Many student loan borrowers left behind

The HILLPresident Obama’s executive action to make more students eligible for income-based payment plans is a tremendous relief for those 5 million students newly eligible.  The Pay As You Earn Plan allows students lower payments in the early years of their careers and catching up on payments as their career advances.  It makes great sense.

Unfortunately 6.5 million students, the equivalent of the combined population of Los Angeles and Chicago, whose loans are already in default are tragically being left behind.  Under current rules, those students are not eligible for the plan just authorized by the president or for any of the other plans where payments are based on income.

Default on a student loan is a serious matter and the student must have missed at least nine regular payments to achieve that status.  Default can cause students to be subjected to all sorts of penalties.  Their income tax refund can be seized; their wages can be withheld if they work for the federal government; they can be sued and wages garnished.  They could even be denied renewal of certain professional licenses or lose out on job opportunities because their credit score is so badly damaged.  Think of the irony, students spending four years of their lives to become more employable – and now that their credit score is damaged, they become unemployable.

Even if you don’t feel sorry for these 6.5 million students, you might want to start feeling sorry for yourself.  This problem has now boiled out of the pot and affects every one of us. Student loan defaults cause tremendous harm to the national economy.  The growing burden of student loans threatens to undermine the housing recovery by discouraging or preventing an entire generation of potential buyers from purchasing their first homesSales of new autos are impacted negatively.  If students drop out of the housing and auto market, the economic recovery as weak as it is, sputters to a stall and slips into a tailspin.  Some are already predicting this could cause a downturn equal to or worse than the housing crash of 2008. 

The Department of Education hires outside parties to receive and keep track of payments.  Those private companies, called loan servicers, do a pretty good job of tracking the roughly 50 million student loans while processing tens of millions of payments every month.  What they are not good at is devoting the time and attention necessary to counsel students in financial difficulty about the various alternative deferment or payment plans.  Largely, students simply don’t get the right advice or that extra help and their loan falls into default.  Sadly, once the loan has defaulted, the student is no longer eligible for the income based payment plans.   

Some critics claim that the loan servicers are simply terrible at communicating with students who need assistance and just don’t mention the income based alternatives to prevent default. Others point out how complicated the rehabilitation process can be.  Regardless of the cause, the fact is that the nation cannot turn its back on 6.5 million students and their loans representing $90 billion of the government’s money.

 President Obama made a bold decision when he decided to open the door and allow millions more access to the Pay as You Earn Plan.  He should make another bold decision and use his pen to direct the Department of Education to take special and extraordinary action to focus on those students who have loans in default.  The students who need it most have not received the help they need and are not going to get it under the current system.

The Department of Education should borrow a tactic from the FDIC.  When dealing with a failed bank, the FDIC will quickly separate the troubled loans from the performing loans and assign the troubled loans to a different servicer.  This process allows each servicer to focus on only one type of situation.  Since the existing servicers clearly are not getting the job done, the defaulted student loans should be yanked away from the current servicer and assigned to a new Special Servicer who does nothing but deal with those defaulted loans — the far greater challenge. 

The Special Servicer will be more focused and more capable of working closely with students with defaulted loans.  Rehabilitating those loans is the only way to keep the student out of a continued downward spiral.  The rehabilitation is not hard but requires a lot of time and personal attention to each student to understand their situation and custom fit a solution.  It will help that the student now has only one point of contact for everything.

More than just the extra attention, the Special Servicer would be required to help these students find jobs, provide financial literacy education, arrange for needed social services and help the student deal with any other credit problems in their life. 

A Special Student Loan Servicer assigned to tackle only those defaulted loans will make a world of difference in the lives of those students.  Imagine the possible outcomes of helping 6.5 million students out of a tough problem and helping the government recover the money it has loaned to give a young person an education. 

The potential for greatness is incredible.

Bartmann is CEO of consumer financial recovery firm, CFS2.  He is author of the recently published book Out of Control: Cases of Debt-Collection Abuse in America and What We Can Do About It. All proceeds from the book are donated to the National Consumer Law Center.

Read more:

Solving Debt Collection Abuse With a Tax Credit?





Tax law is often used to encourage behavior modifications to promote certain governmental philosophies and interests. For example, to increase implementation of solar energy among consumers, the government created a meaty solar tax credit. Want to increase the attractiveness of the American dream of owning a home? Make the mortgage interest and property tax costs a write off.

