Debt sale guidelines from the Office of the Comptroller of the Currency (regulatory agency for federally chartered banks)

Monday, August 4th, 2014



Subject: Consumer Debt Sales
Date: August 4, 2014
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties

Description: Risk Management Guidance


This bulletin provides guidance from the Office of the Comptroller of the Currency (OCC) to national banks and federal savings associations (collectively, banks) on the application of consumer protection requirements and safe and sound banking practices to consumer debt-sale arrangements with third parties (e.g., debt buyers) that intend to pursue collection of the underlying obligations. This bulletin is a statement of policy intended to advise banks about the OCC’s supervisory expectations for structuring debt-sale arrangements in a manner that is consistent with safety and soundness and promotes fair treatment of customers.


The guidance describes the OCC’s expectations for banks that engage in debt-sale arrangements, including

  • ensuring that appropriate internal policies and procedures have been developed and implemented to govern debt-sale arrangements consistently across the bank.
  • performing appropriate due diligence when selecting debt buyers.
  • ensuring that debt-sale arrangements with debt buyers cover all important considerations.
  • providing accurate and comprehensive information regarding each debt sold, at the time of sale.
  • ensuring compliance by the bank with applicable consumer protection laws and regulations.
  • implementing appropriate oversight of debt-sale arrangements.

Note for Community Banks

This guidance is applicable to all OCC-supervised banks.


Lending is the primary method by which banks meet the credit needs of their customers. A risk inherent in lending is that some debt will not be repaid. Pursuant to the Uniform Retail Classification and Account Management Policy guidelines, banks are generally required to charge off certain consumer debt when the debt is 180 days past due, and in some instances, earlier than 180 days past due.1  The majority of debt that banks charge off and sell to debt buyers is credit card debt, but banks also sell to debt buyers other delinquent debts, such as auto, home-equity, mortgage, and student loans.

Although banks charge off severely delinquent accounts, the underlying debt obligations may remain legally valid and consumers can remain obligated to repay the debts. Banks may pursue collection of delinquent accounts by (1) handling the collections internally, (2) using third parties as agents in collecting the debt, or (3) selling the debt to debt buyers for a fee. This guidance focuses on the third category of bank practice for fully charged-off debt.2

Most debt-sale arrangements involve banks selling debt outright to debt buyers. Banks may price debt based on a small percentage of the outstanding contractual account balances. Typically, debt buyers obtain the right to collect the full amount of the debts. Debt buyers may collect the debts or employ a network of agents to do so. Notably, some banks and debt buyers agree to contractual “forward-flow” arrangements, in which the banks continue to sell accounts to the debt buyers on an ongoing basis.

The OCC recognizes that banks can benefit from debt-sale arrangements by turning nonperforming assets into immediate cash proceeds and reducing the use of internal resources to collect delinquent accounts. In connection with charged-off loans, banks have a responsibility to their shareholders to recover losses.3  Still, banks must be cognizant of the significant risks associated with debt-sale arrangements, including operational, compliance, reputation, and strategic risks. Accordingly, banks that engage in debt sales should do so in a safe and sound manner and in compliance with applicable laws—including consumer protection laws—taking into consideration relevant guidance.

The OCC has focused on issues related to debt sales for several years and has highlighted the risks associated with this type of activity on a number of occasions. Beginning in 2011, the OCC conducted a review of debt collection and sales activities across the large banks it regulates. Through this work, the OCC identified a number of best practices that OCC large bank examiners have incorporated into their supervision of debt sales activities. In July 2013, the OCC provided a copy of this best practices document to the Senate Subcommittee on Financial Institutions and Consumer Protection. In an accompanying statement, the OCC announced that the agency was using these best practices and insights gained from its on-site supervisory activities to inform the development of policy guidance applicable to a broader range of financial institutions. Since that time, the OCC has received comments and input from a wide variety of interested parties, including financial institutions, debt buyers and collectors, consumer and community advocates, and other governmental entities. The OCC has considered carefully all of this input in formulating the following guidance, which is applicable to all OCC-supervised institutions.4

Risks Associated With Sale of Debt to Debt Buyers

Selling debt to a debt buyer can significantly increase a bank’s risk profile, particularly in the areas of operational, reputation, compliance, and strategic risks. Increased risk most often arises from poor planning and oversight by the bank, and from inferior performance or service on the part of the debt buyer, and may result in legal costs or loss of business.

