CFPB Panel 1: Info Available to Debt Collectors at Time of Assignment, Sale

Moderator: Thomas Kane, FTC

Panelists:

Manoj Hastak, American University

Loraine Lyons, FMA Alliance

David Pauken, Convoke Systems

Ira Rheingold, National Association of Consumer Advocates

Larry Tewell, Wells Fargo

Contigency collectors?

Thomas Kane: What do contingency collectors typically receive?

Loraine Lyons:

• Depends on the type of debt and the sophistication of the creditor.
• Name of consumer
• Address
• Phone number
• Very minimal requirements that are going to be contained.
• In some cases we have access to the creditor’s system for this data.
• We want to contact the right consumer and collect legitimate debts.
• There is a constant flow of info between us and the creditors we work with.
• Will notify creditor client when there’s a request for verification.
• As a contingency collection agency, we do not own the debt.

Thomas Kane asked Larry Tewell: do you sell and also place?

Larry Tewell:

• Creditors have four primary options: (1) Work debt internally inside the bank; (2) place with agency; (3) might sell it into debt buying ecosystem; (4) work with attorneys for litigation.
• The industry in general provides enough info for a consumer to recognize the debt.

Thomas Kane asked Ira Rheingold is the info agencies receive sufficient?

Ira Rheingold:

• I don’t have actual information about what’s being transferred.
• Our main concern is the debt buying industry.
• Original contract needs to be provided, credit history, etc.
• Information is not provided to consumers.
• That information, to start with, is very essential.
• The information gets worse every time you move a step away from the original creditor.

Thomas Kane: What do debt buyers obtain when they buy debt? What information does a debt buyer generally obtain at the time they purchase the debt?

Larry Tewell:

• Referencing FTC Debt Buying Report: name, account number, social security number, phone number, last known address, date account opened, date account charged off.
• If we could have uniform national standards, it would go a long way towards allowing this system to function well.

Thomas Kane: Tell us briefly how the debt buying system works. (Who hires, where does the data come from)

Dave Pauken

• Credit issuer sells to a debt buyer
• Following sale, they would unload to Convoke all the info Larry mentioned (name, account number, social security number, phone number, last known address, date account opened, date account charged off)
• Different issuers have different approaches to delivering documents.
• Some might provide last 6 or 12 months of statements. Others wait for a request.

Thomas Kane: Any sorts of documents that your database could hold that aren’t being asked to h0ld?

Dave Pauken

• We can capture just about any document necessary.
• Charge off statement, and last statement that reflects either payment or charge.
• We can deliver nearly 100% of those in a short period of time.

Thomas Kane: Ira, is that info sufficient?

Ira Rheingold:

• Is the initial information from the creditor even reliable?
• Can credit issuers even maintain good information?
• In terms of info being sold: if this info is so good, why is it being sold so cheaply?
• If you’re providing valuable info that is useful and reliable, it would be worth a lot more than two or three cents.
• The information being transferred to the debt buyer is insufficient.

Thomas Kane: You question the data, but for our purposes, what kinds of docs/info should debt buyers get that they’re not getting now at the time of sale?

Ira Rheingold:

• I don’t know why that info isn’t provided initially. Why wait for the moment of dispute.
• Many debt buyers have a model of Take Debt and Litigate.
• A lot of the issues we see today would be mitigated if the info was provided at initial moment.

Thomas Kane: Should everything be provided at time of sale?

Larry Tewell:

• Basic premise: it’s not a matter of infomration availability. It’s a matter of information variability.
• Two basic things that we can do as leaders of our industry: (1) create rational standards; (2) see some discipline around test and control.
• The basic premise of getting it right is a goal we share.

Thomas Kane: What are the benefits to having debt buyers have more info?

Ira Rheingold:

• It makes the process work.
• It would cost more money.
• Make it easier for debt buyers to collect debt.
• When you provide original notice, you can solve some of the problem about disputes when the data is provided.

Thomas Kane: Any technical solutions?

Ira Rheingold:

• There’s no reason why tech can’t help.
• This information should be in a useful and legally reliable form and be able to transfer it.
• The question has to be, “What is this industry going to look like five years from now?”
• No willingness from creditors, though, to make that work.

Thomas Kane: Any suggestions about national standards?

Larry Tewell:

• The industry is very interested in providing consumer info.
• There can be confusion around original ownership and who is owed the money.

Thomas Kane: Information conveyed to consumers? Validation? 1692-G notice? How can these disclosures be improved?

