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    Edelman, Combs, Latturner, & Goodwin, LLC

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    Phone: 312-739-4200
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    5 things debt collectors will no longer be able to do to you

    Saturday, July 30th, 2016

    Prepared Remarks of CFPB Director Richard Cordray on Field Hearing on Debt Collection

    Sacramento, Calif.
    July 28, 2016

    Thank you all for coming today. I am glad to be here in California, which has actively sought to protect its consumers from bad debt collection practices. In fact, the Rosenthal Fair Debt Collection Practices Act was enacted in 1977, at the same time as its federal counterpart. Yet it goes further by applying most of its provisions to first-party creditors as well as third-party contract collectors, a premise we will be considering carefully ourselves as we proceed.

    These laws were enacted to put an end to abusive practices by debt collectors. They have made a large difference in the lives of consumers. Yet even today, we continue to hear about serious problems with debt collection – debiting accounts without authorization, calling at all hours of the day or night, threats of arrest or criminal prosecution, or threats of physical harm to consumers and even their pets. Together, the Consumer Financial Protection Bureau and the Federal Trade Commission have worked to curb some of these worst abuses with vigorous enforcement of existing federal laws. To date, we have ordered creditors and debt collectors to refund hundreds of millions of dollars in enforcement actions based on unlawful debt collection practices.

    But still there is much work to be done to assure that consumers are treated with the dignity and respect they deserve throughout the debt collection process. And that is what we are here to talk about today.

    We recognize that debt collection serves an important role in the proper functioning of consumer credit markets. If people owe money that they borrowed on their credit card, or because they took out a student loan or received service from their telephone company, they are obligated to pay the money back and they should do so. But for many understandable reasons, huge numbers of Americans fall behind on their debts at one time or another. We estimate that about one in three consumers – more than 70 million people in all – were contacted by a creditor or collector seeking to collect a debt within the past year.

    In the debt collection market, notably, consumers do not have the crucial power of choice over those who do business with them when creditors turn their debts over to third-party collectors. They cannot vote with their feet. They have no say over who collects their debts, and they likely know next to nothing about the collector until they receive a call or a letter. This can quickly lead to a barrage of communications, which in some cases are designed to be harassing or intimidating. Often debt collectors are motivated to go to almost any lengths to try to extract as much as they possibly can from the debtor. This is because they are typically paid based on the amount they collect, the relationship may be fleeting, and the more distant risk of being called to account later may not outweigh the immediate urgency of getting paid today.

    It is not surprising, then, that for many years, the debt collection industry has drawn more complaints than any other, not only complaints to the Consumer Bureau but also to other agencies and officials in federal, state, and local government. To date, we have handled about 250,000 debt collection complaints, which is about one-quarter of all the complaints we have received. Last year alone, we fielded 85,000 debt collection complaints. The largest segment had to do with continued attempts to collect a debt that the consumer said was improper, because it was not their debt in the first place or because it had already been repaid or discharged in bankruptcy. Without clear rules of the road that can be effectively enforced in an even-handed manner, the companies that try to collect debts in the right way will have trouble competing against others that are willing to bend the rules or push the limits of the law to get an advantage.

    A collections item can start as an overdue car payment, medical bill, or utility bill, or any kind of unpaid invoice. The story of how a financially struggling consumer gets to the point of owing money can reflect all the many limitations of human nature and the human condition. Some people just put their head in the sand and avoid payment. Other problems result from poor or unfortunate choices. Often the overdue bill is due to bad luck or some unexpected larger tragedy like job loss, illness or injury, or the dislocations caused by divorce. Those living under the shadow of indebtedness already tend to bear an emotional toll, which is intensified as they experience the new trials of the debt collection process.

    When a consumer fails to pay the original creditor, that creditor usually makes some effort to collect on its own, but eventually may hire a third-party collector or sell the debt to a debt buyer. When the creditor sells off the debt, that typically means it has given up trying to recover the funds owed and has settled for recouping what it can by selling the delinquent debts, perhaps for as little as pennies on the dollar. The new debt owner then has the legal right to seek to collect the full amount of the original debt. In addition to trying to contact the consumer to seek payment, the debt owner may report the debt to the credit reporting companies, which creates pressure to pay it off, or may file a lawsuit against the consumer.

    The main federal law that protects consumers and governs the industry is the Fair Debt Collection Practices Act, enacted almost forty years ago. Since then, courts have come to different interpretations of the statute, creating uncertainty for debt collectors and consumers alike. Moreover, as new forms of technology have emerged, many questions have arisen as to how to apply the law. For example, the law explicitly addresses the use of postcards, collect calls, and telegrams – but is silent about the use of voicemail, email, and text messages.

    In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act authorized the Consumer Bureau to be the first agency to issue comprehensive federal rules on debt collection. Since we opened our doors, we have been studying this industry as we engaged in enforcement and supervisory activity to improve legal compliance. We have engaged extensively with stakeholders across the spectrum and conducted our own research.  And we have also looked to the good work done in this area by our colleagues at the Federal Trade Commission. One of their research reports concluded that debt collectors need to have better information so they are more likely to collect from the right person in the right amount.

    Today we are considering proposals that would drastically overhaul the debt collection market. Our rules would apply to third-party debt collectors and to others covered by the Fair Debt Collection Practices Act, including many debt buyers. As part of our overhaul, we also plan to address first-party debt collectors soon, but on a separate track. The basic principles of the proposals we are considering are grounded in common sense. Companies should not collect debt that is not owed. They should have more reliable information about the debt before they try to collect. They would have to limit the number of attempts to make contact and should give consumers better information and more control over the process. Collectors also would have to make it easier for consumers to pursue disputes, and they would be barred from collecting on disputed debt that lacks proper documentation. These same requirements would follow along with any debts that are sold or transferred to another collector.

