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  Wednesday, December 04, 2019
  ProPublica story on how Utah payday lenders get borrowers jailed for missing payments
  Here. Excerpt:
  Across Utah, high-interest lenders filed 66% of all small claims cases heard between September 2017 and September 2018, according to a new analysis of court records conducted by a team led by Christopher Peterson, a law professor at the University of Utah and the financial services director at the Consumer Federation of America, and David McNeill, a legal data consultant and CEO of Docket Reminder.
  Companies can sue for up to $11,000 in Utah’s small claims courts, which are stripped of certain formalities: There are rarely lawyers, judges are not always legally trained and the rules of evidence don’t apply.
  Lenders file thousands of cases every year. When defendants don’t show up — and they often don’t — the lenders win by default. Once a judgment is entered, companies can garnish borrowers’ paychecks and seize their property. If borrowers fail to attend a supplemental hearing to answer questions about their income and assets, companies can ask the court to issue a bench warrant for their arrest.
  Arrest warrants were issued in an estimated 3,100 small claims cases during the period studied by Peterson’s team. Almost all of the warrants — 91% — were issued in cases filed by payday, auto title or other high-interest lenders. The number of people who are jailed appears to be small. * * *
  There's a lot more in the article worth reading.
  Posted by Jeff Sovern on Wednesday, December 04, 2019 at 12:06 PM in Debt Collection, Predatory Lending | Permalink | Comments (0)
  Thursday, October 17, 2019
  Paper: Racial Disparities in Debt Collection
  Jessica LaVoice and Domonkos F. Vamossy, both of the University of Pittsburgh's Department of Economics, have written Racial Disparities in Debt Collection. Here is the abstract:
  A distinct set of disadvantages experienced by black Americans increases their likelihood of experiencing negative financial shocks, decreases their ability to mitigate the impact of such shocks, and ultimately results in debt collection cases being far more common in black neighborhoods than in non-black neighborhoods. In this paper, we create a novel data-set that links debt collection court cases with information from credit reports to document the disparity in debt collection judgments across black and non-black neighborhoods and to explore potential mechanisms that could be driving this judgment gap. We find that majority black neighborhoods experience approximately 40% more judgments than non-black neighborhoods, even after controlling for differences in median incomes, median credit scores, and default rates. The racial disparity in judgments cannot be explained by differences in debt characteristics across black and non-black neighborhoods, nor can it be explained by differences in attorney representation, the share of contested judgments, or differences in neighborhood lending institutions.
  Posted by Jeff Sovern on Thursday, October 17, 2019 at 04:20 PM in Consumer Law Scholarship, Credit Reporting & Discrimination, Debt Collection | Permalink | Comments (5)
  Sunday, September 15, 2019
  Consumer Law Professors Who Want to Read or Sign On to a Comment on the CFPB's Proposed Debt Collection Rule . . .
  . . . should get in touch with @daliejimenez.
  Posted by Jeff Sovern on Sunday, September 15, 2019 at 09:02 PM in Consumer Financial Protection Bureau, Debt Collection | Permalink | Comments (0)
  Sunday, August 25, 2019
  Oh where, oh where has verification gone in the CFPB's proposed FDCPA regulation?
  by Jeff Sovern
  Section 1692g(a)(4) requires debt collectors to send consumers a "a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector . . . . " But as best I can tell, the CFPB's proposed debt collection regulation doesn't provide for notification of this right to verification if you use the safe harbor of Model Form B-3, which appears at page 491 of the proposal. Here's what the model form says about this (I apologize for not getting the formatting correct; as one of my children likes to point out far too gleefully, I'm not great at tech):
  How can you dispute the debt?
  Call or write to us by November 12, 2019, to dispute all
  or part of the debt. If you do not, we will assume that our
  information is correct. If you write to us by November 12, 2019,
  we must stop collection on any amount you dispute until we
  send you information that shows you owe the debt.