Operational risk. Operational risk is the risk of loss to earnings or capital from inadequate or failed internal processes, people, and systems or from external events. Banks face increased operational risk when they sell debt to debt buyers. Inadequate systems and controls can place the bank at risk for providing inaccurate information regarding the characteristics of accounts, including balances and length of time that the balance has been overdue. In addition, banks should be cognizant of the potential for fraud, human error, and system failures when selling debt to debt buyers.

Reputation risk. Reputation risk is the risk to a bank’s earnings or capital arising from negative public opinion. Banks should be keenly aware that debt buyers pursue collection from former or current bank customers. Even though a bank may have sold consumers’ debt to a debt buyer, the debt buyer’s behavior can affect the bank’s reputation if consumers continue to view themselves as bank customers. Moreover, abusive practices by debt purchasers, and other inappropriate debt-buyer tactics (including those that cause violations of law), are receiving significant levels of negative news media coverage and public scrutiny.5  When banks sell debt to debt buyers that engage in practices perceived to be unfair or detrimental to customers, banks can lose community support and business.

Compliance risk. Compliance risk is the risk to earnings or capital arising from violations of laws, rules, or regulations, or from nonconformance with internal policies and procedures or ethical standards. This risk exists when banks do not appropriately assess a debt buyer’s collection practices for compliance, or when the debt buyer’s operations are inconsistent with law, ethical standards, or the bank’s policies and procedures. The potential for serious or frequent violations or noncompliance exists when the bank’s oversight program does not include appropriate audit and control features, particularly when the debt buyer implements new collection strategies or expands existing ones. Compliance risk increases when privacy of consumer and customer records is not adequately protected, such as when confidential consumer data are released before a sale of the data, or when conflicts of interest between a bank and debt buyers are not appropriately managed, such as when the debt buyers pursue questionable collection tactics.

Strategic risk. Strategic risk is the risk to earnings or capital arising from adverse business decisions or improper implementation of those decisions. Strategic risk arises when a bank makes business decisions that are incompatible with the bank’s strategic goals or that do not provide an adequate return on investment. Strategic risk increases when bank management introduces new business decisions without performing adequate due diligence reviews or without implementing an appropriate risk management infrastructure to oversee the activity. Strategic risk also increases when management does not have adequate expertise and experience to properly carry out decisions. Decisions to sell debt to debt buyers must be carefully analyzed to ensure consistency with the bank’s strategic goals. Selling debt to debt buyers without first performing appropriate due diligence, or without taking steps to implement an appropriate risk management structure, including having capable management and staff in place to carry out debt sales, increases the bank’s strategic risks.

Supervisory Concerns With Debt-Sale Arrangements

Debt-sale arrangements can pose considerable risk to banks that do not conduct appropriate due diligence to assess and manage those risks. Through its supervisory process, the OCC has identified instances in which banks agreed to sell debt to debt buyers without full understanding of the debt buyers’ collection practices. Banks should know what resources debt buyers use to manage and pursue collections and consider the debt buyers’ past performance with consumer protection laws and regulations.

The OCC has identified situations in which banks inappropriately transferred customer information to debt buyers. In these instances, banks gave debt buyers access to customer files so they could assess credit quality before the debt sale, without the banks first making proper customer disclosures, which was inconsistent with the banks’ internal privacy policies and applicable laws and regulations. The OCC also has identified instances in which banks, debt buyers, or both had inadequate controls in place to protect the transfer of customer information. In addition, the OCC has identified debt-sale arrangements between banks and debt buyers that lacked confidentiality and information security provisions. Debt-sale arrangements between banks and debt buyers should clearly specify each party’s duties and obligations regarding confidential customer information, and should include provisions requiring debt buyers to comply with applicable laws and consumer protections.

Through its supervisory process, the OCC also has identified issues related to the adequacy of customer account information transferred from banks to debt buyers, including situations in which the transferred customer files lack information as basic as account numbers or customer payment histories. In these circumstances, because the debt buyers pursue collection without complete and accurate customer information, the debt buyers may employ inappropriate collection tactics or engage in conduct that is prohibited based on the facts of a particular case (e.g., pursue collection on a debt that was previously discharged in bankruptcy or after the applicable statute of limitations).