    Both consumers and responsible businesses stand to benefit by improved standards for debt collection. Consumers deserve to be treated with dignity and respect, and businesses should be able to operate fairly and reasonably to collect the debts they are legitimately owed.


    In the United States today, debt collection is a $13.7 billion industry that employs more than 130,000 people across approximately 6,000 collection companies. When these companies receive a portfolio of debts to begin collection, they may get only basic data – for example, name, address, creditor, and an amount claimed to be due. If the account is later sold or transferred, the information that goes with it is often incomplete, and anything a consumer had submitted may not be passed along. That breeds inaccuracy.

    Our proposal under consideration would require collectors to substantiate a debt before seeking to collect on it. Collectors would have to confirm that they have sufficient information to start collection, such as the full name, last known address, last known telephone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default. In addition, we are considering requiring collectors to refrain or cease from collecting if certain “warning signs” appear, such as a portfolio with large amounts of missing information or a high dispute rate.

    These rules would apply to each successive debt collector. Each new collector would have to review their files to establish a reasonable basis for demanding payment. And if debt gets sold, it would have to be accompanied by specific information about the debt – information that benefits the consumer, not just the collector. For example, if a debt collector learns that a consumer is represented by an attorney, that information would have to be passed on to the next collector. For an active-duty servicemember with protections under the Servicemembers Civil Relief Act, that information would have to be passed from one collector to the next so those protections would be readily known and maintained.

    Documentation of claims has long been a problem at all phases of the debt collection process. But let me focus on the process of seeking repayment through the courts, which is where bad information can hurt consumers the most. When debt collectors file a lawsuit to collect on a debt, as they often do, few consumers have the resources, the time, or the ability to appear and defend their cases in court. This will often lead to a default judgment and a victory for the debt collector, regardless of whether the suit is against the wrong person or for the wrong amount. It is even true where the time allowed for filing the lawsuit has already expired. Our research indicates that default judgments are entered in 60 to 90 percent of the lawsuits that are filed.

    These situations encourage sloppy or even fraudulent practices. Nearly a year ago, we took enforcement actions against two of the largest debt buyers in the country, Encore Capital Group and Portfolio Recovery Associates, for churning out lawsuits using robo-signed court documents. In numerous cases, the companies had no intention of proving the debts in court. Instead, they relied on consumers defaulting – even where the paperwork often stated incorrect balances, interest rates, and due dates. The two companies were ordered to pay $61 million in consumer refunds and stop collection on more than $128 million worth of debts.

    We also have been active on the debt seller side of the equation. Along with attorneys general from 47 states and the District of Columbia, we took action against JPMorgan Chase for selling invalid credit card debt and for robo-signing documents. The bank was ordered to pay $50 million in consumer refunds and $136 million in penalties and payments. It also agreed to halt collection activity on more than 528,000 consumer accounts, including a permanent ban on collecting the accounts, enforcing them in court, or selling them to someone else.

    But enforcement actions alone cannot fully resolve these problems. Our proposal under consideration would make clear that collectors must meet a higher threshold before pursuing a lawsuit than before they make a verbal or written claim to a consumer. And the proposal under consideration would make clear that collectors are barred from filing a lawsuit to collect on a debt where the statute of limitations has expired.


    It is not enough simply to assure that debt collection is premised on the right person and the right amount. Consumers need to understand what the collector is doing and why. Consumers also need protection when it comes to what, when, where, and how collectors communicate with them. Debt collectors are generally prohibited from engaging in acts that harass, oppress, or abuse consumers. But many consumers still complain about frequent or repeated phone calls; debts that are wrongly disclosed to third parties; and contacts at inconvenient times or places, such as when they are in the hospital. Our proposal under consideration would give consumers more information and control in their dealings with collectors and limit excessive contact.

    When consumers are contacted by collectors for debt they do not recognize or barely remember, they may not know what their next move should be. They may wonder if it is a scam. They may feel pressure to pay a debt they do not believe is accurate just to make the collector go away. So one thing we are considering is to enhance the information people receive from collectors. Debt collectors already must give consumers initial notices about the debt that contain limited information. But we have heard from many consumers who remain confused even after getting these notices. We are considering expanding the information in these notices so consumers get much more detail about the debt.

    We also want consumers to be better informed about the debt collection process. Many people do not know what rights they have, when they can invoke their rights, or how they can dispute a debt. The initial notices consumers receive from collectors often are written in legalese that can be hard to understand. On the other side, industry has been hesitant to edit or improve these letters because of concerns about potential liability if they do not repeat what the law says word for word. So we would require collectors to provide a statement with specific information about a consumer’s federal rights, written in plain language. This would include a notice of their right to stop or limit communications, a statement that the debt is too old to support a lawsuit, and information about the Consumer Bureau’s website, where they can file a complaint or “Ask CFPB” to answer their debt collection questions.

    The proposal we are considering would also put consumers in control of their communications with collectors. One provision would limit collectors on each account to no more than six attempts per week to contact a consumer they have not previously reached. This cap would cover all contact attempts through various phone numbers, email addresses, or postal addresses, including unanswered calls and voicemails. After the consumer has been contacted initially, a collector then would generally be limited on each account to one actual contact per week and no more than three attempted contacts per week.

    Consumers would also be able to stop collectors from using specific channels to contact them. For example, they could more easily block collectors from calling on a particular phone line, such as a work phone, or calling during certain hours. If consumers say not to call on their cell phone, then the collector would have to comply. We also are considering a 30-day waiting period for collectors seeking to collect the debt of a consumer who has passed away. This would protect the dignity of surviving spouses or others who may be coping with the early stages of the grieving process.


