Possibility #1 seems like the best way to achieve the FDCPA goals of not harassing or abusing the debtor AND not disclosing the existence of a debt to 3rd parties. Once the collector has verified that they are speaking to the debtor, they can (and should) give the mini-miranda disclosure.
While possibility # 5 (sometimes called a Zortman message) IS a workable solution to the FOTI dilemma and comes the closest to complying with the competing sections of FDCPA, it seems much more embarrassing to a debtor who's roommate/spouse/child etc. hears the message.
I also like the suggestion from #6 that the debtor can "opt out" of the mini-miranda warning in subsequent communications. In the real world, once a collector & debtor have spoken there is not much chance that the debtor does not know the purpose of subsequent communications or that the collector is calling to collect.
Option #2 seems like a good idea, but very few people will actually go to the website AND an eavesdropping 3rd party could go to the website and figure out that the call was regarding a debt.
As most Courts have stated, # 4 (FOTI message) is just rubbish. Furthermore, I would urge the CFPB to disregard almost any case or rationale that has come out of that circuit.
Ultimately, I just want CFPB to set forth SOME/ANY "safe harbor" provisions on these types of issues such that we can stop guessing how to be in compliance.
The idea of "private policing" has done nothing to actually change the way collectors behave. Instead, it has created a cottage industry for former slip-and-fall attorneys who can now extort collection agencies (or attorneys) who simply cannot afford to risk paying out $50,000 in atty fees if their "bona fide error" defense turns out to be insufficient. Essentially, a well-intentioned collector has no choice but to either pay these extortionists or risk bankruptcy.
These proposed rules are the first thing I've seen come out of FDCPA that might actually make a difference in the way that collections are handled. Therefore, I encourage CFPB to actually follow through with providing guidance to collectors instead of spending so much time, web space and effort teaching debtors how to sue collectors.
In order to get a default judgment through a State Court, a collector's pleadings have to spell out the theory of their case (usually contract) with sufficient specificity that a reasonable person can understand the basis for the claim. Without some form of affidavit from the actual creditor, very few courts will award a default judgment. Also, most state court approved forms are already written for the "least sophisticated debtor."
I don't see any reason to impose a more stringent standard on collection lawsuits than are imposed on any other lawsuit.
Either State or Federal law should provide some penalty for passing an NSF or "closed account" check that includes a presumption of guilt. The check either bounced or it did not. There's not a lot of grey area here. That said, either State or Federal law should also allow the drafter of the check a "safe harbor" wherein they can pay the face value of the check and some nominal compensation for the hardship suffered by the recipient of that check in order to avoid this penalty. Michigan has such a procedure and it seems relatively equitable.
The Michigan program for handling NSF checks is outlined in Michigan statute (MCL 600.2952). The statute provides the exact language to be used in the demand notice to the debtor but does not include the FDCPA Miranda language- which we add to the notice. We also send a copy of the dishonored check with the notice. The statute allows the debtor to pay the value of the check plus $25 is paid within 30 days of the notice, or $35 if paid thereafter. IF the creditor brings suit (after the first 30 days) they can sue for the value of the check, PLUS damages of 2 times the amount of the dishonored check PLUS $250 in costs. This may even be used in small claims court. It seems that the idea is to penalize those who pass bad checks such that merchants will be willing to accept checks from customers.
Providing too much information in the first notice creates a risk of divulging sensitive personal information to the person who now lives where the actual debtor used to. I do think that providing the chain of ownership information (especially original creditor) should be provided for sold debts. When it comes to medical debts, HIPPA becomes another concern. Therefore, specific info on medical debts should only be provided AFTER the collector has verified that they are communicating with the proper party.
The current validation notice is already too long--bordering on "boilerplate". To add more language to this would confuse or intimidate the least sophisticated debtor and/or lead them to immediately ask that the creditor cease communication. The problem with that strategy is that it forces the creditor to file suit, thereby incurring court costs that will be added to the debt. Instead, debtors should be encouraged to communicate their questions & concerns to the collector who can then (after right-party verification) openly discuss the account & quite possibly answer the debtor's question(s).
As for medical collections, I very, very rarely see a legitimate dispute. Most often people are just trying to get the item removed from their credit or scare the collector with threats of FDCPA action. Many of the disputes we receive are copied directly from the internet and contain all kinds of demands for proof that are not required by any state or federal law OR even the rules of evidence during trial. CFPB really needs to address this issue and set a clear standard for what is (or is not) a legitimate dispute and how the collector should respond.
