Tag Archive | Collection agency

New Limitations on what Debt Collection Agencies are allowed to do

There could be no national economy without debt. Owing money is one of those things that is just a part of life. However, personal debt can get out of control and people may find it difficult to pay back the money that they owe to creditors. This is where debt collection comes into the equation. And it turns out that the people of this country are having some very big problems with debt collections companies. There are over 6,000 of these companies in the country and some of them use aggressive collections tactics in order to reclaim money that people owe.

There have been so many complaints about debt collections companies that the CFPB is proposing new rules that are designed to help bring this industry under control a bit, while providing some much-needed relief for American consumers who are struggling with repaying their debts.credit card debt

There are more than 130,000 people who work in the debt collection industry and those folks bring in over $13 billion each year. This industry has become more complex over the past few years. Some creditors will sell outstanding debts for pennies on the dollar. Third party debt collection firms purchase these debts and often use some very shady tactics to get their job done.

Chiming in on the current state of debt collections in the United States the CFPB Director, Richard Cordray said, “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.”

If Cordray and the CFPB get their way, here are some of the things debt collectors will not be able to do in the future:

  • Collect on debts that do not exist. Some consumers have been hit up by debt collectors for money that they don’t even owe. This happens sometimes due to error and sometimes due to fraud on the part of debt collections companies. The CFPB has proposed that collectors will have to verify that a debt exists prior to beginning any collections actions.
  • Demanding payment without letting consumers know their rights. Debt collectors often rely on using confusing statements when they contact people. Debt collections companies will often only let people know their rights via cryptic, legalistic language the most people cannot understand. The CFPB wants to make these types of communications more transparent and easy to understand for consumers.
  • Endlessly harassing people to repay. Some collections agencies will call and even email people non-stop. They seem to think that the more they annoy people the more likely it is that they will be able to collect. The CFPB has proposed that limits be put on how many times debt collections agencies are allowed to make contact with consumers. The proposed limit is 6 times per week that agencies are allowed to contact people. This applies to phone calls, email or even letters sent to people.

The best way to avoid the hassles of dealing with debt collectors is to avoid getting in so much debt that you cannot repay what you owe. However, sometimes that is impossible, and sometimes you may not even really own money, but still wind up getting hassled by debt collectors. These new limitations should help people to avoid the potential nightmare that can happen when dealing with the worst kinds of debt collections companies.

Lending Company Challenges Constitutionality of CFPB Authority

Even though government organizations and groups are formed with a mission to serve the American people, there are times when those groups overstep their boundaries. Of course, the folks in charge of these organizations and those who support said government groups usually don’t like it when individuals or businesses challenge the authority of governmental organizations. But in order to keep the powers that be honest, in check and accountable, there are times when the powers have to be challenged.Consumer Financial Protection Bureau

Such is the case with a lawsuit that sees a business challenging the constitutionality of the Consumer Financial Protection Bureau’s power. This trial is the official case of PHH Corp. versus the CFPB. It is just getting underway, and will be heard in the U.S. Appeals Court for the District of Columbia. This case will likely drag on for a while, but legal experts expect to get a ruling on this case before the year ends.

PHH Corp is a lending company based in New Jersey. This company is working to get a $109 million penalty that the CFPB issued overturned. The penalty was issued back in June of 2015 with regard to PHH’s alleged violations of RESPA (the Real Estate Settlement Procedures Act.) This case is going to be one to watch, and will likely set a huge precedent due to the fact that it is the first time since the CFPB began – which was about 5 years ago – in which a company has issued a direct judicial challenge against a CFPB mandated penalty.

The CFPB first announced that it was taking action against PHH in the first quarter of 2015. The bureau sought a civil fine, victim restitution and an injunction to prevent PHH from violating in the future. In November of 2014, a judge said that PHH received kickback payments via reinsurance premiums that were paid to a company that is a subsidiary of PHH. The payments were given by mortgage insurers and the entire set up was found to be a RESPA violation. The judge ordered that PHH pay a $6.4 million penalty for their part in these things.

PHH did what any company would do, and appealed this ruling. This prompted the Director of the CFPB, Richard Cordray to both deny the appeal and to up the penalty to a whopping $109 million. Cordray said the original ruling was not correct because it did not account for the payment methods on mortgage premiums. The CFPB even went on record with allegations that PHH had been receiving kickbacks for these types of deals as far back as the 1990s.

The lawyers for PHH Corp. stated, “Never before has so much authority been consolidated in the hands of one individual shielded from the president’s control and Congress’s power of the purse.” These lawyers immediately filed a petition with the court of appeals, and claimed that the CFPB was abusing its considerable power. As a result, we are now witness to a case where a company has boldly gone where no other business has, and is actually making a legal case that challenges not only the power that the CFPB has, but also the constitutionality of the organization as a whole.

Cordray and the CFPB have made their fair share of enemies over the years. Currently, there are even Republican and Democrat leaders working hand-in-hand to prevent the bureau from enabling new short term lending restrictions in the near future. As such, this case will likely go down in the history books as a case of lending companies getting fed up with the CFPB and finally exercising their rights to do something about it.