Debt Collection Law Ranks High in Safety and Security

Debt collection law gets a bad rep. Just Google “debt collection,” and you’ll stumble across a thousand stories about crooked collectors, deceptive ruses and stringent regulations to maintain the climate of lending, borrowing and repayment.

If you’ve been following our blog, you likely already know that debt collectors must follow specific federal guidelines to avoid violating consumer rights and maintain their own responsibilities. Well-known laws that we’ve discussed include the Fair Debt Collection Practices Act (FDCPA), the Fair Credit Reporting Act (FCRA) and the Gramm-Leach-Bliley Act (GLBA).

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However, what you might not know is that in the entire field of law, the legal debt collection industry is in the top 10 percent for IT security, data security, physical security and third party vendor management.

Because of the nature of the practice, collections tops all other areas of law in disaster preparedness, disaster recovery plans and employee training and conduct.

The industry as a whole is more likely to have superior call recording capabilities that record 100 percent of incoming and outgoing calls, email encryption and email programs that recognize and restrict the sending of a 16-digit sequential number (ie—credit card numbers).

The licensed and recognized creditors bar is the least likely to be hacked among all law firms nationwide, and although there have been attempted website hacks, there are no known data breaches in the entire industry of legal collections.

While the stringent standards placed on collectors are to protect the consumers, they make the practice of debt collection very expensive. Collectors rank high in the areas of safety and security, and that is a positive thing, but they pay handsomely to do so.

The bottom line after paying out for security systems and other third party vendors depends entirely on a collectors’ ability to connect with debtors and work toward a payment plan that benefits both parties.

Despite the horror stories, these statistics shine a positive light on the field of legal debt collection. Collectors are doing their best to ensure a safe and secure relationship with debtors, protect important and private information and collect money in order to regain economic balance in the area of lending.

Senate Bill No. 542 Important for WV Debt Collectors

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The West Virginia Consumers Credit and Protection Act (WVCCPA) was originally passed in 1974 as a measure against abusive and deceptive debt collection practices. It has since been amended several times, most recently in the 2015 first session of the 82nd West Virginia Legislature.

Senate Bill No. 542 is an amendment that made significant changes to several sections of the WVCCPA. The bill, which was signed into law by Governor Tomblin on March 31, will go into effect on June 12; however, certain provisions of the bill will not become applicable until September. The bill seems to focus on issues that are frequent claims litigated in West Virginia courts, such as how many phone calls per week constitutes a violation and appropriate times for communicating with consumers.

There are two major changes that will be particularly significant to day-to-day debt collection operations. The first is that the bill states that notifications of attorney representation must be made in writing (either on paper or electronically) and sent to either the West Virginia Secretary of State or the collector’s place of business.

Section 46A-2-128 formerly stated that collectors should cease communication with a consumer “whenever it appears” they are represented by an attorney. This was often ambiguous and could constitute anything from a brief phone call or voice mail to an e-mail. However, the amendment sets a more specific procedure and timeline and offers a 72 hour grace period after the collector receives the written notice from the consumer or his or her attorney. This will help collectors avoid unnecessary fines for violating the WVCCPA and federal standards.

For example, let’s say a collections firm or agency had an automated outgoing call set up to contact a consumer on Saturday morning, and the firm received notice that the consumer had obtained an attorney on Friday afternoon. In the past, if the automated call was not canceled, the firm would be fined for violating the consumer’s rights. However, with the recent amendment, the firm has 72 hours to comply after receiving the written notice.

In addition, Senate Bill No. 542 revised Section 46A-5-106, which previously allowed statutory penalties to be adjusted for inflation. Per the amendment, the penalty will be reset as of September 1, 2015. The new fixed penalty of $1,000 per violation will no longer be subject to the inflationary standards originally imposed in 1974; however, a new inflationary standard may be imposed after September 1. An across-the-board four-year statute of limitations will be imposed on WVCCPA penalties as well.

These changes signify a significant change in the nature of debt collection legislation. Up until this point, most regulations have been made with the objective of protecting consumers, but recent changes demonstrate a shift toward assisting the collections industry, which over time will benefit the state and its economy.

Collecting Corporate Debts, Part II

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As we discussed last week, collecting the debt of a corporation is significantly different than collecting the debt of an individual. Over the course of this blog, we’ve discussed at length the authority and regulations of the Fair Debt Collection Practices Act (FDCPA), and this might be the most considerable difference between consumer and corporate debt collection.

A lower degree of compliance is required when dealing with corporate debt. The regulations put in place by the FDCPA do not apply to commercial debts, and even the West Virginia Consumer Protection Act excludes commercial transactions.

As a result, collectors are able to pursue commercial clients more persistently, without fear of violating FDCPA standards or even fear of the nuisance lawsuits that are rampant throughout the industry today. Collectors should still use good business sense when pursuing these interests; however, they are allowed more leeway and flexibility in engaging corporations.