    The third category of protections we are considering has to do with disputes. Under current federal law, consumers can dispute the debt or ask for more information if they are unsure whether they owe money to a creditor or how much. But few consumers fully understand their rights to question or dispute a debt.

    Under the proposal we are considering, just by asserting a disagreement about the validity of the debt or the right of the collector to collect that debt, consumers would obligate the collector to go back and check their documentation. Collection activity could not resume until the information is confirmed. We would make it easier for consumers who do not believe they owe that amount to file a dispute at the very beginning of the process by including a “tear off” sheet at the bottom of the notice sent to the consumer. Consumers could mail this form back to the collector and simply check the relevant boxes on the form, explaining why they think the collector is wrong. If they do so within 30 days after receiving the notice, the collector would be blocked from contacting them until after the dispute has been investigated and written verification has been provided.

    A key point is that collectors would not be able to bury the dispute just by selling the debt to a new collector. If they have not resolved the dispute before selling the debt, any new collector would have to investigate and address the dispute before seeking payment.


    Today we are sharing this outline of proposals to reform debt collection with representatives of small entities engaged in debt collection. Next month, these representatives will meet with a Small Business Review Panel we are forming along with our colleagues from the Office of Management and Budget and the Office of Advocacy of the Small Business Administration. The panel will explore the potential impact of these measures on small businesses. We also will be meeting with consumer and industry stakeholders to obtain their input.

    As Thomas Fuller once said, “Debt is the worst poverty.”  It can overwhelm people and imbue them with a sense of helplessness. By cleaning up the integrity of this process, we would resolve many of the problems at their foundation. Consumers should not be limited to being passive participants in a system they do not trust or understand. We are determined to put the burden of proof on the debt collector and take some of this weight off the consumer. We will remain determined to address these issues in ways that improve people’s lives. Thank you.

    FTC order against LabMD

    Friday, July 29th, 2016

    Stating Company Failed to Protect Consumers’ Sensitive Medical and Personal Information

    The Federal Trade Commission today announced the issuance of an Opinion and Final Orderreversing an Administrative Law Judge (ALJ) Initial Decision that had dismissed FTC charges against medical testing laboratory LabMD, Inc. In reversing the ALJ ruling, the Commission concludes that LabMD’s data security practices were unreasonable and constitute an unfair act or practice that violated Section 5 of the Federal Trade Commission Act.

    The case concerns the alleged failure by Respondent LabMD, Inc., which operated as a clinical laboratory for physicians, to protect the sensitive personal information, including medical information, of consumers. Over the course of its operations between 2001 and 2014, LabMD collected sensitive personal information, including medical information, for over 750,000 patients.

    As explained in its unanimous opinion, written by Chairwoman Edith Ramirez, the Commission concludes that the ALJ applied the wrong legal standard for unfairness and finds that “LabMD’s security practices were unreasonable, lacking even basic precautions to protect the sensitive consumer information maintained on its computer system. Among other things, it failed to use an intrusion detection system or file integrity monitoring; neglected to monitor traffic coming across its firewalls; provided essentially no data security training to its employees; and never deleted any of the consumer data it had collected.”

    The Commission further finds in its opinion that “these failures resulted in the installation of file-sharing software that exposed the medical and other sensitive personal information of 9,300 consumers on a peer-to-peer network accessible by millions of users. LabMD then left it there, freely available, for 11 months, leading to the unauthorized disclosure of the information.”

    Section 5 of the FTC Act authorizes the Commission to challenge “unfair or deceptive” acts or practices in or affecting commerce. Section 5(n) provides that an act or practice may be deemed unfair if it “causes or is likely to cause substantial injury to consumers” which is neither reasonably avoidable by consumers nor outweighed by countervailing benefits to consumers or competition.

    The Commission in its decision concludes that “the privacy harm resulting from the unauthorized disclosure of sensitive health or medical information is in and of itself a substantial injury under Section 5(n),” and that LabMD’s disclosure of a file containing this information for 9,300 consumers caused substantial injury.  In addition, the Commission finds that LabMD’s security practices were “likely to cause substantial injury,” as they led to the exposure of sensitive information to millions of online P2P users, and because complaint counsel proved that the likelihood and magnitude of potential harm were both high. Complaint counsel’s expert witnesses identified a range of harms such as medical identity theft that can often result from the unauthorized disclosure of the types of sensitive personal information maintained by LabMD on its computer network.

    Having found that LabMD violated the FTC Act, the Commission’s Final Order will ensure that LabMD reasonably protects the security and confidentiality of the personal consumer information in its possession by requiring LabMD to establish a comprehensive information security program. It also requires LabMD to obtain periodic independent, third-party assessments regarding the implementation of the information security program, and to notify those consumers whose personal information was exposed on the P2P network about the unauthorized disclosure of their personal information and about how they can protect themselves from identity theft or related harms.

    LabMD has 60 days after service of the Commission’s Opinion and Final Order to file a petition for review with a U.S. Court of Appeals.

    The Commission vote to issue the opinion and order was 3-0.

    Advocates Applaud CFPB Proposed Debt Collection Rules but Additional Provisions Are Needed

    Friday, July 29th, 2016

    Advocates Applaud CFPB Proposed Debt Collection Rules but Additional Provisions Are Needed

    FOR IMMEDIATE RELEASE: JULY 28, 2016 || Contacts:: April KuehnhoffMargot Saunders or Jan Kruse, 617-542-8010

    (WASHINGTON) New proposed debt collection rules outlined today by the Consumer Financial Protection Bureau (CFPB) will significantly strengthen consumer protections against debt collection abuses, but even stronger action is needed due to the rampant debt collection abuses prevalent today, according to advocates at the National Consumer Law Center (NCLC).

