible. The difference is with government regulating business, failure is more bureaucratically thickened via a slow moving porridge of red tape whereas left to their own devices businesses are allowed to fail faster and more fluidly, but not necessarily with a whole lot of liquidity.

Businesses are thought to have responded to regulation by hoarding money in foresight of potentially high expenses that may come about with increased corporate taxes and regulation related costs. However, market observers such as Loren Steffy of the Houston Chronicle think there is more to it. Specifically, Steffy thinks businesses do not forecast a whole lot of revenue growth so do not want to use up their capital on unnecessary labor costs.

What Collection Agencies Don't Want You To Know

Debt collection agencies aren't exactly thrilled to reveal what they're not allowed to do under The Fair Debt Collection Practices Act. Instead debt collection agencies may be more likely to avoid mentioning, explaining, or acknowledging the existence of such legislation in a possible attempt to place pressure on those persons who they are trying to collect money from. Consumer protection law is available to the public under Title 15, chapter 41, sub-chapter 5 of the U.S. Code.(1)

Being aware of what these rules disallow certain practices within debt collection, in regard to debt collection agencies can assist people in debt know their rights when their debt is passed to a debt collector. These rights help empower debtors in so far as the law allows, and does so for the purpose of protecting debtors from harassment, manipulation, threat and danger.

• Debt collection agencies can't violate your privacy

According to the privacy rights clearinghouse, debt collectors cannot leave pre-recorded voice mails on cellular phones if a cell phone was not given on a credit application.(4) Debt collectors are also not allowed to leave messages with third parties as per Title 15, chapter 14, subchapter V, section 1692c of the U.S. Code. the Privacy Rights Clearinghouse.

• Communication from debt collection agencies can be terminated

A debt collector can be asked to cease contact with the provision they are allowed one additional communication to notify a debtor of the collection effort thereafter. This does not mean one no longer owes debt, but it does mean that particular collection agency is obligated to cease communication following the defined contact prescribed by law.

• Misrepresentation of debt, business, legal and individual communication

Debt collection agencies must act honestly with their communications so as to avoid coercing, manipulating, harassing or lying to the debtor, all of which are illegal. The debt collector is required to disclose the purpose of their initial communication and may not mislead or contact the debtor before 8:00AM or after 9:00PM in that debtor's time zone.(1)

• Collection fees and assets are prohibited unless authorized

A debt collection agency may also neglect to mention the unfair practice provisions of the aforementioned statutory law. This includes unauthorized collection of debt owed and associated fees as well as personal property. By unauthorized one means as made through agreement with the collection agency or as allowed through other regulatory laws.

• Disclosure of identity

If a debt collection agency calls a debtor directly, they are required to provide "meaningful disclosure" of their identity.(1) This means a debt collector cannot telephone a debtor anonymously and provides the debtor an opportunity to communicate his or her wishes regarding the conduct of the debt collector.

Summary

Debt collection agencies are limited in their range of conduct by statutory law. Being aware of this law is something debt collectors may not want you to know because it empowers consumers and debtors, possibly to the disadvantage of the debt collector.

If debtors are unaware of these laws and how a debt collection agency must conduct itself, this can place clearer restraint on the actions, and communications of debt collectors so as not to seek out or utilize less than savory debt collection methods.

Sources:

1. http://bit.ly/czXTlG (Cornell University: Title 15, Chapter 41 U.S. Code)
2. http://bit.ly/alP2Y (Federal Trade Commission (FTC): Consumer guide)
3. http://bit.ly/VAUo9 (FTC: Consumer credit)
4. http://bit.ly/bBuOTw (Privacy Clearinghouse)