Minoj Hastak:

• An area fraught with challenge and frustration.
• Disclosures must be tested. There’s a reluctance to test disclosures.
• Many look pretty clear on the face of it.
• Different audiences are looking for different things from disclosure.
• Better information will improve consumer choice.
• Disclosures need to be tested in order to understand their value.

Thomas Kane: What sorts of information are debt collectors currently providing to consumers in validation notices:

Loraine Lyons:

• Provide information required: name of creditor and amount due.
• Some industry members have gone beyond that. List original creditor and current creditor.
• We want consumers to understand why they’re being contacted.
• We need uniform national standards based on research and best practices.

Thomas Kane: Doesn’t more info make collection easier?

Loraine Lyons:

• Not necessarily. It didn’t make the debt more collectible or more valuable.
• We can embrace new tech and interfaces that will improve collection process.
• We’ll need

Ira Rheingold:

• Minimal info is being provided — and it’s intentional.
• No need to provide any more.
• You can’t ignore the fact that the reason the info is scant is because its best for the current business model of debt buying.
• As we move to a new system where courts won’t rubber stamp millions of new cases, that data will become necessary.

Thomas Kane: Any useful information that debt collectors can convey to consumers?

Larry Tewell:

• Be consistent between collection call and letter.
• We’re all consumers
• Original creditor name in the proper context.
• Last payment, last payment date.
• It’s not that we don’t want to provide the information; there is a risk of providing too much information and overwhelming the consumer.

Thomas Kane: Validation notices?

Minoj Hastak:

• Dealing with long, complex disclosures.
• One of the issues with long disclosures is to use it as a vehicle for consumer education.
• Verbal disclosures are also very challenging.
• Testing is the only way.

Thomas Kane: Is the info that collection agencies convey to consumers in a validation notice different from the info in the early communications?

Loraine Lyons:

• Not necessarily. We’re going to state we’re a debt collector, etc.
• We’re going to say the same thing in a call. We’re going to identify ourselves.

Submitted Questions:

1) Concrete information abotu incremental costs in uploading information?

Dave Pauken:

• All tech has costs. It’s not free.
• To provide info, there’s a cost. Issuers incur cost to deliver. Debt buyers incur cost to pull it in.
• When we think about providing info in a more efficient way, it also has to be cost-effective.
• We think it can be done at a price that is efficient for all involved.

Larry Tewell:

• I’m not concerned about the cost. If it adds value, we’ll find a way to do it.
• When we move data, are we safeguarding the customer’s information?

2) Can you comment further on advantages/disadvantages of using creditor system v. agency’s own?

Loraine Lyons:

• Varies by sophistication.
• Benefit to using creditor system if it’s the better system.
• Does it have more information that is meaningful?
• If that info can be passed, then we’re in the same position.
• You have to look at parties involved and type of debt.

3) Do you think consumers would identity debt more readily if a charge-off statement was included?

Ira Rheingold:

• A breakdown of the cost would be the most useful thing for a consumer to have.
• The more info you provide that gives context is beneficial.

4) How many unsophisticated consumers can understand validation notice as written in FDCPA?

Minoj Hastak:

• Not my area of expertise.
• Almost nothing in a Google search about what validation is.

5) Do contingency or debt buyers get info about disputes?

Dave Pauken:

• Don’t see a lot of that happening.
• The customers we’re working with, there’s a high level of interest.
• Finding a tool for an efficient and effective way.

Ira Rheingold:

• A consumer may dispute, and may be right, but when it gets sold, the next down the line does the exact same thing.
• That history has to be part of information that gets included.

Loraine Lyons:

• My experience is that there’s an exchange of information.
• The initial agency would submit info to creditor and the dispute is investigated.
• Disputes are either justified or unjustified.

Final Thoughts

Minoj Hastak

• Developing good disclosures is a challenging activity
• Testing is only root at successful disclosure
• Standardizing disclosures is a good idea, but presents significant challenges.

Loraine Lyons

• Standardized notice: our industry would welcome model language, uniform to all consumers.
• That will help improve level of confidnece

David Pauken

• By and large, there’s interest in improving processes that benefit consumers.
• They’re doing a good job of trying to understand issuer and collection-side of things.

Ira Rheingold

• It’s in everybody’s common interest, when debt is sold the information it’s sold with is complete.
• The only want the system work is if everyone has access to trustworthy information.

Larry Tewell

• In common interest to do what’s best for customer.
• We want to provide all info that helps a customer identify debt.
• Test and control is very important
• Uniform national statnds relateive to data and media when interjected will benefit all participants — mostly consumer
• Consumer education