We instruct our collectors to treat EVERY dispute the same--whether received in writing or over the phone and without regard to when it was received. Therefore, I agree that debtors should provide the information referenced in FCRA. The problem with FCRA disputes is the E-Oscar system that only affords the collector a couple options like "account information is accurate as of date reported"???? this doesn't even make sense as a response to the info provided by the debtor. If E-Oscar is going to be a valid "dispute" under FDCPA, that website needs some serious updating including making sure that disputes actually contain the information listed in CFR 1022.43(d) and allowing collectors to transmit the actual contract/itemized statements/etc back to the debtor.
Any FTC rule regarding verification should absolutely include an exception for frivolous and irrelevant disputes because there are way too many websites out there providing sample dispute letters and the advice to keep using them that the process is abused by enough debtors that we now have a standard letter to address this issue.
The CFPB should clarify whether "verify" means verify that you are a legitimate collection agency (not a scam) OR does it mean to prove the legitimacy of the account relative to the debtor's objections. If is the former, some basic information relative to the account--contract, itemized statements, or any other identifying information that only the creditor would have access to would suffice. If CFPB wants "verify" to answer every single objection a debtor can cook up, a collector could never move forward without spending hundreds of hours normally reserved for litigation.
As to a time frame on answering, I think the current system of stopping collection action until verification is provided is appropriate. Normally, sending the information to the debtor is not the hard part. Getting the info from the creditor and then circling back around to this particular account is what takes the time.
I don't think disputes should be limited to the first 30 days, but should be prohibited once suit has been filed. The Court rules and discovery process provide the debtor all the access to this information they could ever need or want and the provide this access under pretty strict penalties from the Court if the creditor/plaintiff does not provide the info requested.
If our client(s) can't provide any verification of the debt, we close the account and send the debtor a letter that we are doing so. Note: this has only happened once or twice in 20 years.
an unresolved dispute account should NOT be sold. If so, seller should be liable.
The problem is not with a form letter of dispute. The problem is that these websites and unreasonable letters lead unsophisticated debtors to believe that a creditor has to provide extraordinary proof that simply is not required.
'stopwithspoofedcallerID' (if that IS your real name) is correct that no legitimate dispute should be ignored, regardless of the form, but nor should debtors be allowed to abuse the system by repeatedly asking for proofs that are not required.
Tfleeman
1
Possibility #1 seems like the best way to achieve the FDCPA goals of not harassing or abusing the debtor AND not disclosing the existence of a debt to 3rd parties. Once the collector has verified that they are speaking to the debtor, they can (and should) give the mini-miranda disclosure. While possibility # 5 (sometimes called a Zortman message) IS a workable solution to the FOTI dilemma and comes the closest to complying with the competing sections of FDCPA, it seems much more embarrassing to a debtor who's roommate/spouse/child etc. hears the message. I also like the suggestion from #6 that the debtor can "opt out" of the mini-miranda warning in subsequent communications. In the real world, once a collector & debtor have spoken there is not much chance that the debtor does not know the purpose of subsequent communications or that the collector is calling to collect. Option #2 seems like a good idea, but very few people will actually go to the website AND an eavesdropping 3rd party could go to the website and figure out that the call was regarding a debt. As most Courts have stated, # 4 (FOTI message) is just rubbish. Furthermore, I would urge the CFPB to disregard almost any case or rationale that has come out of that circuit. Ultimately, I just want CFPB to set forth SOME/ANY "safe harbor" provisions on these types of issues such that we can stop guessing how to be in compliance. The idea of "private policing" has done nothing to actually change the way collectors behave. Instead, it has created a cottage industry for former slip-and-fall attorneys who can now extort collection agencies (or attorneys) who simply cannot afford to risk paying out $50,000 in atty fees if their "bona fide error" defense turns out to be insufficient. Essentially, a well-intentioned collector has no choice but to either pay these extortionists or risk bankruptcy. These proposed rules are the first thing I've seen come out of FDCPA that might actually make a difference in the way that collections are handled. Therefore, I encourage CFPB to actually follow through with providing guidance to collectors instead of spending so much time, web space and effort teaching debtors how to sue collectors.
View this comment in the discussion thread
Tfleeman
2
In order to get a default judgment through a State Court, a collector's pleadings have to spell out the theory of their case (usually contract) with sufficient specificity that a reasonable person can understand the basis for the claim. Without some form of affidavit from the actual creditor, very few courts will award a default judgment. Also, most state court approved forms are already written for the "least sophisticated debtor." I don't see any reason to impose a more stringent standard on collection lawsuits than are imposed on any other lawsuit.
View this comment in the discussion thread
Tfleeman
3
Either State or Federal law should provide some penalty for passing an NSF or "closed account" check that includes a presumption of guilt. The check either bounced or it did not. There's not a lot of grey area here. That said, either State or Federal law should also allow the drafter of the check a "safe harbor" wherein they can pay the face value of the check and some nominal compensation for the hardship suffered by the recipient of that check in order to avoid this penalty. Michigan has such a procedure and it seems relatively equitable.