Lastly, the OCC has found that some banks may lack appropriate internal oversight of debt-sale arrangements to minimize exposure to potential risks. For example, some banks have not developed and implemented bank-wide policies and procedures to ensure that debt-sale arrangements are governed consistently across their organizations.

Supervisory Expectations of Debt Sales

The OCC expects banks to structure debt-sale arrangements in a prudent and safe and sound manner to promote the fair treatment of customers. OCC examinations assess management oversight of debt-sale arrangements and focus on compliance with applicable consumer protection statutes and potential safety and soundness issues. The OCC takes appropriate supervisory action to address any unsafe or unsound banking practices associated with debt sales, to prevent harm to consumers, and to ensure compliance with applicable laws.

OCC-supervised banks are expected to adopt appropriate practices in connection with debt sales. The OCC considers the following practices to be consistent with safety and soundness.

  • Ensure appropriate internal policies and procedures are developed and implemented to govern debt-sale arrangements consistently across the bank. Policies and procedures should
    • identify the persons or offices within the bank responsible for all debt sales across the bank. The establishment of an oversight committee by the bank should also be considered.
    • require that a financial analysis be completed detailing why selling debt is more beneficial than other options that might be available to the bank, such as managing the debt collection internally or employing debt collectors.
    • assess how debt sales align with the bank’s business strategy and risk profile.
    • include ongoing monitoring and analysis of repurchase requests from debt buyers to improve the bank’s account review process before each debt sale.
    • require involvement of appropriate bank personnel in the debt-sale approval process to ensure all risks are fully considered (e.g., compliance, risk management, information technology, credit, legal, collections, audit, and information security).
    • identify types of accounts that should not be sold and specify quality control standards for debt that is sold, with an emphasis on ensuring the accuracy of account balance information.
    • ensure that debt-sale arrangements with debt buyers clearly delineate the responsibilities of the parties involved.
    • require the provision of detailed and accurate information to debt buyers at the time of sale (to enable them to pursue collections in compliance with applicable laws and consumer protection requirements).
    • ensure that customers receive timely notification from the bank that the debt has been sold, the dollar amount of the debt transferred, and the name and address of the debt buyer.
    • ensure that credit bureau reporting is up-to-date and accurately reflects the sale or transfer of the debt to the debt buyer.
    • specify internal bank documentation retention and quality control standards.
    • ensure that the bank’s management information systems can generate timely, accurate, and comprehensive reports for bank management that detail debt sales across lines of business, sales prices, repurchase volumes, losses incurred, and customer complaints.
    • address internal review standards to ensure debt sales comply with the bank’s own policies and procedures.
  • Perform appropriate due diligence when selecting a debt buyer. 6  Debt buyers pursue collection from former or current bank customers, so banks should fully understand the debt buyers’ collection practices, including the resources that debt buyers or their agents use to manage and pursue collection. Banks should perform appropriate due diligence before entering into debt-sale arrangements with debt buyers. For example, banks should assess the potential debt buyers’ background, experience, and past performance, including consumer complaints about the debt buyers, and assess steps taken by debt buyers to investigate and resolve the complaints. Before entering into any arrangements with debt buyers, banks should review all pertinent information (including audited financial statements) to confirm that debt buyers are financially sound and appropriately licensed and insured. In addition, before entering into debt-sale arrangements, banks should determine what repurchase and litigation reserves should be established given the size and type of debt sales contemplated.

Before a bank enters into a contract with a debt buyer, the debt buyer should be able to demonstrate that it maintains tight control over its network of debt buyers and that it conducts activities in a manner that will not harm the bank’s reputation. In particular, a debt buyer’s staff should be appropriately trained to ensure that it follows applicable consumer protection laws and treats customers fairly throughout the collection process. In addition, banks contemplating entering into a relationship with debt buyers should first assess the debt buyer’s record of compliance with consumer protection laws and regulations. Banks should conduct this level of due diligence before entering into new relationships with debt buyers, and periodically when forward-flow contractual arrangements are in place. Banks should reserve the right to terminate such relationships when appropriate. This means banks should develop and implement controls and processes to ensure risks are properly measured, monitored, and controlled, and develop and implement appropriate performance review systems.

