The Consumers Union, a long standing consumer advocate and watch group, in partnership with East Bay Community Law Center, weighed in with their recommendations for amending the Fair Debt Collection Practices Act (FDCPA).
Read the report here: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now.
In their “PAST DUE” report, I found some of the most pro-consumer recommendations for amending state and federal collection laws I have seen to date. Here are some of the key recommendations the report suggests should be adopted in order to better protect consumers and lessen the drain on publicly funded court resources:
The FDCPA and parallel state fair debt collection laws must be expanded so that the list of required “baseline” items also includes: (6) a statement explaining the consumer’s rights under the FDPCA; (7) the name of the original creditor, whether or not the consumer requests it; and (8) an itemization of the total principal, interest, fees and other charges that were added to the debt:
“Baseline” Information (currently required)
1. Amount of debt;
2. Name of creditor;
3. Statement re: assumption of debt validity in the absence of a dispute;
4. Statement re: if the debt is disputed the debt collector will “verify”; and
5. Statement re: upon written request the collector will provide name of original creditor if different from current creditor.
Recommended Additional “Baseline” Information
6. Statement notifying consumers of two significant rights they have under the FDCPA;
7. Name of original creditor; and
8. Itemization of: total principal, interest, fees and other charges that have been added to the debt.
The report recommends additions of items 6 though 8 to the already required baseline protections found in items 1-5. While I see recommendations 6 and 7 as good, I really like number 8! It is of major importance that there be an opportunity for consumers who find themselves in a position to effectively bounce back from past financial setbacks be able to do so with a correct measure of what they legitimately owe.
All too often highly inflated, and sometimes, bogus debt collector fees.
The report further identifies what is dubbed “Baseline Plus“recommendations:
The FDCPA and parallel state fair debt collection laws should also be amended to require that debt collectors make a good faith effort to retain certain “baseline plus” information to the extent possible. A debt collector should be required to provide all “baseline plus” information it has to the consumer within five days after their first communication. Courts should also require that all available “baseline plus” information be attached to any complaint in a debt collection lawsuit:
Recommended “Baseline Plus” Information
9. Proof of indebtedness signed by the consumer;
10. Date that debt was incurred and date of last payment;
11. Chain of title if debt has been sold;
12. Original debt;
13. Each payment credited to the debt;
14. Each fee and charge added to the debt;
15. Each payment credited against those fees and charges;
16. All other debits or charges to the account; and
17. Explanation of the nature of those fees, charges, debits, and all other credits to the debt, by source and amount
Item 9 will be hard to come by if asking for a wet ink signature due to the prominence of electronic acceptance of terms and internet applications for credit.
Numbers 10, 11, 12, 14 & 17 would certainly put the nail in the coffin of most zombie debt that exists today. It would also crimp the reselling of portfolios of bad debt that had already been sold at least once prior to the enactment date of any future legislation that includes these, or similar provisions.
None of this is a bad thing.
The report discusses the drain on court resources around the country resulting from debt collection lawsuits that are filed mill style and shows how the collection of unsecured debt has its own “robo signing” issues similar to the well published woes of foreclosure mill law firms across the country. Past Due is well worth the read.
Amendments to the FDCPA are still some time away.
If some of the “Plus” lines found in the report from Consumers Union make it into the amended federal collection laws, I predict the following:
- Fresh charge off debt portfolio values will increase to highs not seen since 2005.
- An end to lawsuits filed mill style
- A bit of shrinkage in the number of debt collection shops that will continue operations.
- Traffic to some of the more wacky web sites about “How to beat a debt collector with Debt Validation” will drop dramatically.
- Debt buyers will adapt their portfolio performance goals and move to sue sooner after purchase than later.
I believe that most of the suggestions found in the CU/EBCLC report will not only lead to better consumer protections, but also create better recovery performance at legitimate companies operating in the collection space.
When you work with consumers who are trying to recover from financial struggles of the past or present for any significant period of time you can honestly say; the vast majority of people want to pay their obligations. You should certainly be able to do so with dignity and confidence that you actually owe the debt, are not paying too much, paying the right party and are able to put the debt behind you for good and move on with your life.
Your participation in discussing this important topic in the comments section below is welcome.