Commercial debtors are also typically held to higher standards in court. Contracts are more strictly interpreted and enforced in terms of interest rates, payment due dates, attorney fees, equipment levees, creditor bills, receiverships, liabilities and other clauses. Any of these may be enforceable and valid but are much less likely to be imposed against an individual consumer.

Lawyers often cite the hypothetical least sophisticated consumer standard when representing individual debtors. This standard was created to protect all consumers (no matter their education level or understanding of their debt or contract) by suggesting that even the least sophisticated consumer would have been deceived or misled by the terminology and true meaning of a given contract. However, it is assumed that corporations would be much savvier in understanding the agreement into which they were entering.

What do you think? Should corporations be held to a higher standard of contractual obligation than individual consumers? Tell us your thoughts in our comment section, and check in next week for the final installation of our series on collecting corporate debt.

Collecting Corporate Debts, Part I

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Approximately 77 million Americans are in some form of debt. Most debt collection agencies and law firms focus a lot of their time, energy and resources on collecting these retail consumer debts. However, businesses and corporations can also default on loans and mortgages and purchase inventory they cannot afford.

For collectors, compelling a commercial debt can be significantly different than collecting an individual consumer debt (although many firms use the same processes). Depending on the corporate structure, using your tried and true policies and procedures may be the best course of action for continuity for your employees and records.

An important step in collecting a corporate debt is finding the right person to contact. For a small business, it’s usually the owner, but for a corporation or chain, it is typically someone in the accounts payable department. When a collector is researching the appropriate contact, he or she might find that there are actually two debtors: the named corporation and a personal guarantor, an individual who also signed their name to the purchase or contract.

Corporate debts are often easier to collect, and corporations are often more likely to pay than individual consumers. There are fewer restrictions on the collector and often, more money is involved.

However, depending on the size of the debt and the stability of the company, corporate debts also have a shorter life. While a personal debt can be pursued until the debtor passes away (and even then, certain debts are inherited by relatives) or the statute of limitations expires, if a company goes out of business, files bankruptcy or becomes defunct, time expires for the collector.

Over the course of this three part series, we will look at the unique differences and practices involved in the collection commercial debts. Be sure to check in next week for more information!

In the News 02/24/2015

DriveTime Automotive Group, Inc. has recently been accused of debt collector harassment and agreed to an $8 million settlement to reconcile charges of violating the Fair Debt Collection Practices Act (FDCPA). The charges brought against the company after an investigation by the Consumer Financial Protection Bureau (CFPB) alleged that they lacked an adequate written policy for their bill collectors, which led to collector harassment, as well as inaccurate reporting of current balance information on accounts, timings of repossessions and dates of first delinquency.

The report issued stated that DriveTime, which has dealerships across the country, had only two employees assigned to handle up to 22,000 disputes each year. Accusations of calling consumers at work and after receiving cease contact requests were also included in the charges.

Read more here: http://www.lawyersandsettlements.com/articles/Bill-Collector-Harassment/debt-collector-lawsuit-bill-19-20461.html#.VOykQvnF__F

8 Ways to Recognize a Debt Collection Scam

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As we’ve discussed in previous posts, government agencies have been created and charged with overseeing and policing debt collection agencies and law firms due to illegal and unethical collection practices.

However, their responsibilities also extend to notorious debt collection scams, which have affected thousands of people and garnered millions of stolen dollars. When someone calls you imitating a collector, they may have already accessed your personal information through identity theft or by obtaining your credit report, but there will still be signs if the caller is a fraud.

Here we’ve listed a few ways to recognize a debt collection scam. Do not provide personal information if any of the following tactics are used:

  1. The caller uses fear or harassment to urge you to pay the debt. Licensed and trained debt collectors know that the use of abusive tactics is illegal and punishable under the Fair Debt Collection Practices Act (FDCPA). If the caller-in-question threatens you with an immediate lawsuit, a call to the police or possible arrest, they are most likely not a legitimate collector.
  1. The caller demands that you pay today or in the very near future, with no offer of a payment plan. Compassionate collection practices suggest that consumers be offered monthly payment plans if they are unable to pay their debt in a lump sum. A caller suggesting that you are required to pay your debt all at once is suspicious.
  1. The same person calls you multiple times or answers the phone every time you call. Most collections agencies have a variety of employees working on each case and a receptionist that transfers incoming calls to the appropriate extension. If you have been interacting with the same person during every phone call (both received and placed by you), ask to speak to someone else. If the caller refuses, you may be speaking with a debt collection scammer.
  1. They offer only one form of payment. Every collections firm and agency is interested primarily in collecting money; thus, they will typically accept a variety of payment options including personal checks, online payment with a debit or credit card, money orders or bank ACH. Scammers often encourage you to pay with a credit or debit card over the phone.
  1. They cannot provide an address. If you are suspicious of the caller, ask them to provide their mailing address for you to send a personal check. If they cannot provide you with basic information like an address or return phone number, hang up.
  1. The caller cannot answer basic questions or refers you to the original creditor with questions. Collections agencies and law firms are equipped with all of the necessary information in order to collect on your debt and are in regular contact with the original creditor. If the caller cannot provide you with basic information about the debt, such as the date of default, principle amount or interest rate or suggests you contact the original creditor with questions, he or she is likely being dishonest.
  1. You’ve never received written communication stating an attempt to collect on the debt. If this phone call is the first time you’ve ever been contacted about your debt, request a validation letter before speaking with the caller.
  1. The caller contacts you at inappropriate times or after you’ve requested collection attempts to stop. FDCPA regulations state specific times that collectors can contact you. If the calls come before 8:00 a.m., after 9:00 p.m. or while you are at work, do not answer. If you have submitted a written notice requesting no further contact about the alleged debt, communication efforts must be terminated immediately. Continued contact is considered abusive and deceptive under the FDCPA.