    “Nearly 40 years after Congress passed the Fair Debt Collection Practices Act, too many debt collectors pursue the wrong person or the wrong amount. Instead of simply requiring collectors to have full and accurate information, the CFPB proposal sets up a complicated and inadequate system that lets collectors rely on information that may be inaccurate,” said Margot Saunders, an attorney with the National Consumer Law Center.

    Collection of time-barred “zombie debts” is addressed in the proposal, but imperfectly. The CFPB’s proposal would prohibit lawsuits on stale debt, require collectors to tell consumers that the consumer can no longer be sued, and prohibit revival of the time-barred debt if the consumer makes a payment. But collectors can still mislead consumers into paying debts that are not legally enforceable and can still improperly collect default judgments against consumers who don’t have attorneys to navigate complicated laws. “Killing off zombie debt once and for all by banning all collection of time-barred debt remains the most effective way to protect consumers,” said National Consumer Law Center attorney April Kuehnhoff.

    Consumers continue to be overwhelmed with harassing collection phone calls. Credit card companies “limit” their collectors to 4-15 calls per account per day and collectors want the right to call you 6 times a day – up to 186 times a month. “Most people who owe debts simply do not have the money to pay due to unexpected illness, unemployment, or divorce,” explained Saunders. “Abusive collectors should not be allowed to add to families’ stress with multiple harassing calls each week.” She applauded the proposal to clearly limit the number of calls each week, but noted that the six calls per week should be much lower and, “it is essential that consumers are told that they have the right to tell an abusive collector: ‘Stop calling!’”

    “We are also disappointed that the proposal does nothing to increase penalties for abusive collectors,” added Kuehnhoff. She urged the CFPB to clarify that courts can impose multiple penalties for collectors who break the law multiple times and can order the collector to obey the law. “Stronger penalties are essential to stop especially abusive collectors from continuing business as usual,” she explained.

    The proposed rules outlined by the CFPB only address third-party debt collectors; a second proposal to address abusive collection by first-party creditors, such as credit card companies and payday lenders, is expected at a later date.

    NCLC has published a summary of Rules Needed to Stop Debt Collection Abuses. For more information on NCLC’s body of work on fair debt collection, visit:

    National Consumer Law Center Resources

    Debt Collection Rulemaking at the CFPB:

    CFPB debt collection proposals

    Thursday, July 28th, 2016


    July 28, 2016

    Office of Communications
    Tel: (202) 435-7170

    New Protections Would Limit Collector Contact and Help Ensure the Correct Debt is Collected

    Washington, D.C. – Today the Consumer Financial Protection Bureau (CFPB) outlined proposals under consideration that would overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt. Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect. As they are collecting, companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute the debt. When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence. These requirements and restrictions would follow the debt if it were sold or transferred.

    “Today we are considering proposals that would drastically overhaul the debt collection market,” said CFPB Director Richard Cordray. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

    The outline of the proposals under consideration can be found at:

    Debt collection is a multi-billion dollar industry and affects about 70 million consumers who have debt in collection, some of whom may be wrongly contacted by debt collectors. Banks and other original creditors may collect their own debts or hire third-party debt collectors. Original creditors also often sell their consumers’ debts to debt buyers that may collect on the purchased debts or hire third-party debt collectors to recover them. It is estimated that there are more than 6,000 debt collection firms in the United States.

    According to a recent CFPB study, about one-in-three consumers had been contacted by a creditor or collector trying to collect a debt within the past year. Most consumers who had been contacted reported attempts to collect payment on between two and four debts. And one-third of consumers who had been contacted about a debt in the last year reported an attempt to collect in the wrong amount.

    Debt collection generates more complaints to the CFPB than any other financial product or service. The most common complaints are about collectors seeking to collect debt from the wrong consumer, for the wrong amount, or debt that could not legally be enforced. When consumers are contacted by collectors for debt they do not recognize, they often do not know what to do next. They may feel pressure to resolve the debt but do not have a clear understanding of their rights. Sometimes consumers pay a debt they don’t believe is accurate to make the collector stop contacting them. Other times, consumers spend significant time and money to dispute the debt. They may have to dig through old records to prove information to the collector or retain a lawyer.

    Problems with the information that collectors receive when they are hired or they purchase debt, combined with the lack of information provided by collectors to consumers during collections, can cause substantial consumer harm. These factors also drive up costs to collectors, which hurts the industry at large. When an account is sold or placed with a new collector, the information that transfers is often only to the benefit of the collector. It usually includes how to contact the consumer and how much money they supposedly owe. The Bureau’s proposals under consideration would overhaul debt collections from when third-party collectors first examine their portfolios of debt to their last attempts to collect.

    Debt Collection Protections
    Debt collectors are already prohibited by federal law from harassing, oppressing, or abusing consumers. The main law that governs the industry and protects consumers is the 1977 Fair Debt Collection Practices Act. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act revised that law, making the Bureau the first agency with the power to issue substantive rules under the statute.