People sit up and pay attention when it comes to tax breaks and credits.

Credit card debt is a ballooning problem in the U.S., with the average household carrying $15,191 in outstanding credit card bills. As a country, credit card debt totals $854 billion, according to NerdWallet’s latest figures.

Is there a way the IRS can help reduce these numbers?  Bill Bartmann, CEO of a debt advisory firm, Bartmann Enterprises and CFSI thinks so. He claims banks sell $68 billion in delinquent credit card loans to private for-profit companies every year for pennies on the dollar. These companies in turn go after the debtors. Some of the collectors have been accused of fraudulent practices such as pursuing a debt that has been extinguished by the tolling of the statute of limitations. Other practices have put many families at financial risk.

Bartmann is familiar with the industry. He launched a privately-held debt-collection company, Commercial Financial Services (CFS), in 1986 that grew to be an estimated $3.5 billion. CFS made money from charged-off credit card loans: it bought the bad debts and went on to collect on them. In 1999, it imploded in scandal and whipped out Bartmann’s personal fortune. In 2010, he started CFSI, which has similar structure and business plan as CFS.

Bartmann has long rallied against dangerous and unethical debt collection practices. The company claims not to sue anybody and he says it strives to help debtors get back on their feet through an array of social services.

Bartmann has come up with a piece of legislation, the Bartmann Ethical Debt Collection Practices Act (SB1430), that sits before the Oklahoma legislature. It’s a tax credit that would incentivize banks to donate their delinquent credit card loans to 501(c)(3) organizations.

In a statement, Bartmann claims, “American taxpayers are being sought after by abusive debt collectors and as a result of these robo suing tactics 10 million unnecessary and fraudulent collection law suits clog the entire US Court system a year. In addition we’ve seen 2 million foreclosures and 80% of garnishments and repossessions. A tax credit would eliminate this… and would give economic mobility for 35 million families!”

The statement also claims the legislation would cut the national bankruptcy rate in half, and “reduce the burden of tax payers at the local, county and state level who are paying taxes to support the court system that has been hijacked by a half-dozen private companies for their own economic purpose.”

501(c)(3) organizations would renegotiate the debt to a level that the consumer can afford, and would agree to the following:

  • Not to sue the debtor;
  • Not to charge interest on the debt;
  • Not to attempt to collect beyond the statute of limitations;
  • Not to attempt to contact the debtor more than twice a day;
  • Not to resell the loans;
  • To help the consumer by negotiating with their other creditors;
  • To help the consumer find gainful employment;
  • To help the consumer find necessary social services;
  • To teach financial literacy;
  • To register the consumer to vote.

If the tax credit becomes successful and cost effective in Oklahoma, other states are likely to follow suit. Bartmann sums it up by saying, “Such a tax credit will create the most profound and most dramatic change to the debt collection industry in the past 5,000 years.”



Requiem for the Great Recession


The Great Recession continues to haunt our economy. Although today we see what might be viewed as a return to normality in some sectors such as real estate, banking and the Dow, there is one sector that continues to be mired down and that is consumer spending.

Consumer spending is the economic engine of our economy. The spark plug of that growth and prosperity engine is the broad middle class. But, right now those Americans are hunkered down. They are cautious and worried about paying the bills. Many are not having an easy time of it. Very few of the benefits seen in the recovery of the real estate and financial markets have trickled down to these folks. They are looking for a signal that tells them it is okay to take a deep breath and begin to live normally again.

What is most worrisome to middle class Americans is the huge overhang of consumer debt, much of which is delinquent. For perspective, consider this: The Federal Reserve Bank says that 35 million Americans now have unpaid debts that are so delinquent they have been turned over to collection agencies. We have no good way to know how many millions more are teetering on the edge of the abyss.

There is an elegantly simple solution that would address this worrisome debt overhang, kick-start consumer confidence, provide a boost to business and produce a net gain for the national budget. That solution is the creation of a one-time tax credit that would induce lenders to donate their delinquent consumer loans to qualified non-profit organizations. In exchange for the donation of a delinquent consumer loan the lender would receive a tax credit equivalent to the fair market value of the donated loan.

By donating delinquent consumer loans to qualified non-profits, lenders not only clear their books of problem debts but receive a meaningful uptick in value through the tax credit. This is a plus for the financial industry that will stimulate growth in lending activity and benefit the economy broadly.