  • Ensure debt-sale arrangements with debt buyers cover all important considerations. The structure of the arrangements between the banks and the debt buyers depends on the written contracts between the parties. The contracts should reflect clear, consistent terminology. To the extent that more than one business line at the bank sells debt, banks, if appropriate, should use standard language for all business lines’ debt-sale arrangements. Regardless of the structure of the arrangements, the duties and obligations of the parties, particularly provisions for confidentiality and information security, should be clearly delineated in the contracts, as should responsibility for compliance with applicable consumer protection laws. This includes a termination plan to ensure that customer information is returned to the bank or destroyed in accordance with the debt-sale arrangement. In addition, banks should include minimum-service-level agreements in debt-sale arrangements to promote fair and consistent treatment of customers, applicable whether debt buyers conduct the collection activities or employ other collection agents.

Banks should ensure that the debt-sale arrangements address the extent to which the debt buyers can resell debt. Each time account information changes hands, risk increases that key information will be lost or corrupted, calling into question the legal validity and ownership of the underlying debt. Moreover, resales of debt increase the possibility that subsequent purchasers will pursue collection efforts against the wrong individual, seek to collect the wrong amount, or both. Therefore, in drafting debt-sale arrangements, banks should address whether subsequent resales of former bank debt would be permitted. If so, debt-sale arrangements should obligate the initial debt buyer to conduct thorough due diligence on the proposed purchaser and to pass on all account information and documentation in its possession to a subsequent buyer.

Banks should ensure that contracts with debt buyers address the volume of accounts (both in terms of the total dollar amount and percentage of debt sold, as well as aggregate numbers of accounts) and the reasons why the debt buyer can litigate. Debt-sale arrangements should address the debt buyers’ obligations to engage in ongoing efforts to maintain the accuracy of the information provided by banks. Lastly, where applicable, banks should ensure that contracts do not include compensation provisions that incent debt buyers to act aggressively or improperly.

  • Provide accurate and comprehensive information regarding each debt sold, at the time of sale. Banks should ensure that their debt buyers have accurate and complete information necessary to enable them to pursue collections in compliance with applicable laws and consumer protections. Banks that engage in debt sales should have a strong risk management culture, including a quality control function that evaluates all proposed debt sales before they occur. This may involve the use of “data scrubs” and transactional sampling to ensure that account data are complete and accurate before accounts are transferred to the buyer.

For each account, the bank should provide the debt buyer with copies of underlying account documents, and the related account information, as applicable and in compliance with record retention requirements, including the following:

    • A copy of the signed contract or other documents that provide evidence of the relevant consumer’s liability for the debt in question.
    • Copies of all, or the last 12 (whichever is fewer), account statements.
    • All account numbers used by the bank (and, if appropriate, its predecessors) to identify the debt at issue.
    • An itemized account of all amounts claimed to be owed in connection with the debt to be sold, including loan principal, interest, and all fees.
    • The name of the issuing bank and, if appropriate, the store or brand name.
    • The date, source, and amount of the debtor’s last payment and the dates of default and amount owed.
    • Information about all unresolved disputes and fraud claims made by the debtor. Information about collection efforts (both internal and third-party efforts, such as by law firms) made through the date of sale.

o    The debtor’s name, address, and Social Security number.

  • Certain types of debt are not appropriate for sale. Debt clearly not appropriate for sale, because it likely fails to meet the basic requirements to be an ongoing legal debt, includes the following:
    • Debt that has been otherwise settled or is in process of settlement.
    • Debt of deceased account holders.
    • Debt of borrowers that have sought or are seeking bankruptcy protection.
    • Debt of account holders currently in litigation with the institution.
    • Debt incurred as a result of fraudulent activity.
    • Accounts lacking clear evidence of ownership.

In addition, banks should refrain from the sale of certain additional types of debt because the sales of these types of accounts may pose greater potential compliance and reputational risk. These include:

    • Accounts eligible for Servicemembers Civil Relief Act protections.
    • Accounts of minors.
    • Accounts in disaster areas.
    • Accounts close to the statute of limitations.

If banks are required to repurchase accounts from debt buyers after sales are completed, the banks’ quality control personnel should evaluate why the accounts were returned and determine whether additional quality controls need to be implemented. If necessary, banks should complete look-back reviews to determine whether they or the debt buyers engaged in practices that hurt consumers.

  • Comply with applicable laws and regulations. Banks should implement effective compliance risk management systems, including processes and procedures to appropriately manage risks in connection with debt-sale arrangements. Examiners review banks’ debt-sale arrangements for compliance with applicable consumer protection statutes and regulations. In particular, banks should ensure that all parties involved in the debt-sale arrangement have strong controls in place to ensure that sensitive customer information is appropriately protected.