If you believe you are the victim of an attempted debt collection scam, contact the original creditor or report suspicious or fraudulent activity to the Federal Trade Commission.

Have you ever been the victim of a debt collection scam? Visit our Contact Us page to share your story.

Top 5 Mistakes Debt Collectors Make

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A successful collections call takes a lot of training and practice.

There are several rules and guidelines collectors are required to follow. Following those guidelines will still not help them predict the circumstances they’ll encounter while making their collections calls. During the course of their calls they will speak to a variety of individuals, ranging from polite to the disgruntled, and hear an assortment of personal stories of challenging financial situations.

Debt collectors sometimes have a bad reputation with the general public, due in large part to unprofessional, unethical practices. The illegal tactics of debt collectors are one of the many reasons why the Fair Debt Collection Practices Act (FDCPA) is so important. Consumers filed 45,050 complaints in the first six months of 2009 to the Federal Trade Commission (up 19 percent from that same period in 2008), making it even more important that collections professionals use ethical and compassionate practices. Here we’ve listed five of the top mistakes collectors make when contacting debtors.

  1. Not disclosing identity. Collectors are required under the FDCPA to identify themselves, notify the consumer that the communication is from a debt collector, give the name and address of the original creditor, notify the consumer of their right to dispute the debt and provide a verification of the debt.
  1. Failure to cease communication upon request. If a consumer submits a written notice that they wish to receive no further contact about the alleged debt, communication efforts must be terminated immediately. Continuing to contact a consumer is considered “abusive and deceptive” under the FDCPA. Collectors should also cease contact with a consumer who is represented by an attorney.
  1. Failing to Mirandize. The FDCPA requires that debt collection calls include a mini Miranda statement, which lets the debtor know that any communication (written or verbal) is at attempt to collect a debt and any information obtained during the communication will be used for that purpose.
  1. Misrepresentation, deceit or harassment. Pretending to be law enforcement or an attorney, bullying or threatening and using profanities are all prohibited under the FDCPA. While it is not necessarily considered harassment, compassionate collections practices teach collectors to avoid a bad attitude. Losing your temper (even if the debtor yells, curses or threatens the collector), being impatient and getting caught up in a consumer’s personal stories are all ways to derail a collections call.
  1. Revealing information to a third party. Part of a collections call script should be confirmation that you are speaking to the correct person. Identify the consumer by asking for their social security number, address and phone number. Discussing a debt with someone other than a debtor’s attorney or spouse is prohibited.

At Atkins & Ogle Law Offices, LC, we thoroughly train our collectors in collection law, compassionate collection and professionalism. Experience and hard work are a hallmark to our success and make our firm the most time-tested and progressive debt collection law firm in the state of West Virginia. We are guided by our values of service, honesty, integrity and proficiency. While we work to serve our clients with compassion, we also extend those sentiments to debtors.

In the News 1/27/2015

A recent decline in lawsuits filed in federal court claiming violations of the Fair Debt Collection Practices Act (FDCPA) is a sharp contrast to the rise seen in 2008-2009. The number of cases in 2014 (9,720) was down 5.7 percent from 2013, making this the third straight year of decline.

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Photo credit: Inside ARM

However, this decline may be attributed to the rise in cases involving the Telephone Consumer Protect Act (TCPA), which were up 25 percent in 2014. The increase in TCPA cases has left many accounts receivable management companies increasing their efforts in compliance.

Members of the credit card, mortgage, real estate, debt collection and telecommunication companies may find that the FDCPA has quantified more clearly what is and is not a violation, whereas the TCPA leaves more room for consumers to allege more vague claims prior to discovery. Read more here:

http://www.insidearm.com/daily/fdcpa-lawsuits-decline-for-third-straight-year-but-tcpa-suits-up-25/

What are your thoughts on compliance regulations? What tools can ARM companies use to increase their compliance standards? What does the TCPA offer Consumers that the FDCPA does not?