    Today’s proposals under consideration would increase protections pertaining to third-party debt collectors and others covered by the Fair Debt Collection Practices Act, including many debt buyers. As part of its overhaul of the debt collection marketplace, the CFPB plans to address consumer protection issues involving first-party debt collectors and creditors on a separate track. Specifically, the new protections are aimed at ensuring that debt collectors:

    • Collect the correct debt: Collectors would have to scrub their files and substantiate the debt before contacting consumers. For example, collectors would have to confirm that they have sufficient information to start collection, such as the full name, last known address, last known telephone number, account number, date of default, amount owed at default, and the date and amount of any payment or credit applied after default.
    • Limit excessive or disruptive communications: Collectors would be limited to six communication attempts per week through any point of contact before they have reached the consumer. In addition, if a consumer wants to stop specific ways collectors are contacting them, for example on a particular phone line, while they are at work, or during certain hours, it would be easier for a consumer to do that. The CFPB is also considering proposing a 30-day waiting period after a consumer has passed away during which collectors would be prohibited from communicating with certain parties, like surviving spouses.
    • Make debt details clear and disputes easy: Collectors would be required to include more specific information about the debt in the initial collection notices sent to consumers. This information would include the consumer’s federal rights. They would have to disclose to consumers, when applicable, that the debt is too old for a lawsuit. The proposal under consideration would also add a “tear-off” portion to the notice that consumers could send back to the collector to easily dispute the debt, with options for why the consumer thinks the collector’s demand is wrong. The tear-off would also allow consumers to pay the debt. The consumer could also verbally question the debt’s validity at any time, and prompt the collector to have to check its files again.
    • Document debt on demand for disputes: If the tear-off sheet or any written notice is sent back within 30 days of the initial collection notice, the collector would have to provide a debt report – written information substantiating the debt – back to the consumer. The collector could not continue to pursue the debt until that report and verification is sent.
    • Stop collecting or suing for debt without proper documentation: If a consumer disputes – in any way – the validity of the debt, collectors would have to stop collections until the necessary documentation is checked. Collecting on debt that lacks sufficient evidence would be prohibited. In addition, collectors that come across any specific warning signs that the information is inaccurate or incomplete would not be able to collect until they resolve the problem. Warning signs could include a portfolio with a high rate of disputes or the inability to obtain underlying documents to respond to specific disputes. Collectors also would be required to check documentation of a debt before pursuing action against a consumer in court. For example, collectors would have to review evidence of the amount of principal, interest, or fees billed, and the date and amount of each payment made after default.
    • Stop burying the dispute: If debt collectors transfer debt without responding to disputes, the next collector could not try to collect until the dispute is resolved. The proposals under consideration also outline information that collectors would have to send when they transfer the debt to another collector so that a consumer does not have to resubmit this information to the new collector.

    Today’s outline of the proposals under consideration is in preparation for convening a Small Business Review Panel to gather feedback from small industry players, which is the next step in the rulemaking process. In addition to consulting with small business representatives, the Bureau will continue to seek input from the public, consumer groups, industry, and other stakeholders before continuing the rulemaking process. When the Bureau issues proposed regulations, the public is invited to submit written comments which will be carefully considered before final regulations are issued.

    As part of the review process, the CFPB is also releasing a report, “Study of Third-Party Debt Collection Operations,” which is available at:

    To date, the CFPB has taken a number of steps to improve the debt collection marketplace and study the industry. In October 2012, the CFPB issued a Larger Participant rule establishing supervisory authority over nonbank debt collectors with more than $10 million in annual receipts resulting from consumer debt collection. This covers approximately 175 debt collectors accounting for more than 60 percent of the industry’s annual receipts. The Bureau has ordered creditors and debt collectors to stop collecting on debt based on bad information, and to refund hundreds of millions of dollars for unlawful debt collection.


    Payday loan collection scam — we get lots of complaints about this

    Monday, July 18th, 2016

    If you get a letter/ email like this, it is a scam.  Do not pay.  Do not provide information.  Do forward it to the Federal Trade Commission, Consumer Financial Protection Bureau, and your state Attorney General:


    This is to inform you, that you are going to be legally prosecuted in the Court House within a couple of days. Your S.S.N is put on hold by the US Federal Government, so before the case if filed we would like to notify you about this matter.

    It seems apparent that you have chosen to ignore all our efforts to contact you in order to resolve your case with the Bureau of Defaulters. At this point you have made your intentions clear and have left us no choice but to protect our interest in this matter. Now this means a few things for you, if you are under any state probation or payroll we need you to inform your manager/Concerned HR department about what you have done in the past and what would be the consequences once the case has been downloaded and executed in your name.

    Now, FTC is pressing charges against you regarding 3 serious allegations:

    1. Violation of federal banking regulation act 1983 (C)
    2. Collateral check fraud
    3. Theft by deception (ACT 21 A)

    If we do not hear from you within 24 hours of the date on this letter, we will be compelled to seek legal representation from our company Attorney. We re-serve the right to commence litigation for intent to commit wire fraud under the pretence of refusing to repay a total outstanding amount committed to, by use of the internet. In addition we re-serve the right to seek recovery for the balance due, as well as legal fees and any court cost incurred.


    And once you are found guilty in the court house, then you have to bear the entire cost of this lawsuit which totals to $[             ], excluding amount you borrow, attorney’s fee & the interest charges. You have the right to hire an attorney. If you don’t have or can’t afford one then the court will appoint one for you.


    Federal Trade Commission Herbalife order

    Friday, July 15th, 2016

    Company Must Tie Distributor Rewards to Verifiable Retail Product Sales And Stop Misleading Consumers about Potential Earnings

    Note: A press conference with FTC Chairwoman Edith Ramirez will be held today at 10 a.m. ET, 600 Pennsylvania Ave. NW, Room 432, Washington, DC.
    Reporters unable to attend the event can call in. Chairwoman Ramirez and FTC staff will be available to take questions from the media about the case.
    The phone number is (800) 288-8961; the confirmation ID number is 398337. The lines, which are only for news media, will open at 10:00 a.m. The conference leader is Bruce Jennings.

    The event will be webcast live at

    Herbalife International of America, Inc., Herbalife International, Inc., and Herbalife, Ltd. have agreed to fully restructure their U.S. business operations and pay $200 million to compensate consumers to settle Federal Trade Commission charges that the companies deceived consumers into believing they could earn substantial money selling diet, nutritional supplement, and personal care products.