The consumer’s debt ends up in the hands of non-profits that are specifically tasked to find ways to restructure the consumer’s obligations into a solution that works for all parties. Think about the concept of the real estate HAMP program – if your mortgage loan is underwater, rewrite the loan to a lower balance and timeline that makes sense. Same concept works here. Borrowers continue to pay their debts, just at manageable payments.

At first blush this sounds like a giveaway program. It definitely is not. It is merely a reset of the clock that will allow a rational restructure of the debt. Consumer confidence improves and greater economic activity results.
This is a good deal for both lenders and borrowers. The rate of consumer bankruptcy filings would be cut in half. Garnishments and repossessions would fall by 80%. The number of civil lawsuits will decline by millions. Almost two million foreclosures would be avoided. All of these things impose enormous unrecovered costs for businesses and make it even more difficult for consumers to work their way back to financial stability.
This is a really simple proposition. Without financial stability, the middle class cannot contribute its part to building a robust economy.

We all know there is no free lunch. There is a cost to this program – but the benefits and budget savings far exceed the cost.

The estimated cost for the tax credit is $6.8 billion. Some might call that a lot of money, others would recognize it as a rounding error in the scheme of our national economy. It is a pittance compared to the projected $121 billion of economic benefits it will generate. Beyond the reduction of bankruptcies, foreclosures and repossessions; the resulting increased economic activity will also reduce unemployment, increase total wages paid and result in a significant reduction in the demand for food stamps and unemployment compensation. All of which will come right off the bottom line of the federal budget.
While the economic benefits outweigh the economic cost by a factor of 17 to 1, the incalculable benefit will be the myriad of societal improvements that are a by-product of a healthy economy. A decrease in divorce, spousal abuse, child abuse, drug abuse and crime benefit all 320 million Americans, not just the 35 million directly affected by this proposal.
This is a rare opportunity to unshackle and recast the financial future of millions of middle-class consumers, create a boon to banking and businesses, and reduce the net cost of the federal budget.

This will be the requiem for the Great Recession. May it R.I.P.

Bartmann is the CEO of consumer financial recovery firm, CFS2. He is a best-selling author and recently published the book Out of Control: Cases of Debt-Collection Abuse in America and What We Can Do About It, which documents patterns of abusive tactics used by unethical collectors. All proceeds from the book are donated to the National Consumer Law Center.

By Bill Bartmann


A bill collector who brings people hope

Anyone who has ever been in debt and had trouble meeting payments will know just how unusual this story is. When CFS2 agents call people with unpaid, and unpayable, debts, they ask a life-changing question, “How can I help?” In Tulsa, Oklahoma, the collection company founded by Bill Bartmann is making 200% more than its competitors by offering free services to help people get back on their feet.

Bartmann knows from personal experience how easy it is to fall into a hole that is hard to climb out of. In his autobiography, Bouncing Back, he tells the story of growing up in deep poverty, becoming an alcoholic and a gang member by the time he was 17, and learning to walk again after a drunken fall left him paralyzed.

He worked his way out of the hole of his early years and built a company that manufactured pipes for oil rigs, Hawkeye Pipe Services Inc. When the OPEC cartel took a nosedive in 1985, sales dropped from $1 million in July to zero in August. He had to lay off all his employees and liquidate the company’s assets. That left him owing $1 million to creditors.

Rather than declare bankruptcy, Bartmann was determined to pay back the entire debt, no matter how long it took. A 1997 article by Jerry Useem in Inc. relates just how hard that was. With debt collectors hounding him and friends disappearing, Bartmann and Jay Jones, his former chief of operations, took a shot so long it seemed absurd. They decided to bid on a batch of delinquent loans from a Tulsa bank that had gone under. Useem describes it:

As if to emphasize the absurd nature of their mission, only one other bidder showed up at the auction. Some 200 portfolios of bad loans were for sale, ranging from the mildly delinquent to the long-since-considered-unredeemable. Bartmann began inspecting the latter. ‘They were the double-uglies,’ says Jones, ‘the bottom-of-the-bucket kind of loans,’ and were therefore the cheapest. As Bartmann perused the files he saw the collectors’ records of their unsuccessful efforts: ‘This deadbeat won’t pay, he says go to hell.’ And then it struck him: ‘I realized, This is me.’

They paid 2¢ on the dollar and launched Commercial Financial Services Inc., with $13,000 in start-up money loaned to Bartmann by the American Bank of Muskogee. It was already holding his $1 million debt but decided to gamble on him. He got on the phone, collected $64,000, paid his debt and persuaded the bank to loan him $100,000 so he could buy more debt. He kept doing that as he worked his way up to becoming one of the richest men in America.

