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).

images

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

Capital Bldg

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.

In the News 04/21/2015

The 2015 West Virginia legislative session saw significant changes for the debt collection industry. The WV Legislature passed Senate Bill No. 542, which amended several sections of the West Virginia Consumer Credit Protection Act (WVCCPA). The bill, which was signed into law by Governor Tomblin on March 31, made concessions regarding when and how often consumers can be contacted, how collectors must be notified when a consumer has obtained attorney representation and minimized the interest rate on collections’ penalties, which will be effective on September 1.

For more information, you can read the bill in its entirety here: https://legiscan.com/WV/text/SB542/2015.

Or check out our blog this Thursday for a breakdown of the WVCCPA amendments and how they will affect collections in the Mountain State.

Collecting Corporate Debts, Part III

s-corporation

After the service of process, a consumer has 20 days to answer the court before a default judgment is filed, but corporations are given 30 days to respond. There are a variety of ways to attempt to collect on a corporate debt. Collectors can freeze the bank accounts of corporations, file a writ to attach inventory or file a writ for a till tap.

When collectors file to freeze a corporate bank account, they usually try to catch the bank right before payroll to get the attention of management quickly.

To attach inventory is rare, but in this case, a sheriff would be dispatched to put tags on inventory at the business’s location. For example, if the judgment was for $10,000, the sheriff would tag enough inventory to equal that amount. Tagged items cannot be sold, and those assets are “frozen.” This would be similar to garnishing the wages of an individual consumer.

Filing a writ for a till tap is another antiquated practice that is rarely used. Again, say the debt owed is $10,000. The sheriff’s department would dispatch a deputy to the store site for the day. The deputy would stand behind the counter and watch the cash register, and at the end of the day, he or she would seize the profits made that day and take it to the collector. This is not necessarily used to collect the entirety of the debt, but to let the business know that you are serious about collecting and that they need to take the appropriate steps to make the debt a priority.

Settlements are often the best way to resolve a corporate debt for several reasons. Large corporations are usually concerned with keeping their names out of the news. A settlement allows the debt to be resolved quickly, without dragging out the process with monthly payments.

While the lender is usually the only person that would not want a settlement, cooler heads normally prevail in this situation. Lenders realize that they are more likely to get the largest amount of their money back by settling.

Collecting Corporate Debts, Part I

Scales

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!

8 Ways to Recognize a Debt Collection Scam

FE_DA_120725_online-scam425x283

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.

In the News 02/17/2015

The Consumer Financial Protection Bureau (CFPB), a government agency originally created with the power to oversee, audit and punish banking and collection agencies, continues to address acts which it believes to be harmful to consumers or internal policies that are not sufficient to protect consumers from unfair, deceptive and abusive acts or practices

The Bureau is currently focusing on information access and student lending in early 2015. It recently issued guidelines restricting disclosure of confidential supervisory information, such as documents prepared by or for the CFPB or federal or state government usage and compliance reports. Under these new regulations, supervised financial institutions cannot disclose confidential supervisory information except in specific circumstances.

ATI

Other activity includes their partnership with the U.S. Department of Education to issue a $480 million forgiveness of student loans through Corinthian College, Inc.’s Genesis loan program.

This stems from the Bureau’s ongoing lawsuit against Corinthian College, which suggests that the college used false and deceptive advertising to encourage students to take loans and then subsequently use illegal debt collection tactics in an effort to force students into paying the loans back while they were still in school.

Also on the agenda for 2015, the CFPB is targeting credit card company fee structures and extending its supervisory authority. Read more about recent CFPB activity here:

http://tinyurl.com/o56fy3x

Top 5 Mistakes Debt Collectors Make

debt-collection-notice-iStockphoto

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.

CFPB— David versus Goliath

I had this friend that had a summer job as a teenager— he and a buddy pressure-washed siding on apartment buildings.

Whenever the supervisor would come around, the duo acted like they didn’t understand how to do the job very well.  The super would get frustrated, grab the washer and show them how it was done – for about ten full minutes!

What luck!  It was an excellent break!

Normally, nobody likes the boss looking over their shoulder.  They might get caught doing something the wrong way.

But what if you figure out how to use the boss to your advantage like my friend did?

The Consumer Financial Protection Bureau (CFPB) is a government created agency with the power to oversee, audit and even punish banking and collection agencies.

cfpb

If the CFPB finds that acts have been committed which it believes are harmful to consumers or even that the internal policies are not sufficient to protect consumers from unfair, deceptive and abusive acts or practices (commonly called UDAAP), then those institutions will be subject to swift and harsh fines.

If you are new to the industry, the CFPB can appear to be the giant yelling, “FEE FI FO FUM,” while the collection industry collectively scurries around finding places to hide.

Why?

Good question. It doesn’t really have to be that way.

Yes, it’s true that the CFPB has the authority to unilaterally decide which practices were UDAAP and what the fines for it would be for committing them.

But it’s also true that you can use the CFPB to your advantage, like the pressure-washing boss.

When the CFPB began auditing, it looked for findings in seven categories or seven different ‘modules’. And if you will forgive the brief praise of government work, the CFPB did a smart job of presenting these modules in a logical manner.

This is one of those times when the “super” is working for you, so use them to your advantage.  CFPB has provided guidelines so that you know your shop should have written, tested materials in each of these following modules:

Module 1:        Your business model and work flow, including vendors

Module 2:        Communications (all communications to consumers)

Module 3:        Information sharing to third parties

Module 4:        Consumer complaints and dispute resolutions

Module 5:        Payment processing

Module 6:        Equal Credit Opportunity Act compliance

Module 7:        Litigation practices and knowing your legal limitations

These guidelines give debt collection attorneys and agencies that lucky break to perform well.

I don’t know about you, but if the person coming in to test me was willing to show me the test ahead of time, I wouldn’t be too intimidated about that.  And perhaps the tester wouldn’t feel like that much of a giant after all.

Now how do we get the CFPD to audit those defense attorneys?!