    In its complaint against Herbalife, the FTC also charged that the multi-level marketing company’s compensation structure was unfair because it rewards distributors for recruiting others to join and purchase products in order to advance in the marketing program, rather than in response to actual retail demand for the product, causing substantial economic injury to many of its distributors.

    “This settlement will require Herbalife to fundamentally restructure its business so that participants are rewarded for what they sell, not how many people they recruit,” FTC Chairwoman Ramirez said. “Herbalife is going to have to start operating legitimately, making only truthful claims about how much money its members are likely to make, and it will have to compensate consumers for the losses they have suffered as a result of what we charge are unfair and deceptive practices.”

    According to the FTC’s complaint, Herbalife claims that people who participate can expect to quit their jobs, earn thousands of dollars a month, make a career-level income, or even get rich. But the truth, as alleged in the FTC complaint, is that the overwhelming majority of distributors who pursue the business opportunity earn little or no money.

    For example, as stated in the complaint, the average amount that more than half the distributors known as “sales leaders” received as reward payments from Herbalife was under $300 for 2014. According to a survey Herbalife itself conducted, which is described in the complaint, Nutrition Club owners spent an average of about $8,500 to open a club, and 57 percent of club owners reported making no profit or losing money.

    The small minority of distributors who do make a lot of money, according to the complaint, are compensated for recruiting new distributors, regardless of whether those recruits can sell the products they are encouraged to buy from Herbalife.

    Finding themselves unable to make money, the FTC’s complaint alleges, Herbalife distributors abandon Herbalife in large numbers. The majority of them stop ordering products within their first year, and nearly half of the entire Herbalife distributor base quits in any given year.

    The settlement announced today requires Herbalife to revamp its compensation system so that it rewards retail sales to customers and eliminates the incentives in its current system that reward distributors primarily for recruiting. It mandates a new compensation structure in which success depends on whether participants sell Herbalife products, not on whether they buy products.

    For example:

    • The company will now differentiate between participants who join simply to buy products at a discount and those who join the business opportunity. “Discount buyers” will not be eligible to sell product or earn rewards.
    • Multi-level compensation that business opportunity participants earn will be driven by retail sales. At least two-thirds of rewards paid by Herbalife to distributors must be based on retail sales of Herbalife products that are tracked and verified. No more than one-third of rewards can be based on other distributors’ limited personal consumption.
    • Companywide, in order to pay compensation to distributors at current levels, at least 80 percent of Herbalife’s product sales must be comprised of sales to legitimate end-users. Otherwise, rewards to distributors must be reduced.
    • Herbalife is prohibited from allowing participants to incur the expenses associated with leasing or purchasing premises for “Nutrition Clubs” or other business locations before completing their first year as a distributor and completing a business training program.

    Under the order, Herbalife will pay for an Independent Compliance Auditor (ICA) who will monitor the company’s adherence to the order provisions requiring restructuring of the compensation plan. The ICA will be in place for seven years and will report to the Commission, which shall have authority to replace the ICA if necessary.

    The settlement also prohibits Herbalife from misrepresenting distributor’s earnings potential or likely earnings. The order specifically prohibits Herbalife from claiming that members can “quit their job” or otherwise enjoy a lavish lifestyle.

    In addition, the order imposes a $200 million judgment against Herbalife to provide consumer redress, including money for consumers who purchased large quantities of Herbalife products (such as many Nutrition Club owners, among others) and lost money. Information on the FTC’s redress program will be announced at a later date.

    The Commission votes authorizing the staff to file the complaint and stipulated final order, and to issue a Statement of the Commission, were 3-0. The complaint and the stipulated final order will be filed shortly in the U.S. District Court for the Northern District of California, San Francisco Division.

    NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. Stipulated final injunctions/orders have the force of law when approved and signed by the District Court judge.

    The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs andsubscribe to press releases for the latest FTC news and resources.

    criminal action vs debt collector

    Thursday, July 14th, 2016

    FTC and State Law Enforcement Partners Announce More Actions and Results in Continuing Crackdown Against Abusive Debt Collectors


    In four separate actions, the Federal Trade Commission is announcing that it has stopped illegal debt collection tactics of several debt collection operations. In addition, other federal and state law enforcement officials have taken 12 more actions as part of a federal-state-local law enforcement initiative against deceptive and abusive debt collection practices. The cases announced today bring to 130 the number of actions taken over the past year by more than 70 law enforcement partners in Operation Collection Protection.

    The continuing nationwide crackdown targets collectors whose illegal tactics include harassing phone calls, false threats of lawsuits and arrest, attempts to collect phony debts, not providing consumers with legally required disclosures, and noncompliance with state licensing requirements.

    The FTC actions announced today include:

    AFS Legal Services

    In November 2015, the FTC brought an action against National Payment Processing LLC; National Client Services LLC, also doing business as AFS Legal Services, AFS Services, Account Financial Services, and Account Financial Solutions; Omar Smith; and Ernest Smith. The operation allegedly called consumers and demanded payment of payday loan or other purported debt, even when consumers disputed the debt and the defendants failed to verify that money was owed.

    According to the FTC’s complaint, the defendants impersonated investigators and law enforcement and threatened to arrest or sue consumers if they did not pay. Because they often had consumers’ personal information such as Social Security and bank account numbers, consumers believed the calls were legitimate and thought they would be arrested for check fraud or sued. The collectors also made harassing calls and contacted relatives, friends and co-workers about consumers’ debts. The defendants allegedly have caused around $4 million in consumer injury, using multiple corporate names and locations to avoid detection, and failing to identify themselves as debt collectors.