Then in 1998 an anonymous letter from a disgruntled employee set in motion legal procedures that ended up in liquidation of the company and laying off its 3900+ employees before Bartmann was cleared of all wrongdoing in 2005.

Once again he worked his way out of a deep hole, and in July 2010 he resurrected his company as CFS2. This time he added a suite of free services to his debt-collection business.

Reasoning that it is easier to collect money from people who have it, he offers assistance with debt consolidation, the labyrinth of government assistance (for such things as housing, food, medicine, transportation and child care), and job hunting (including resume writing, posting the resumes, matching skills with jobs, scheduling interviews and even doing interview coaching). The CFS2 Web site shares some of the company’s success stories as well as testimonials from customers grateful to have been treated with compassion and dignity.

When the U.S. House of Representatives shut down the government in October 2013, CFS2 phoned creditors of those furloughed, convincing most of them to allow workers a grace period for paying their bills. They did the same thing in the wake of tornadoes. Bartmann has also launched an initiative, Stop These Criminals, to try to reform the debt-collection industry.

The combination of crushing debt and hard times can rob anyone of dignity. Bartmann, who has been there himself, understands what people need to get back on their feet. He gives me hope.

To read the original article:

Debt Collection Industry Siding with CFPB So Far

Debt Collection Industry Siding with CFPB So Far

NOV  6, 2013  5:31pm ET

WASHINGTON — The debt collection industry is gearing up for a major shake-up as the Consumer Financial Protection Bureau looks to revamp rules that will likely cover every player in the market, from first-party creditors down to the buyers of others’ debts.

The CFPB said Wednesday that it would begin taking comments on how to write new regulations for the debt collection industry, that could impact how often a debt can be sold and to whom. The agency’s actions echo changes the CFPB is seeking in other markets, including mortgages.

Although the new mortgage rules have made lenders anxious, however, many debt collectors appear supportive of heightened regulations, with some suggesting more rules are necessary.

“The last thing we’re going to do is run because of regulatory headwinds. It’s not going to put us out of business. It’s just unpleasant and sad that we need this,” said Clint Sallee, president and chief executive of Fidelity Creditor Service, a debt collector in California. “But I can fully appreciate where the CFPB is headed.”

Though opinions may change once the CFPB issues its proposed regulations, most debt collectors are hopeful that the rules will weed out the bad actors who often buy debt for pennies on the dollar and then threaten consumers through litigation without verifying documents.

“Many of the buyers in the industry today will not be able to sustain the standard that’s been established by the CFPB because of their practices,” said Bill Bartmann, chief executive of debt collector CFS II. “It’s a ticking time bomb … and banks are going to be cautious about selling loans to a buyer who has litigation-heavy model.”

Already, some of the larger debt collectors and banks have been preparing their systems for heightened rules and enforcement after the Dodd-Frank Act gave the CFPB authority to write regulations on the industry. Other regulators such as the Office of the Comptroller of the Currency have also been scrutinizing debt sales.

That has helped to spur both JPMorgan Chase and Wells Fargo to halt unpaid debt sales. JPMorgan also closed and redistributed its group that handles litigation services for debt collection.

Larry Berlin, analyst at First Analysis said the biggest banks that halted such sales are likely to enter back into the market during the next few quarters once they get clearer understanding of what the CFPB is planning to do. It’s the smaller firms that Berlin said will likely not be able to afford the new standards.

“A year ago, there were roughly 175 collectors,” he said. “We think that’s going to go into the handful … it might have been such a heavy boat that it’s going to be flipping over.”

Labor and costs have already increased for debt collectors as a result of the CFPB’s moves. Sallee said he gets three emails from the CFPB every night to inform him of the status of consumer complaints that require numerous clicks in order to find out whether or not a complaint has been filed against his company. Since the CFPB started receiving complaints on the debt collection industry in July, Sallee said he’s only received one complaint but that doesn’t stop him from digging through emails every night.

“Every time there is a new regulatory process related to compliance, it has created a lot of resentment among peers because they don’t want to go through a bunch of hoops to find out they don’t have any issues,” Sallee said.