Federal laws and regulations applicable to debt sales include the following:

    • Fair Debt Collection Practices Act (FDCPA). The FDCPA applies to debts incurred primarily for the consumer’s personal, family, or household purposes, and is designed to (1) eliminate abusive practices in the collection of consumer debts, (2) promote fair debt collection, and (3) provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information’s accuracy.7Under the FDCPA, “debt collector” is defined broadly to generally encompass debt buyers working on behalf of original creditors, including banks.8
    • Fair Credit Reporting Act (FCRA). The FCRA, which is implemented by Regulation V, regulates the collection, dissemination, and use of consumer information, including consumer credit information.9  The FCRA and Regulation V require that furnishers of information to consumer reporting agencies (e.g., creditors such as banks and debt buyers) follow reasonable policies and procedures in connection with the accuracy and integrity of consumer credit information they report to the consumer reporting system. If consumer information is furnished to credit reporting agencies, banks and debt buyers have affirmative duties to (1) provide complete and accurate information to the credit reporting agencies, (2) investigate disputed information from consumers, and (3) inform consumers about negative information that has been or will be placed in their credit reports.
    • Gramm-Leach-Bliley Act (GLBA). Certain provisions of the GLBA and Regulation P, which implements the GLBA,10  require banks to provide consumers with privacy notices at the time the consumer relationships are established and annually thereafter. The privacy notice must disclose (1) the information collected about the consumer, (2) where that information is shared, (3) how that information is used, and (4) how that information is protected. In addition, this law imposes limitations on banks’ sharing of nonpublic personal information with debt buyers.
    • Equal Credit Opportunity Act (ECOA). The ECOA and its implementing regulation, Regulation B,11prohibit discrimination in any aspect of a credit transaction on a “prohibited basis”; i.e., because of a customer’s (1) race, (2) color, (3) religion, (4) national origin, (5) sex, (6) marital status, (7) age (provided the customer has the capacity to contract), (8) receipt of public assistance income, or (9) exercise in good faith of any right under the Consumer Credit Protection Act or any state law under which an exemption has been granted by the Consumer Financial Protection Bureau (CFPB). The prohibition against discrimination in any aspect of a credit transaction on a prohibited basis includes collection procedures.12
    • Federal Trade Commission Act (FTC Act). Section 5 of the FTC Act prohibits unfair or deceptive acts or practices (UDAP) in or affecting commerce.13  Acts or practices may be found to be unfair when or if (1) they cause or are likely to cause substantial injury to consumers, (2) the injury cannot be reasonably avoided by consumers, and (3) the injury is not outweighed by countervailing benefits to consumers or to competition. Public policy may also be considered in determining whether acts or practices are unfair. Acts or practices may be found to be deceptive if (1) there is a representation, omission, act, or practice that misleads or is likely to mislead a consumer, (2) the act or practice would be deceptive from the perspective of a reasonable consumer, and (3) the misleading representation, omission, act, or practice is material.
  • Implement appropriate oversight of the debt-sale arrangement. The bank’s oversight responsibilities will vary depending on the structure of the arrangement between the bank and the debt buyer. Regardless of the structure of the arrangement, the bank’s appropriate oversight of the debt-sale arrangement is important to minimize the bank’s exposure to potential reputation damage and supervisory action. In addition to monitoring the implementation of the sales contract, particularly when the bank is engaged in a forward-flow arrangement with a debt buyer, the bank should consider, as applicable, (1) reviewing the debt-buyer’s annual financial statements to ensure ongoing financial strength, (2) remaining alert for any relevant adverse information about the debt-buyer’s principals, and (3) monitoring the bank’s complaints for any potential adverse treatment of consumers by the debt buyer. In addition, the bank’s ongoing due diligence should be focused on the volume of, and reasons for, repurchases by the bank. The bank’s audit program should periodically evaluate its compliance with its debt-sale policies and procedures. Results of all oversight activities should be reported periodically to the bank’s board of directors or designated committee, including identified weaknesses, which should be documented and properly addressed.

