FTC orders debt collectors to open there books

[bigun]

What is the name of your state (only U.S. law)?

Feds order collection firms to open books on debt sales
Submitted by SHNS on Tue, 01/12/2010 - 19:16 By ISAAC WOLF, Scripps Howard News Service washington ShareThis WASHINGTON - Federal authorities have issued a sweeping order for some of the nation's largest debt collecting companies to open their books.
In its first investigation of the $60-billion consumer debt resale market, the Federal Trade Commission has directed the nine companies that buy the most second-hand debt to turn over essentially all purchase and sales records for a six-month period in 2009.
That's just one part of a sweeping request included in a 15-page demand for information issued by the FTC in late December and obtained by the Scripps Howard News Service this week. Sent to the country's nine largest purchasers of unpaid credit card bills, hospital fees and other debts, the request is formally known as an "Order to File a Special Report."
The FTC's examination focuses on a segment of the debt collection industry that has mushroomed in the last decade and is drawing criticism for some of its practices. A Scripps Howard News Service investigation beginning in November documented serious problems spawned by this market.
The Scripps articles showed that when old credit card and other debts are sold, the new owners frequently do not receive documentation of the original debt. That, in turn, can lead collectors to use bad information to try to collect unsubstantiated debt, sue consumers without proof and damage their credit scores.
No federal law requires collectors to verify the alleged debt owed by a consumer or to transfer the proof of the debt to the new debt purchaser, the Scripps report found.
Following the Scripps reports, the FTC announced last week it has started its first-probe of the debt resale market. Agency officials say they want to pinpoint where, how, and when there is an information breakdown about these old debts.
The FTC's order -- which received a unanimous thumbs-up from the FTC's four commissioners -- seeks all transaction information for debts that were bought and sold during the specified period last year.
"The FTC is making it clear that they're out there to help consumers protect their rights," said Gerri Detweiler, co-author of "Debt Collection Answers" who has written four other books on credit and debt. But even as federal authorities take a more aggressive stance, consumers who feel they have been mistreated should stand up for themselves, Detweiler said.
"It still is important for consumers to speak up," Detweiler said. "Let the regulators know what's really going on."
The information requests to the firms aren't voluntary. The FTC's order carries weight similar to a subpoena, said Tom Pahl, assistant director of the FTC's division of financial practices.
But it's unclear how the nine companies will respond to the information orders. Each company either did not respond to interview requests or declined to comment, with one exception: Niles, Il-based Arrow Financial Services. Arrow is owned by Sallie Mae, the student loan giant based in Reston, Va.
"Arrow is cooperating fully with the FTC's study of the consumer debt resale market," company spokeswoman Martha Holler said.
The FTC -- which oversees debt collectors -- is asking for an array of records, including contracts between debt buyers and sellers, policies on providing information and detailed statistical calculations. The debt collectors have until February 25 to turn in their records, explanations and statistics.
To Detweiler, the debt expert, the rule change that would most help consumers would be a requirement for collectors to verify and itemize a debt. "The one thing I hear from consumers is 'I don't understand why they think I owe this much'," Detweiler said. "When consumers pay these debts, they should at least understand what they're paying and how soon they'll be able to retire the debt."
According to the FTC, the nine companies are:
-- Arrow Financial Services LLC, based in Niles, Ill. and part of Sallie Mae
-- Asta Funding, Inc., based in Englewood Cliffs, N.J.
-- B-Line, LLC, based in Seattle, Wash.
-- eCast Settlement Corp., affiliated with New York-based JP Morgan
-- Encore Capital Group Inc., based in San Diego, Calif.
-- NCO Portfolio Management, Inc., based in Horsham, Pa.
-- Portfolio Recovery Associates, L.L.C., based in Norfolk, Va.
-- Sherman Financial Group LLC, based in New York, N.Y.
-- Unifund Corp., based in Cincinnati, Ohio
(E-mail reporter Isaac Wolf at wolfi(at)shns.com)
(Distributed by Scripps Howard News Service, ScrippsNews | current events, culture, commentary, community)
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Feds order collection firms to open books on debt sales | ScrippsNews

Thought this might interest some of our members.

 

[justalayman]

why do these statements:

No federal law requires collectors to verify the alleged debt owed by a consumer

To Detweiler, the debt expert, the rule change that would most help consumers would be a requirement for collectors to verify and itemize a debt. "The one thing I hear from consumers is 'I don't understand why they think I owe this much'," Detweiler said. "When consumers pay these debts, they should at least understand what they're paying and how soon they'll be able to retire the debt."

not jive with what is required by the FDCPA unless the FTC is stating the FDCPA does not have the force of law?

Personally, I see their actions as useless. The records they seek seem to be irrelevant based on the complaints noted. If they want the FDCPA to require something else, then they amend it.

when they make statements such as this:

The Scripps articles showed that when old credit card and other debts are sold, the new owners frequently do not receive documentation of the original debt. That, in turn, can lead collectors to use bad information to try to collect unsubstantiated debt, sue consumers without proof and damage their credit scores.

they seem to ignore the fact that a demand for validation by the consumer will require that exact info to be obtained from the original creditor. Now, if they simply want the collectors to verify the debt as valid and collectible, the write it in the FDCPA but they cannot since so often, the collectiblility and validity of a debt is determined by the courts and cannot be determined by any outside of the courts.

if they want such actions to not affect credit scores, then they simply need to order the info not be included on a CR if if has not been substantiated in court once it is disputed by the consumer.

for some reason I read this action as much ado about nothing.

 

[bigun]

I think this action coupled with the NY Ag's crackdown on debt collectors is the opening chapter in an overhaul of the FDCPA.
With the management information systems available to businesses to day, there just is no execuse for not being able to furnish information aout an alleged debt to a consumer. Copies of paperwork where they opened an account and an itemimzed statement showing how the dollars they're being dunned for was calculated and, when the debt went into default should be things that are furnished with ease.

Unforunately, when people demand validation the request is either ignored or,the debt collector just sends the name of the orginal creditor.

 

[TigerD]

There is an error somewhere in your story.

The FTC order was for Debt Buyers, not collections.

The FTC is trying to understand the industry so they can take 30 days to write new regulations. Never mind that the industry is far too complex for any person to grasp effectively in less than several years worth of experience -- but that's bureaucrats at work.

DC