The other major concern by the CFPB is that the main rule governing debt collectors — the Fair Debt Collection Practices Act — was written 35 years ago before electronic data, mobile phone and email communication took off. Though it’s unclear how the CFPB will address the issue, most collectors would prefer clearer updates, rather than being cited for communication violations.

“The reputable debt collection companies actually welcome clarification on issues like electronic communications with debtors, caller ID, data storage and sharing, and what constitutes ‘unfair, deceptive, and abusive acts and practices,’” said Ronald Rubin, a former CFPB enforcement attorney who now represents large debt collection companies at the law firm of Hunton & Williams. “The upstanding debt collection companies, and there are many of them, know that the CFPB’s rules will increase their compliance costs, but in the long run will make them more profitable by putting the bad actors out of business.”

Original Article can be found at:


How Being Nice Helps the Bottom Line

The Daily Blur

Thoughtful Advice For Good Companies


At the risk of revealing way too much about my DVR queue again this week, I saw a piece on CBS Sunday Morning one night last week.

It was a great little piece by Steve Hartman about debt collector Bill Bartmann.

Debt collectors have a bad name.  Biblically bad.

But not Bill Bartmann.  He’s so beloved that a  university president recently nominated him for the Nobel Peace Prize.  One of his targeted collectees gets tears up when she talks about the process.  The goosebumpy, fond feeling kind of tears not usually associated with debt collection.


Bill says he is making 200 percent more than his competitors just by being nice.

His collection agency, CFS-2, has decided that those in debt don’t pay because they have no money.  So they will help their debtors with job applications, interview prep, and they will even call them to get up to go to work on time.   And if they get to work, they will make money.  And if they make money, they will pay their bills, especially if the bill collector is a friend.  Bill Bartmann wants to be a friend.

And make a bunch of money in the process.

How can you be kinder and more helpful today?  How can you be a friend?

The bottom line of your business will grow, and my guess is, so will your heart.

Original Article:

Debt collector thrives with simple strategy: kindness

CBS News TULSA, Okla. – Nurse Lori Factor from Tecumseh, Okla., could be any one of the 35 million Americans who owe money to a collection agency.

The only difference is that Lori loves her debt collector.

Lori recalls him once telling her, “I’m here to help you.”

“I just felt like, “OK, maybe I can get out of this mess,’” said Lori.

Nurse Lori Factor from Tecumseh, Okla., was lucky to fall on a kind debt collector.

Because when Lori’s hours got cut at work, she fell behind on her bills.

Part of that debt was turned over to a new collection agency in Tulsa called CFS-2.

Inside it looks like any other collection agency — but if you listen in on the calls, you realize it’s not.

The company is owned by Bill Bartmann. Bartmann operates on the basic premise that people in debt — don’t have money. So why brow beat ‘em?

Bill says he does not hire debt collectors. Instead, he hires people with customer care experience. And rewards them — not for how much money they bring in — but for how many free services they provide.

The goal is to get debtors back on their feet — be it through government assistance, housing, even helping build resumes.

Bill Bartmann encourages his employees to give out free services.

Bill says his company will even fill out the application and schedule the interview for their clients.

“Because if I can get you out of debt, you will have more money to pay me later,” said Bill.

He started this as an experiment about a year ago. And the results are now in.

Bill says he is making 200 percent more than his competitors just by being nice.

What’s even crazier is that one local university president was so impressed with what Bartmann is doing here, he nominated him for the 2014 Nobel Peace Prize.

It’s a long shot, of course, but customers like Lori are hopeful.

His company helped her by renegotiating all her debts — not just the one she had with CFS2 — and did it all for free.

Today, everything is paid off.

“I’m just so thankful, I really am,” said Lori. Although if you look in her eyes you can tell, she’s clearly still indebted.

To see the original CBS segment:


A Debt Collector With Heart


Bill Bartmann, a debt collection agency CEO, has recently been nominated for a Nobel Peace Prize. The agency, CFS2 is winning top awards and growing fast—and it is based on a very different model than most.

As any other debt collector, CFS2 buys peoples’ debts from banks and then works to make sure the money gets paid back. But instead of purely focusing on the money, it focuses on being nice to those people in debt—”to strive to improve the life of each of our customers,” explained Bartmann via email.

After three years of the new approach, Bartmann is able to say that “Our collection results are in excess of 200 percent of our industry peers. Yes, there is a bit of additional cost to provide these services, but that cost is minimal in relation to the excess collections they produce.” Bartmann and his wife, Kathy, were seriously in debt in the eighties. They experienced firsthand the aggressive tactics debt collectors use.