  You may use the form below or you may write to us without the
  form. You may also include supporting documents. We accept
  disputes electronically at www.example.com/dispute.
  What else can you do?
  Write to ask for the name and address of the original
  creditor. If you write by November 12, 2019, we will stop
  collection until we send you that information. You may use the
  form below or write to us without the form. We accept such
  requests electronically at www.example.com/request.
  Nowhere there does it refer to verification. But the Bureau thinks the form does cover the consumer's verification rights, and indeed, that it meets the requirement of § 1692g(a)(4) of specifying that verification requests much be in writing. The Proposal states at page 253 "While Model Form B–3 would alert consumers to an oral dispute option, the form would clarify that only a written dispute would invoke verification rights pursuant to FDCPA sections 809(a)(4) and (5).” Maybe the Bureau thinks that a right to verification is limited to the right to obtain the name and address of the original creditor. But that has to be wrong as a matter of standard statutory interpretation because § 1692g(a)(5) already requires the validation notice to say that the consumer can request the original creditor's name and address. In other words, (a)(4) would have no independent meaning if all verification meant was that the consumer can get the original creditor's name and address and so would be surplussage. Courts usually construe statutes to avoid surplussage.
  That definition of verification also seems inconsistent with what at least some courts say verification means. For example, in Haddad v. Alexander, Zelmanski, Danner & Fioritto, PLLC, 758 F.3d 777, 783–86 (6th Cir. 2014) (per curiam), the court wrote that a verifying collector:
  [S]hould provide the date and nature of the transaction that led to the debt, such as a purchase on a particular date, a missed rental payment for a specific month, a fee for a particular service provided at a specified time, or a fine for a particular offense assessed on a certain date.
  That's a lot more than the name and address of the original creditor though I should note that some courts require less (for more on what verification requires, and consumer survey results on that question, see the article I co-authored here).
  Now maybe the Bureau thinks that the right to verification is encapsulated in the right to dispute the debt, especially as the model form includes a tear-off which lists several reasons the consumer might to dispute the debt, as follows:
  I want to dispute the debt because I think:
  □ This is not my debt.
  □ The amount is wrong.
  □ Other (please describe on reverse or
  attach additional information).
  I want you to send me the name and
  address of the original creditor.
  [There's supposed to be a check box before the last item too; more glee from my offspring]. But I don't think that's the Bureau's position based on the statement quoted above from page 253 that only a written notice of dispute invokes verification rights when the model form also indicates you can dispute debts orally. In addition, it bears repeating that nothing in the form says that you have to use the tear-off or an equivalent writing to assert verification rights; the only thing it says you have to do in writing is request the name and address of the original creditor.
  While Proposed § 1006.34(c)(3)(i) provides for the validation notice to include a “statement that specifies . . . that, if the consumer notifies the debt collector in writing before the end of the validation period that the debt, or any portion of the debt, is disputed, the debt collector must cease collection of the debt, or the disputed portion of the debt, until the debt collector sends the consumer either the verification of the debt or a copy of a judgment,” that provision does not appear in the model form.
  I would be interested in hearing comments on this if anyone thinks I have gone off the track.
  Posted by Jeff Sovern on Sunday, August 25, 2019 at 06:34 PM in Consumer Financial Protection Bureau, Debt Collection | Permalink | Comments (0)
  Tuesday, June 11, 2019
  My Bloomberg piece about the CFPB's FDCPA proposed rules and consumer privacy
  by Jeff Sovern
  Link here
  Excerpt:
  [T]the bureau proposal would invade consumer privacy by allowing collectors to bombard consumers with demands for payment. Under the proposal, debt collectors could try the consumer’s phone number seven times a week and leave voicemails each time. That may not sound too bad, but the CFPB reports that nearly 75% of consumers with a debt in collection also have other debts in collection, meaning that such consumers could be overwhelmed with calls from multiple collectors. * * *
  Add in that the proposal does not limit the number of texts and emails individual collectors could send, and the result might be that consumers, far from receiving occasional reminders that they owe a debt, flinch when their phone vibrates with a call, text, or email.