Best Business Practices, Part VII

Continuing Training Policy

As the old saying goes, “Check, re-check and then check again.”

And so it goes in the seventh installment of our series on best practices in the legal debt collection industry. This week we discuss the need for a continuing training policy.

As with any job, an employee will have certain training at the outset of employment. We all too often leave the employee after that with only on-the-job experience.

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 But just like the machines that your business will use need tune-ups and computers need new software, your employees need reminded of their initial training and formally trained on new skills and techniques. Therefore, your continuing training policy should consider the following questions:

  1. In which areas of our business should our employees be trained periodically?

Certain jobs require no re-training—they are obvious. But there are other matters, typically the issues that arise in security, compliance or regulatory training, that require re-training, as a person is bound to forget the details of a policy or a procedure over time unless it is re-read or rehearsed.

Ask yourself this important question:  What policies exist in this business that if an employee were to forget it or forget the complete details of it, could cause my business or client harm?

For example, employees at Atkins & Ogle Law Offices, LC learn about a federal law known as the Fair Debt Collections Practices Act at the outset of their employment. It is essential knowledge in our industry, and failure to adhere to this act could prove damaging to a consumer, which could also prove costly to our clients and ultimately this firm. This is an example of something that we have chosen to periodically re-train.

  1. Can we categorize these areas of our business and train them together periodically?

Above, we mentioned as examples the likely categories of:

  1. Security: Physical Plant, Data
  2. Compliance: Cease & Desist, Out-of-Statute, Compliant Handling, etc.
  3. Regulatory: FDCPA, Bankruptcy, other federal, state and local laws

Consider whether you should keep as many subject matters together as possible (for continuity) or whether spreading your training out and testing more often and more consistently would be better for your staff.

  1. How should we train and what will be our standard for determining whether an employee passes or fails training?

What is the best method for training or re-training your material?  Should you design tests, have teaching sessions or try on-line training?

Assuming you have some method for evaluation, such as testing your employees on their knowledge, will you require your employees to receive a mere passing grade? A 90 percent? A perfect score? Consider the question raised above. Given the particular topic, what level of failure is acceptable to your customers and your business?

  1. Who is able to train, test and evaluate our employees, and should this change depending on the task?

Perhaps you have a person in your business solely responsible for all employee training. Or, perhaps this responsibility will always fall on the owner or managing partner.  Consider, however, that different tasks bring different challenges and there will naturally exist in your business various individuals or job titles better suited for those training duties.

The appropriate question to ask when assigning training duty is, if you truly need your employees to understand this information and you need to be ready to explain how you prepared this employee to have this information, then who is the best equipped or most logical person to be tasked with training?

Remember, whatever you decide, make sure it is always documented in a written policy.

Drop by next week for the final installment of Better Business Practices on information security policies.

“A man, though wise, should never be ashamed of learning more and must unbend his mind.” – Sophocles, Antigone

Best Business Practices, Part IV

Skip Trace Waterfall Procedure

So far in our series on best business practices, we’ve discussed disaster recovery and vendor management plans, both of which are applicable to a variety of business models. Today’s topic, skip tracing waterfall procedure, is more specific to the debt collection industry.

The bottom line is debt collectors and lawyers cannot do their jobs without being in contact with the person in debt.  Skip tracing is the process by which collectors and investigators use software to search electronic databases and online profiles. These searches can uncover information useful in the efforts of debt collection and assists collectors in ensuring they’re contacting the right individuals.

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Skip tracing waterfalls combine the use of electronic information, automated lists created by the collector and the talents of skip tracing specialists to ensure that every available resource is expended.  A beneficial skip tracing waterfall procedure streamlines old skip tracing practices and makes the process of finding information more efficient.

The waterfall model itself is a process often used in software development and designed to emulate a waterfall in that the information flows from top to bottom through phases (or in our case, vendors).

Your skip tracing waterfall procedure should include building easy access lists of accounts as well as having a dependable and cost-efficient arsenal of vendors.  Once established, it’s paramount that you train your skip tracers to find the best vendors that do the best work for the best prices and then use these tools for optimum success.  This will allow you to find and contact debtors and help them to explore their options for satisfying the debt by making payments or settling the debt upon contact.

Vendors are ranked and utilized based on their capability, economics, past successes and accuracy of results.  Once these factors are determined and searches are underway, skip tracers have more time to work other projects, perform other forms of skip tracing procedures and seek new information for communicating with debtors.

The waterfall approach is considered a best business practice because it is a progressive and innovative way to reach people and is part of the successful formula that makes a collections business thrive.

Drop by next week for Better Business Practices, Part V on employment waterfall procedure.