People have reported debt collectors to the Federal Trade Commission (FTC) for harassing and threatening; demanding more money than legally allowed; failing to verify disputed debts; and violating privacy laws by informing employers, co-workers, family members, and friends about the debt.

The FTC receives more complaints about debt collection than any other industry in the United States.

The Bartmann family vowed to change the game. Instead of making people afraid, the Bartmann’s wanted to “focus on the pleasure principle,” said Bartmann. They wanted to use pleasure instead of fear as a motivator, to work with people instead of fight with them.

He didn’t know how to put this into practice initially. Bartmann started by asking his employees how they could “befriend” the customer, he told the Harvard Business Review.

CFS2 gives people in debt the helping hand they need. It goes beyond even advising an unemployed person in debt on how to get a job, for example; it will match the person’s resume with job openings, help him fill out job applications, schedule interviews, coach him via Skype before the interview to practice answering questions, provide business attire, and even a wake-up call on the morning of the interview.

It does the “heavy lifting for them, since they’re so beat down they have no get-up-and-go left,” Bartmann said.

CFS2 also negotiates with creditors to get a discounted settlement or a more suitable payment plan. It helps people connect with the government assistance programs they qualify for. And there is more.

A CFS2 employee thought to ask customers their needs, and came up with a list of other areas the agency can provide assistance: providing food or childcare, fixing a leaky roof, et cetera.

A typical customer relationship manager is selected on his or her capacity to “empathize (not sympathize)” with people, Bartmann said. “We do not hire employees with collection experience. Instead, we are looking for employees with social worker experience.”

“The daily tasks are dramatically different,” Bartmann said. “In the old days we did what most collection companies currently do—we focused on determining what resources the customer had with which to pay us, and then endeavored to get as much as possible. The new approach is to not even ask for payment but instead to ask, ‘how we can help?’ Once we have truly delivered value (as recognized by the customer) we can then get around to discussing our debt.”

CFS2 looks to the person’s long-term well-being. The customer relationship managers, backed by a supporting team, get to know the person and determine whether an organization exists to provide support for him or her. If someone is facing a particular issue, CFS2 will connect that person with an organization that helps people with that issue.

The story of Scott (last name withheld) illustrates the agency’s impact. Scott depended financially on his mother-in-law’s help and needed food, utility assistance, and money to take his daughter to the dentist. A CFS2 consultant helped him fill out a food stamp application online, gave him an address for a free dental clinic, and helped him get a job that pays better than any he has had in years.

Bartmann is spreading the new paradigm. He has taught classes on his methodology to students from 27 countries. He will teach a group of some 400 bankers and debt collectors in November in the UK how to emulate CFS2′s process.

When asked what advice he could give to aspiring friendly debt collectors, Bartmann said: “Quickly make the change, as regulatory agencies will soon put out of business any collector who follows the old ‘beat ‘em into the ground approach.’”

Banks are also becoming concerned about their reputations when choosing a collection agency. They don’t want their names sullied by harsh and harassing collectors, and are selective about the agencies they will sell delinquent loans to. Regulatory agencies are also holding banks liable for the actions of collectors, even if the bank sold the assets to the collector.

At CFS2, one consultant can help several hundred customers per month, Bartmann said, Bartmann’s companies have worked with over 4.5 million families.

Original Article:


CFPB Signals Renewed Crackdown on Credit Rating Data Providers

Compliance Week

Consumer credit rating companies, and the firms that feed them with consumer data, have been put on notice by the Consumer Financial Protection Bureau that they must do a better job addressing complaints and inaccuracies.

In a bulletin issued on Wednesday, companies that supply information to consumer reporting companies, also known as “furnishers,” will be under added scrutiny by the CFPB when they investigate disputes forwarded by the consumer reporting companies. An upgraded, electronic database is intended to better enable then to review information provided with disputes and documents submitted by consumers.

Consumers may file a dispute with a consumer reporting company about an incorrect or challenged item on their credit report. If they do, the consumer reporting company typically inform their furnisher of that dispute and forward all relevant materials.

An electronic system, known as “e-OSCAR,” is used by the three largest nationwide consumer reporting companies – Equifax Information Services, TransUnion, and Experian Information Solutions – to send information relating to consumer disputes to furnishers. In a December 2012 study, the CFPB flagged the fact that this system did not provide any means for credit reporting companies to forward to furnishers any documents submitted by consumers.