  Posted by Jeff Sovern on Tuesday, June 11, 2019 at 08:56 AM in Consumer Financial Protection Bureau, Debt Collection | Permalink | Comments (0)
  Friday, June 07, 2019
  Some big problems with the CFPB's proposal to allow debt collectors to leave limited-content messages over the phone
  by Jeff Sovern
  The more I think about the CFPB's recent proposal to allow debt collectors to leave limited-content messages over the phone, the more I think the proposal has real problems. The proposal would allow debt collectors to leave voicemails or oral messages with whomever answered the phone. To qualify as a limited-content message, the message must contain a few items--such as the collector's name and number--may contain certain other items--such as that the person is calling about an account--but can't contain still other items, such as that the person is trying to collect a debt. These limited-content messages would not count as "communications" within the meaning of the FDCPA, and so wouldn't trigger disclosures that would tell third parties who happened to hear the message that a debt collector is pursuing the consumer. But I don't think they will work, at least not as currently proposed. First I'm going to discuss messages left with a human being, and then voicemails.
  Messages left with people
  Suppose a collector calls to speak to a consumer, let's call him Stan, and someone else, call her Marina, answers. The collector delivers the message: "Please have Stan call me, Ryan, at [number]." So far there's not a problem. But what happens when Marina asks, as people taking messages often do, "What's this about?" Ryan could reply that it's about an account, which is permitted under the proposal. But of course Marina is then likely to ask an account with whom. And Ryan can't answer because if Ryan goes beyond the items listed in the definition of a limited-content message, he's no longer delivering a limited-content message, and anything he says risks violating the FDCPA.
  So maybe Ryan doesn't want to use the word "account" to avoid getting the question about whom the account is with. Should Ryan answer that it's a "personal business matter"? That choice has two problems. First, it violates the prohibition on saying anything not listed in the definition of limited-content messages. Second, that was the language the collector used in Foti v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643 (S.D.N.Y. 2006), the case that created the so-called Foti problem. Not only did Foti say that the message left there violated the FDCPA (though some courts have not agreed as to similar messages), but the Bureau's decision not to include such language within the limited-content messages safe harbor when the Bureau proposal cited Foti indicates that the Bureau is not comfortable with limited-content messages being left that include that language. What if Ryan says it's private or some other such formulation? I don't think that's different enough from "personal business matter" to give me confidence that it will work. Any debt collector saying the matter is private risks paying for litigation to determine if the message is no longer a limited-content message.
  Another option for Ryan is to say "I can't answer any questions." But again, who knows if that will take the message out of being a limited-content message? Even saying that is saying something. Still another option is for Ryan to hang up quickly when the consumer asks a question. That will probably work once or even twice per debtor. But if Ryan calls a third time, and hangs up on the same person taking the message a third time, is that harassment? Harassment also violates the FDCPA. Maybe Ryan could try to hang up quickly before the person taking the call gets to ask a question, but that's going to be hard to time when Ryan probably wants to verify that the person has written down the phone number correctly. At the end of the day, debt collectors might be better off not leaving messages with live people. Otherwise, they risk funding a law suit to defend their conduct, and maybe losing it.
  Voicemails
  The collector doesn't have to worry about being asked questions when leaving voicemails, so that's not a problem. But there are two other issues (and these are also true of messages left with live people): first, it won't take long before everyone knows that a voicemail that refers to an account but doesn't say who it's with is a call from a debt collector. I will have more to say about that in an upcoming piece in Bloomberg Law, so I will leave that alone for the moment.