    The defendants have agreed to be bound by a preliminary injunction, pending the litigation in which they are prohibited from using the illegal collection tactics described in the FTC’s complaint. They are also barred from activities that violate the FDCPA.

    The FTC appreciates the assistance of the Rockdale County Sheriff’s Office, DeKalb County Police Department, Gwinnett County Police Department, and Hapeville Police Department in bringing this case.

    The Commission vote authorizing the staff to file the complaint for permanent injunction was 4-0. The U.S. District Court for the Northern District of Georgia, Atlanta Division, issued a temporary restraining order against the defendants on November 3, 2015, and a stipulated preliminary injunction on January 5, 2016.

    Samuel Sole and Associates

    In May 2015, the FTC obtained court orders temporary halting the operations of Premier Debt Acquisitions LLC, also doing business as PDA Group LLC; Prizm Debt Solutions LLC, also d/b/a PDS LLC; Samuel Sole and Associates LLC, also d/b/a SSA Group LLC and Imperial Processing Solutions; Charles Glander; and Jacob E. Kirbis. The FTC alleged that the defendants had impersonated law enforcement officials or process servers, threatened to have consumers arrested for nonpayment, falsely threatened consumers with lawsuits and wage garnishment, and withheld information consumers needed to confirm or dispute debts.

    The defendants have now agreed to a stipulated order for permanent injunction, that will ban them from debt collection activities, and prohibit them from misrepresenting material facts about financial-related products and services and from profiting from their former customers’ personal information. The order imposes a judgment of $2,229,756, representing the amount of the defendants’ debt collection revenue, which will be partially suspended upon surrender of certain personal assets, including real estate.

    The Commission vote authorizing the staff to file a proposed stipulated order for permanent injunction in the U.S. District Court for the Western District of New York was 4-0. Stipulated orders have the force of law when approved and signed by the District Court judge.

    Warrant Enforcement Division

    Defendants Municipal Recovery Services Corporation, d/b/a Warrant Enforcement Division, and its owner, Marcos Nieto, a/k/a Mark Nieto have agreed to settle FTC charges that they violated the FTC Act when they sent consumers letters and postcards that falsely implied that they had come from a municipal court and falsely threatened consumers with arrest if they did not pay while collecting overdue municipal utility bills, traffic tickets, court fines and other debts for local governments in Texas and Oklahoma. One letter, labeled “WARRANT FOR YOUR ARREST,” falsely threatened arrest at the consumer’s home or office, jail time, vehicle impoundment, and inability to renew a driver’s license. A “FINAL NOTICE BEFORE ARREST” letter followed, falsely stating that “WARRANT OFFICERS HAVE BEEN GIVEN YOUR CURRENT ADDRESS.” The defendants also mailed postcards to collect on past-due utility bills, stating “PAY YOUR FINE NOW—AVOID GOING TO JAIL.” According to the complaint, the defendants also failed to inform consumers of the amount of the debt and the creditor’s name, and their right to dispute the debt, as required by the Fair Debt Collection Practices Act.

    Under a proposed stipulated order for permanent injunction, the defendants are prohibited from misrepresenting any material fact while collecting debts, including that a failure to pay a debt will result in the consumer being arrested or jailed, having their vehicle impounded, or being unable to renew their driver’s license. The order imposes a $194,888 judgment that is suspended based on the defendants’ inability to pay. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition.

    The Commission vote authorizing the staff to file the complaint and proposed stipulated order for permanent injunction in the U.S. District Court for the Northern District of Texas, Dallas Division, was 4-0. Stipulated orders have the force of law when approved and signed by the District Court judge.

    Williams, Scott & Associates

    The FTC has obtained a permanent injunction against the final defendant in its case against Williams, Scott & Associates, LLC. On November 4, 2015, the court granted summary judgment in the FTC’s favor and banned Chris Lenyszyn from debt collection activities, and ordered him to pay more than $565,000 for using deception and threats to collect on phantom payday and other loan “debts” that consumers didn’t owe. An earlier order, in April 2015, banned John Williams, Williams, Scott & Associates, LLC; and WSA, LLC from debt collection and ordered them to pay $3.9 million.

    The FTC thanks the Federal Bureau of Investigations, the Consumer Protection Unit of the Georgia Attorney General’s Office, the State Bar of Georgia, and the Financial Institutions Division of the Nevada Department of Business and Industry for their assistance in this case.

    In addition, since Operation Collection Protection was announced in November 2015:

    • the Consumer Financial Protection Bureau has resolved four law enforcement actions and issued acompliance bulletin on in-person debt collection;
    • the Minnesota Department of Commerce signed consent orders that stopped Collect Pros and Service Investment Company from further law violations and imposed civil penalties totaling $33,000, and convinced a court to impose a receivership on CLX/Westwood Management, Inc. (details can be found here(link is external));
    • the Colorado Department of Law denied Collect Pros’ renewal application and 4-Star Resolution’s license application and took action against PC Legal Services for engaging in collection practices without a license, resulting in a $613,500 civil penalty (details can be found here);
    • the Indiana Attorney General’s Office also took action against Collect Pros, entering into an assurance of voluntary compliance(link is external) with Collect Pros; and
    • the Massachusetts Attorney General’s office sued one of the largest debt collection law firms in Massachusetts, Lustig, Glaser & Wilson PC and its owners, Ronald Lustig and Kenneth Wilson, who allegedly used illegal threats of lawsuits to obtain payments and sued consumers for debts they did not owe or for debts that were inaccurate.