Since then, the CFPB has been working to ensure that the dispute system was improved. The “e-OSCAR” system has now been upgraded so that the three companies can now send furnishers any relevant dispute documents mailed in by consumers. The CFPB is also currently working to expand the capacity of the system.

With this national database in place and operational, the CFPB issued the notice to detail its ongoing expectations of how furnishers should comply with the requirements of the Fair Credit Reporting Act, particularly when it comes to investigations of consumer disputes.

The CFPB’s expectations detailed by the CFPB include:

  • When a consumer files a dispute about a credit report item, companies need to be able to receive information about the dispute and must investigate the consumer’s concerns.
  • Furnishers must report the results of the investigation to the consumer reporting company that sent the dispute originally.
  • Furnishers are required to report the results of the investigation to nationwide consumer reporting companies if those companies may have received inaccurate or incomplete credit information. Furnishers also have to modify, delete, or permanently block disputed information that is incomplete, inaccurate, or cannot be verified.

If the CFPB determines that a furnisher has engaged in any acts or practices that violate the Fair Credit Reporting Act or other federal consumer financial laws, it will take supervisory and enforcement actions, possibly including restitution to harmed consumers.

The CFPB accepts consumer complaints about credit reporting. If a consumer is dissatisfied with the resolution of a dispute with a consumer reporting company or if the consumer reporting company does not respond, consumers can submit a complaint with the Bureau.

Original Article:

Debt Collectors Get More U.S. Consumer Bureau Oversight

The debt-collection business faces greater U.S. oversight as the Consumer Financial Protection Bureau begins writing the first regulations under a federal law governing the industry and probes for violations.

“We will be looking to write some new rules as well as continue to pursue a lot of enforcement work we’ve been doing,” Richard Cordray, the CFPB’s director, said in an interview yesterday.

The 2010 Dodd-Frank Act that created the bureau also authorized it to write regulations under the Fair Debt Collection Practices Act of 1977. It can oversee debt collection from when credit is extended — such as via credit cards issued by JPMorgan Chase & Co. (JPM) or Capital One Financial Corp. (COF) — through the purchase of charged-off debt by companies including Portfolio Recovery Associates Inc. (PRAA) and Encore Capital Group Inc. (ECPG)

Mark Schiffman, a spokesman for ACA International, a collectors’ trade group, said the industry supports efforts to have “less gray and more black and white” in how to comply with the debt-collection law.

“We’ve anticipated they’d look at how they oversee the industry,” Schiffman said in an interview. “And we’re not necessarily opposed to new rules.”

The debt-collection business has become part of the lives of the roughly 1 in 10 Americans being pursued by debt collectors, Cordray said.

‘Really Matter’

The agency’s work “will really matter to Americans who often feel harassed and oppressed, or are being chased over debts they don’t think they owe,” Cordray said.

Earlier this year, the agency commenced the first direct federal supervision of debt-collection companies, assigning examiners to scrutinize every aspect of the business.

On July 18, CFPB announced it would open its consumer response system to complaints about debt collection, and is allowing submissions to be directed at both collectors and the original lender. The same day, it announced that banks, exempt from the requirements of the 1977 law, would also have to take steps to avoid mistreating consumers in debt collection.

The bureau yesterday directed companies that furnish information to credit bureaus such as Experian Plc (EXPN), TransUnion Corp. and Equifax Inc. (EFX), to respond to consumer inquiries disputing the data. Debt collectors sometimes provide information to the credit bureaus on whether consumers pay debts.

Rules Outdated

When Congress passed the debt-collection law, it didn’t give the agency responsible for its enforcement, the Federal Trade Commission, streamlined authority to write regulations that would ensure the act kept pace with time. As a result, Cordray said, provisions on how debt collectors are allowed to contact consumers reflect the use of mail and the telephone at a time when e-mail and social media use are widespread.

Cordray said that one goal of the agency is to clarify the rules and break a trend in which debt-collection practices are controlled by the outcomes of lawsuits “in courtrooms across the country.”

“Debt collection has become a litigation-heavy industry,” Cordray said. “That’s not very good for consumers and it’s been quite problematic for a lot of consumers who end up having their wages garnished and other things without any real effective ability to contest these lawsuits because they don’t have legal representation.”

To contact the reporter on this story: Carter Dougherty in Washington at

To contact the editor responsible for this story: Maura Reynolds at

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