(Bank of America has also been guilty of credit card debt collection abuses like its infamous rigged arbitration which came with its purchase of MBNA.) Bank of America to pay $772-million for illegal credit card practices
In 2013 unfair bank credit card practices caused a surge of activity by the then newly formed Consumer Finance Protection Bureau (CFPB). The CFBP caught banks lying to consumers and published new guidelines to reign in their behavior. In addition it made them subject to the Fair Debt Collection Practices Act, just like debt collectors and collection attorneys are. Banks and other original creditors are now considered debt collectors subject to the same type of FDCPA rules that third party debt agencies are subject to.
This reflects an increased awareness of abusive credit card practices by banks across the country. JP Morgan Chase has been “made an example of.” It’s recently been sued in California for illegal debt collection practices. The Office of the Comptroller of the Currency, The bank regulator, is looking into how banks sell credit card debts with inaccurate balances. What this probably means for consumers with credit card debt they cannot afford to pay is there could be a reduction in the number of credit card debt lawsuits, and those summonses that are issued will need to have accurate documentation to avoid being thrown out of court.
Consumer Reports Jul 16, 2013 reported the Consumer Financial Protection Bureau (CFPB) announced last week that it will now hold banks responsible for the actions taken by the debt agencies who buy their debts Read more: http://news.consumerreports.org/money/2013/07/fight-back-against-ruthless-debt-collectors.html?EXTKEY=AFOXN04#ixzz2ZuFFsMLm
Inside ARM (ARM stands for accounts receivable management) -July 10, 2013- CFPB Tackles Unfair Debt Collection: Issues Bulletins for Collectors, Form Letters for Consumers, Warning for Unfair Banks
Inside ARM July 16, 2013 – Mike Ginsberg Recent Developments Lay Groundwork for New Debt Sales Rules for Banks American Banker JUL 2, 2013 OCC Pressures Banks to Clean Up Card Debt Sales American Banker JUL 12, 2013 – JPM Executives Silent on Collections Problems by Maria Aspan
JPMorgan Chase has shut down much of its collections operation as it awaits regulatory actions; in the past two years, it has stopped filing lawsuits to collect on charged-off consumer debt, and American Banker reported this month that the bank is no longer selling most bad debt to third-party collectors.
Rolling Stone July 11, 2013 Chase Made Errors in Nine Percent of Credit-Card Collection Lawsuits, Internal Survey Finds By Matt Taibbi
Iowa Attorney General Tom Miller is leading a multi-state effort that is “in the early stages” of determining how the states could foster changes to how credit-card issuers and collectors who buy charged-off debt keep track of consumer information. Many complaints stem from attempts to collect a non-existent debt, or one that’s already been repaid.
Bloomberg Consumer Bureau – Jul 10, 2013 shines a light on unfair practices in Crackdown on Debt Collectors Hits Banks By Carter Dougherty
Card issuers charged off $33 billion in consumer debt for collection in 2012, according to Corporate Advisory Solutions LLC, a Philadelphia-based consultancy. Third-party debt collectors earned $12 billion that same year, while first-party collection — by creditors — was $1 billion.
Isaac Boltansky, an analyst with Compass Point Research & Trading LLC in Washington, said the regulatory pressure could push banks to rely more heavily on third-party agencies.
“This new regulatory framework may result in some of the nation’s larger third-party debt collectors capturing market share as creditors choose to curtail their in-house collections operations due to both heightened headline risk and increased compliance cost,” Boltansky wrote in a research note.
New York Times – July 10, 2013 More unfair practices are revealed in the book, U.S. Vows to Battle Abusive Debt Collectors
In most instances, consumer advocates say, customers acknowledge that they owe some money. The problems arise, though, when the credit card companies and third-party debt collectors run roughshod over legal procedures that govern how the firms can collect money, according to consumer lawyers. “It’s a huge problem where creditors and debt buyers are mass producing fraudulent documents,” said Susan Shin, a lawyer at the New Economy Project, which works with community groups in New York. Some lawsuits, the judges and lawyers say, hinge on erroneous documents, quickly thrown together to make up for critical paperwork that is missing, like payment histories or the original contracts. Since such collection efforts fall into the regulatory void, consumer lawyers say, consumers have little recourse. “These creditors are essentially given free rein,” said Carolyn E. Coffey, a lawyer at MFY Legal Services. Lenders have been buffeted by these kind of problems before, particularly over the way they pursued struggling homeowners. Last year, five of the nation’s largest banks reached a $26 billion deal with 49 state attorneys general over claims the lenders wrongfully seized homes. Now regulatory scrutiny is shifting from mortgages to credit cards. The problems in credit card lawsuits often proliferate in the shadows, because unlike in foreclosure cases, borrowers sued over credit card debt rarely show up to defend themselves. As a result, more than 95 percent of lawsuits result in a default judgment, an automatic win for the lender. The default judgments can be devastating, entitling the lenders to garnish a consumer’s wages or freeze bank accounts. In New York, for example, the judgments are good for 20 years and accrue annual interest of 9 percent.
Blomberg Business Week July 10, 2013 Regulator Reveals Unfair and Scuzzy Debt-Collection Tactics
. . . The practices at banks have come under increased scrutiny, particularly how they collect credit-card debts. In the wake of the foreclosure robosigning scandal, American Banker reported last year that banks resorted to some of the questionable practices used in collecting on mortgages to try to recover unpaid credit-card debts. This included submitting signed documents to the court that hadn’t been verified and misstating the size of debts.
Banks and third-party companies that try to get consumers to repay debt cannot lie about the amount of debt owed, falsely threaten lawsuits, or mislead consumers about how repaying debt will affect their credit scores, the Consumer Financial Protection Bureau said in notices published on Wednesday.
If you’ve been hounded, threatened, pressured or lied to by relentless debt collectors, you’ll like this news. Who else but the nation’s consumer watchdog, the Consumer Financial Protection Bureau (CFPB), has decided to step into the fray to make sure they behave.
The Wall Street Journal July 9, 2013 J.P. Morgan Review Finds errors and unfair characteristics in Debt-Collection Lawsuits
As a top regulator prepares to slap J.P. Morgan Chase JPM -0.64%& Co. for mistakes that were made while collecting old debts, an internal review shows that errors occurred as the bank sued its credit-card users for the delinquent amounts. The bank studied roughly 1,000 lawsuits and found mistakes in 9% of the cases, said people familiar with the review. “Any rate above zero is high,” said one person familiar with the bank’s conversations with regulators. The errors ranged from inaccurate interest and fees applied by outside law firms to a “small number of instances” in which lawsuits listed higher balances than the amounts owed by borrowers, according to an internal document reviewed by The Wall Street Journal. In certain cases sworn documents were signed without knowledge of their accuracy, according to the document.
UPI, The Financial Times, REUTERS, and other media outlets reported JPMorgan Chase was sued by California over unfair and “illegal” debt collection lawsuits. http://www.upi.com/Business_News/2013/05/14/JPMorgan-Chase-sued-for-running-debt-collection-mills/UPI-97121368558922/ http://www.ft.com/cms/s/42754c66-b8ee-11e2-a6ae-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F42754c66-b8ee-11e2-a6ae-00144feabdc0.html&_i_referer=#axzz2aTId3vOd http://www.reuters.com/article/2013/05/09/us-california-lawsuit-jpmorgan-idUSBRE94815X20130509
If you cannot afford to pay your credit card debts, you may be interested in more of my posts and my other materials.