Courts Rule Collectors Not Required To Go To Trial

Three consumers had brought an action against three debt collection agencies on the basis of violating the Fair Debt Collection Practices Act ("FDCPA") on the basis of misleading or deceptive conduct on the basis of threatening action they do not intend to take.

In these cases:

• The collection agency had issued a Summons;
• The collection agency subsequently voluntarily dismissed the proceedings; and
• The consumers argued that the agencies never had an intention of proceeding to trial, but rather were issued to obtain Default Judgment or a settlement of the outstanding debt.

The Court of Appeal dismissed the proceedings and agreed with the Federal Court, noting that it is not always economic or desirable to go to a trial and a collection agency is entitled to change its strategy at any time in the process.

Source: InsideARM - Debt Collection Lawsuits Revisited: Seventh Circuit Rules Collectors Not Required To Go To Trial

1 in 5 Single Repayment Car Loans Result In Repossession

The Consumer Financial Protection Bureau (a consumer protection watchdog in the US) undertook a study of single repayment car loans.

These loans are typically short term loans for consumers in severe financial difficulty and are banned in half of the states in the US. Their existing car is offered as security on a loan that can result in very high interest rates of up to 300% (well in excess of the mandated cap in Australia on interest rates).

By taking out such a loan, according to the report, consumers end up in a downward spiral of debt that they cannot escape. Loans are often taken to repay the initial car loan.

These loans became popular with lenders following regulatory caps in payday lending rates. Like Australia, the US is also investigating the payday industry with this style of loan also under review.

Source: CFPB Press Release

Google Bans Payday Lending Advertising

From 13 July 2016, Google will place a global ban on short-term loan advertising from its websites.

Google Director of Global Product Policy, David Graff, stated "Research has shown that these loans can result in unaffordable payment and high default rates for users so we will be updating our policies globally to reflect that.....We'll continue to review the effectiveness of this policy, but our hope is that fewer people will be exposed to misleading or harmful products."

The ban will apply to credit where repayments are due within 60 days.

This follows a recent case where ASIC forced Nimble to refund $1.6M to consumers for being not engaging responsible lending practices. Read more about this here.

The industry is under review in Australia with practices being closely examined.

Source: Google Public Policy Blog

Repossession Agent Unknowingly Repossess Car with Baby Inside

In the US, a father took his baby for an outing to go shopping, but left the baby in the car whilst he went shopping.

Whilst in the shops, a repossession agent repossessed the car, unbeknownst to him that there was a baby inside. As soon as he realised there was a baby inside, he immediately phoned the police. The repossession agent claimed that he didn't see the baby due to the car windows tint and clothing on the backseat.

The father also phoned the police believing his car had been stolen.

The baby was safely returned to the father who was cited for leaving a baby unattended in a car.

Source: Kens5 Eyewitness News

US city considers compulsory logging of repossessions with police

In the US, Winchester City considers mandatory regulation that repossession agents must log a repossession with police before attendance. Debt Collection agencies had been notifying police of their repossession jobs prior to attempting to repossess goods.

The new requirements to attend a police station prior to repossession to affirm the financiers right to the goods. Whilst agencies had an informal agreement in place with police to do this, the new regulations would apply to anyone attempting to repossess goods, not just debt collection agencies.

This is aimed at reducing unnecessary call outs where owners report vehicles as stolen where in fact it has been repossessed.

experian aiding debt recovery compliance in the US

In the US, Experian have released a new innovative product to aid the compliance to the US Telephone Consumer Protection Act. Although specific to the US, it is a good example of where data matching can aid compliance.

The product takes batches of telephone numbers provided from the creditor or debt collector to match against over 4,500 phone providers in Real Time. This confirms the ownership of the number, connectivity of the number, the carrier and activation date.

This is particularly relevant in the US and the laws around using automated diallers. In the US, you can only use an automated dialler with the consumers consent (this includes SMS services from the web). Should a phone number provided in the past by a debtor (with consent to be automatically dialled) be reassigned to a new person, the new persons consent is required for any further calls.

Collectors Altering Caller ID Received US$48m Fine

In Los Angeles, California, the Consumer Financial Protection Bureau ("CFPB") took action against a finance company and its subsidiary resulting US$48.3m in fines and penalties.

The CFPB investigation allegedly uncovered that the debt collectors from the financier were utilising a web based program called Skip Tracy. 

This program was used for outward and inward bound telephone calls and permits its users to alter the caller ID that a call recipient would receive. Apparently the debt collectors used this Skip Tracy service on over 137,000 loan accounts. They would alter the ID and pretend to be:

• Flower shops, pizza delivery services and family or friends. For instance, if a debt collector alter the caller ID to be from a flower shop, the debt collector would continue to pretend to be from the flower shop in an attempt to find illicit information from the account holder.
• Repossession agents. The debt collectors would advise the consumers that their vehicle was about to be repossessed.
• Storage facilities. The debt collectors making calls would imply a car may be released back if a partial payment was made (even though they would only release the vehicle if full payment was made).
• Law enforcement officials. The debt collectors pretended to be law enforcement officials and would threaten criminal charges, even where the cases had not been referred to law enforcement agencies.

Whilst in the US, it is very very likely that the misleading and deceptive conduct provisions of Australia Law would apply should this style of collection technique be applied here.

Furthermore, the companies were also fined for disclosing the existence of debts to 3rd parties without consent.

Source: American Banker - CFPB Hits Auto Lender With $48.3M Fines

Debt Collection Letters and Barcodes

In Pennsylvania, a Judge has ruled that a debt collection agency has breached the Fair Debt Collection Practices Act (FDCPA) by printing a bar code on the outside of an envelope.

This is because of smartphone bar-code readers and the increases the risk if identity theft. When the bar code is scanned, it reveals the reference number of the debt under collection.

The FDCPA provides that only a debtors address should be on an envelope (s1692f(8))

This follows similar rulings pertaining to information on an envelope other than the debtors address including:

• QR codes not being permitted on the outside of envelopes, where the QR code revealed the name of the Debtor.
• Account reference numbers not being permitted as they could reveal the financial position of the debtor.

Debt Collection Business Ordered to Close

In the US, the Georgia Consumer Protection Office gave orders closing a debt collection business and to stay out of the industry for 5 years. This stemmed from accusations of:

• Attempting to collect debts already paid
• Attempting to collect illegitimate debts
• Threatening consumers with arrest, criminal charges and physical violence
• Pursuing debts that were statute barred
• Making phone calls at unreasonable hours

The owners of the business agreed to pay a US$15,000 fine now with a US$445,000 fine payable if they re-enter the debt collection industry within 5 years.

As part of closing the business, over US$3M loans under collection will no be collected.

Source: http://finance.yahoo.com/news/debt-collector-write-off-3-113047853.html

Bank of America Fined US$30M Violating Consumer Protections

The Bank of America was recently fined US$30M for violation of consumer protections in the US.

The bank breached the Servicemembers Civil Relief Act ("SCRA"). The purpose of the SCRA is to prevent military personnel who are in active service from abusive lending and debt collection practices. These practices were affecting non-home loan facilities.

The bank has undertaken to improve its compliance framework to:

• Correctly determine if military personnel are eligible for SCRA benefits 
• Verify the military status before seeking Judgments
• Calculating the benefits under the SCRA