  But even a limited-content voicemail that doesn't use the word "account" is going to tip off anyone who hears it that the call is from a debt collector. I'm pretty sure that these days, almost no one leaves voicemails of the sort debt collectors would be permitted to leave under the proposal. Back in the eighties and nineties, they did, but today almost everyone communicates via text or email. The only people I get voicemails from are older folks who never took up texting--and anyone who hears one of their messages knows who it's from; doctors' offices--and they always identify themselves; and robocallers--and they're pretty easy to identify. Maybe that isn't true of everyone, but I've been asking people I know, and they say much the same. I never get a voicemail like the one debt collectors will be permitted to leave (if you do, please so indicate in the comments). About a third of adult Americans have a debt in collection, which means a lot of people could receive debt collector voicemails, and if they later hear other people getting the same kind of message, they will know what it is. That will violate the consumer's privacy. This proposal would have made a lot more sense before everyone learned to text or use email. But I don't think it will work today.
  It's ironic: for years, I thought that debt collectors should be able to leave voice messages for consumers. But now I don't think that can be done with violating the FDCPA's goal of protecting consumer privacy. The ship of phone messages has sailed.
  Posted by Jeff Sovern on Friday, June 07, 2019 at 08:02 PM in Consumer Financial Protection Bureau, Debt Collection | Permalink | Comments (0)
  Wednesday, April 17, 2019
  Anticipating the CFPB's Debt Collection Rules
  Reporter Renae Merle has a story up at the Washington Post about the debt collection rules that the CFPB is expected to unveil “in a few weeks.” The story was prompted, in part, by a recent speech given by CFPB Director Kathy Kraninger during which she “laid out a business-friendly vision for the CFPB.” The article highlights what will certainly be contentious issues addressed by the new rules, like how, and how often, debt collectors are allowed to contact consumers.
  The full story is available here.
  Posted by Mike Landis on Wednesday, April 17, 2019 at 06:41 PM in Consumer Financial Protection Bureau, Debt Collection | Permalink | Comments (0)
  Wednesday, January 09, 2019
  ABA President responds to our op-ed but ignores our main argument
  by Jeff Sovern
  Here, in Bloomberg. I'm afraid I didn't find it persuasive. He didn't respond to our argument that state courts often fail to discipline attorneys who violate ethical rules in debt collection matters, as well as other points we made.
  Posted by Jeff Sovern on Wednesday, January 09, 2019 at 05:15 PM in Debt Collection | Permalink | Comments (2)
  Thursday, December 06, 2018
  Bloomberg Law Insight: Why the ABA Is Wrong on Amending Debt Collection Bill
  by Jeff Sovern
  That's the title of my essay my colleague Gina Calabrese and I wrote here in Bloomberg Law. Excerpt:
  The ABA argues that consumers don’t need protection from unscrupulous lawyers because lawyers are already subject to state ethics rules largely written by the ABA itself. Experience tells us otherwise. When a law firm sued consumers for debts they did not owe, the Consumer Financial Protection Bureau needed the FDCPA to stop it. One of us teaches in a law school consumer clinic and has observed that ethical rules do not stop attorneys from deceiving consumers.
  * * *
  One of us has seen an attorney tell a court—under penalty of perjury—that a large balance remained on a debt that had been fully paid. The firm later admitted it was wrong, but only after it was held accountable under the FDCPA. Lawyers have frozen our law clinic’s clients’ bank accounts, blocking their access to their own funds, for debts that had already been paid. In none of these cases did the attorneys face ethics sanctions. Indeed, courts routinely excuse such missteps.
  Posted by Jeff Sovern on Thursday, December 06, 2018 at 09:42 AM in Consumer Legislative Policy, Debt Collection | Permalink | Comments (0)
  Monday, December 03, 2018
  Debt collector trade group to have event at Trump hotel while CFPB considers debt collection rules
  WaPo has the story here. The government is also considering other debt collection initiatives, as noted in the article.
  Posted by Jeff Sovern on Monday, December 03, 2018 at 02:59 PM in Debt Collection | Permalink | Comments (0)
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