    CFPB action against Santander

    Thursday, July 14th, 2016

    Bank Deceptively Marketed Its Overdraft Service to Consumers, Violated “Opt-in” Rule

    WASHINGTON, D.C. — The Consumer Financial Protection Bureau (CFPB) has ordered Santander Bank, N.A. to pay a $10 million fine for illegal overdraft service practices. Santander’s telemarketing vendor deceptively marketed the overdraft service and signed certain bank customers up for the service without their consent. In addition to paying the civil money penalty to the CFPB, Santander Bank must go back and give consumers the opportunity to provide their affirmative consent to overdraft service, not use a vendor to telemarket its overdraft service, and it must increase oversight of vendors it uses to telemarket consumer financial products or services.

    “Santander tricked consumers into signing up for an overdraft service they didn’t want and charged them fees,” said CFPB Director Richard Cordray. “Santander’s telemarketer used deceptive sales pitches to mislead customers into enrolling in overdraft service. We will put a stop to any such unlawful practices that harm consumers.”

    Santander is a national bank based in Wilmington, Del. Santander Bank operates a network of nearly 700 retail branch offices in Connecticut, Delaware, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, and Rhode Island. Santander offers overdraft service with its checking accounts. An overdraft can occur when consumers spend or withdraw more money from their checking accounts than is available.

    From 2010 to 2014, Santander marketed and enrolled consumers in its “Account Protector” overdraft service for ATM and one-time debit card transactions, and charged consumers $35 per overdraft. Santander used a telemarketer to call consumers to persuade them to opt in to the overdraft service and rewarded the telemarketer with a higher hourly rate when it hit specified sales targets.

    In 2010, federal rules took effect prohibiting banks and credit unions from charging overdraft fees on ATM and one-time debit card transactions unless consumers affirmatively opt in. If consumers don’t opt in, banks may decline the transactions because of insufficient or unavailable funds, and can’t charge an overdraft fee.

    The Bureau found that Santander marketed its overdraft service deceptively during telemarketing calls and enrolled consumers in overdraft service without their consent in violation of the opt-in rule. For example, during numerous telemarketing calls, call representatives did not ask the consumers if they wanted to opt in but enrolled them anyway. The Bureau found Santander Bank’s illegal and improper practices included:

    • Signing consumers up for overdraft service without their consent: In some instances, Santander’s telemarketer briefly described Account Protector to consumers, then asked for the last four digits of their Social Security numbers, and enrolled them without their consent. In other instances, consumers said they did not want to enroll but requested information about the overdraft service, but the telemarketer enrolled them anyway. When Santander charged those consumers overdraft fees on ATM and one-time debit card transactions, it violated the opt-in rule.
    • Deceiving consumers that overdraft service was free: Call representatives led consumers to believe that Account Protector was free, when in fact it could potentially cost them hundreds of dollars in fees. Some call representatives falsely suggested that consumers would not be charged a fee if they brought their account current within five business days of an overdraft. Other representatives implied that consumers would be charged fees only for emergency transactions, and that non-emergency purchases would not result in fees.
    • Deceiving  consumers about the fees they would face if they did not opt in: In some instances, call representatives told consumers the bank would charge overdraft fees on ATM and one-time debit card transactions regardless of whether they signed up for Account Protector. In fact, Santander could not charge those fees without the consumer’s consent. Some representatives even told consumers that they risked being charged additional fees if they did not sign up for Account Protector, when in fact the opposite was true.
    • Falsely claiming the call was not a sales pitch: Call representatives falsely told consumers that “this is not a sales call” and that the reason for the call was that the bank had recently changed its name. In fact, the purpose of the call was to sell Account Protector, and Santander’s name change was irrelevant.
    • Failing to stop its telemarketer’s deceptive tactics: Santander offered the telemarketer financial incentives to hit certain sales targets. Santander then failed to identify and stop the deceptive and other improper tactics that its telemarketer used to achieve those sales targets.

    Enforcement Action
    Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices, or other violations of federal consumer financial law. Santander Bank violated the Electronic Fund Transfer Act and the Dodd-Frank Act. The CFPB’s order requires that Santander Bank:

    • Validate all opt-ins associated with the telemarketer: Santander will contact all consumers who were enrolled in Account Protector through the bank’s telemarketer, and ask them whether they wish to be opted in. Santander will not be able to charge those consumers overdraft fees unless they affirmatively consent to opting in.
    • Not use a vendor to telemarket overdraft service: Santander is prohibited from using a vendor to conduct outbound telemarketing of overdraft service to consumers. Santander also may not require its employees to generate a target number of opt-ins or provide its employees with financial incentives in connection with opt-ins.
    • Increase oversight of all third-party telemarketers: Santander will develop and implement a new or revised policy governing vendor management for service providers engaged in telemarketing of consumer financial products or services.
    • Pay a $10 million penalty: Santander will make a $10 million penalty payment to the CFPB’s Civil Penalty Fund.

    You do not have to pay to receive benefits from a class action

    Thursday, July 7th, 2016

    Scam emails purport to be from federal courts in Rockford and Chicago

    It doesn’t matter if the email appears to bear the federal court system’s official seal, Bruton said, because “it’s not the true seal. It’s someone fictitiously making it up.” But recipients may not realize it’s phony, he said.

    Bruton said he recently learned of these scam emails after “someone contacted us to ask us if this was valid. This could be more widespread than we’re aware of.”

    Bruton said he doesn’t know when this scam originated or how many people may have received such emails. The emails might appear to contain a court order, a guarantee of claims release, bill of costs or state that the person is entitled to a class action settlement.


    Anyone who thinks he or she may have received a suspicious email, even if it is from a bank or the federal court system, should “certainly telephone the institution or visit them in person” to inquire if the email is legitimate or might be a scam, Croon said.

    Anyone who wishes to verify the authenticity of such an email is asked to call their local FBI office or Bruton’s office, Bruton said. To verify documents, residents also may email those messages to or log onto Public Access to Court Electronic Records, also known as PACER. That web address is