View this comment in the discussion thread
Tfleeman
4
The Michigan program for handling NSF checks is outlined in Michigan statute (MCL 600.2952). The statute provides the exact language to be used in the demand notice to the debtor but does not include the FDCPA Miranda language- which we add to the notice. We also send a copy of the dishonored check with the notice. The statute allows the debtor to pay the value of the check plus $25 is paid within 30 days of the notice, or $35 if paid thereafter. IF the creditor brings suit (after the first 30 days) they can sue for the value of the check, PLUS damages of 2 times the amount of the dishonored check PLUS $250 in costs. This may even be used in small claims court. It seems that the idea is to penalize those who pass bad checks such that merchants will be willing to accept checks from customers.
View this comment in the discussion thread
Tfleeman
5
Providing too much information in the first notice creates a risk of divulging sensitive personal information to the person who now lives where the actual debtor used to. I do think that providing the chain of ownership information (especially original creditor) should be provided for sold debts. When it comes to medical debts, HIPPA becomes another concern. Therefore, specific info on medical debts should only be provided AFTER the collector has verified that they are communicating with the proper party.
View this comment in the discussion thread
Tfleeman
6
The current validation notice is already too long--bordering on "boilerplate". To add more language to this would confuse or intimidate the least sophisticated debtor and/or lead them to immediately ask that the creditor cease communication. The problem with that strategy is that it forces the creditor to file suit, thereby incurring court costs that will be added to the debt. Instead, debtors should be encouraged to communicate their questions & concerns to the collector who can then (after right-party verification) openly discuss the account & quite possibly answer the debtor's question(s).
View this comment in the discussion thread
Tfleeman
7
As for medical collections, I very, very rarely see a legitimate dispute. Most often people are just trying to get the item removed from their credit or scare the collector with threats of FDCPA action. Many of the disputes we receive are copied directly from the internet and contain all kinds of demands for proof that are not required by any state or federal law OR even the rules of evidence during trial. CFPB really needs to address this issue and set a clear standard for what is (or is not) a legitimate dispute and how the collector should respond.
View this comment in the discussion thread
Tfleeman
8
We instruct our collectors to treat EVERY dispute the same--whether received in writing or over the phone and without regard to when it was received. Therefore, I agree that debtors should provide the information referenced in FCRA. The problem with FCRA disputes is the E-Oscar system that only affords the collector a couple options like "account information is accurate as of date reported"???? this doesn't even make sense as a response to the info provided by the debtor. If E-Oscar is going to be a valid "dispute" under FDCPA, that website needs some serious updating including making sure that disputes actually contain the information listed in CFR 1022.43(d) and allowing collectors to transmit the actual contract/itemized statements/etc back to the debtor.
View this comment in the discussion thread
Tfleeman
9
Any FTC rule regarding verification should absolutely include an exception for frivolous and irrelevant disputes because there are way too many websites out there providing sample dispute letters and the advice to keep using them that the process is abused by enough debtors that we now have a standard letter to address this issue.
View this comment in the discussion thread
Tfleeman
10
The CFPB should clarify whether "verify" means verify that you are a legitimate collection agency (not a scam) OR does it mean to prove the legitimacy of the account relative to the debtor's objections. If is the former, some basic information relative to the account--contract, itemized statements, or any other identifying information that only the creditor would have access to would suffice. If CFPB wants "verify" to answer every single objection a debtor can cook up, a collector could never move forward without spending hundreds of hours normally reserved for litigation. As to a time frame on answering, I think the current system of stopping collection action until verification is provided is appropriate. Normally, sending the information to the debtor is not the hard part. Getting the info from the creditor and then circling back around to this particular account is what takes the time. I don't think disputes should be limited to the first 30 days, but should be prohibited once suit has been filed. The Court rules and discovery process provide the debtor all the access to this information they could ever need or want and the provide this access under pretty strict penalties from the Court if the creditor/plaintiff does not provide the info requested.
View this comment in the discussion thread
Tfleeman
11
If our client(s) can't provide any verification of the debt, we close the account and send the debtor a letter that we are doing so. Note: this has only happened once or twice in 20 years. an unresolved dispute account should NOT be sold. If so, seller should be liable.
View this comment in the discussion thread
Tfleeman
12
The problem is not with a form letter of dispute. The problem is that these websites and unreasonable letters lead unsophisticated debtors to believe that a creditor has to provide extraordinary proof that simply is not required. 'stopwithspoofedcallerID' (if that IS your real name) is correct that no legitimate dispute should be ignored, regardless of the form, but nor should debtors be allowed to abuse the system by repeatedly asking for proofs that are not required.
View this comment in the discussion thread