Examiners determine whether bank management has established controls and implemented a rigorous analytical process to identify, measure, monitor, and manage the risks associated with debt sales. If examiners find unsafe or unsound practices or practices that fail to comply with applicable laws or regulations, the OCC will take appropriate supervisory action, including enforcement actions, when warranted. When the OCC becomes aware of concerns with nonbank debt buyers, the agency refers those issues to the CFPB, which has jurisdiction over these entities.

Further Information

Direct questions to Kathryn Gouldie, Retail Credit Expert–Large Bank Supervision, at (202) 649-6210; Kimberly Hebb, Director for Compliance Policy, at (202) 649-5470; Kenneth Lennon, Assistant Director for Community and Consumer Law, at (202) 649-6350; or Robert Piepergerdes, Director for Retail Credit Risk, at (202) 649-6220.


John C. Lyons Jr.
Senior Deputy Comptroller and Chief National Bank Examiner


1 For closed-end credit, loans should be charged off when a loss is identified but generally not later than 120 days past due. Such open-end loans as credit card accounts must be charged off at 180 days past due. See OCC Bulletin 2000-20, “Uniform Retail Credit Classification and Account Management Policy: Policy Implementation” (June 20, 2000).

2 This guidance applies to all outright legal sales of charged-off debt by banks. This guidance does not apply when a bank has a residual interest in the debt that is sold (e.g., the bank continues to receive income from the debt, or the bank receives a percentage of any recovery by the debt buyer).

3 For the purposes of the Federal Financial Institutions Examination Council’s (FFIEC) Consolidated Reports of Condition and Income (also known as call reports), accounting for cash proceeds received, including timing of any revenue or recoveries recorded, and debt-sale arrangement terms such as representations and warranties, should follow generally accepted accounting principles and the FFIEC’s “Instructions for the Preparation of Consolidated Reports of Condition and Income.”

4 This guidance does not create any new legal rights against a bank that sells debt, either for a consumer whose debt is sold or for any other third party.

5 See “The Structure and Practices of the Debt Buying Industry” (Federal Trade Commission, January 2013).

6 Banks should follow the guidance for assessing and managing risk associated with third-party relationships that is detailed in OCC Bulletin 2013-29, “Third-Party Relationships: Risk Management Guidance” (October 30, 2013).

7 See 15 USC 1692.

8 An institution is not considered a debt collector under the FDCPA if the institution collects its own debts under its own name, or for debts that it originated and then sold but continues to service (e.g., a mortgage loan).

9 See FCRA at 15 USC 1681-1681x and Regulation V at 12 CFR 1022-1022.140.

10 For the general provisions of GLBA that govern disclosure of nonpublic personal information, see 15 USC 6801-6809. See also Regulation P, which implements the provisions of GLBA pertaining to privacy of consumer financial information, at 12 CFR 1016.

11 See ECOA at 15 USC 1691-1691f and Regulation B at 12 CFR 1002.

12 See 12 CFR 1002.2(m) (“Credit transaction means every aspect of an applicant’s dealing with a creditor regarding an application for credit or an existing extension of credit (including, but not limited to, information requirements; investigation procedures; standards of creditworthiness; terms of credit; furnishing of credit information; revocation, alteration, or termination of credit; and collection procedures”).

13 See 15 USC 45(a). The OCC enforces the FTC Act’s prohibition against UDAP pursuant to its authority in the Federal Deposit Insurance Act. See 12 USC 1818(b).

The Office of the Comptroller of the Currency (OCC) charters and oversees a nationwide system of national banks and federal savings associations and assures that these banking institutions are safe and sound, competitive, and capable of serving the banking needs of their customers in the best possible manner.

Errors in Chase credit card lawsuits

Monday, August 4th, 2014

From Rolling Stone:


Chase Made Errors in Nine Percent of Credit-Card Collection Lawsuits, Internal Survey Finds

Chris Ratcliffe/Bloomberg via Getty Images
J.P. Morgan Chase CEO Jamie Dimon.

Yet another damning fact on the bank emerges

A piece in the Wall Street Journal dug up yet another damning fact about Jamie Dimon’s J.P. Morgan Chase. This time, reporters got hold of an internal bank survey of its credit-card collections suits. It turns out that Chase’s own survey found that huge numbers of lawsuits filed by the bank contained errors.

From the article:

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.

Thirteen states, as well as the Office of the Comptroller of the Currency, a primary banking regulator, are investigating Chase’s insanely sloppy practices in the area of credit-card collections. I’ve been following this for years thanks to an acquaintance with former Chase VP and whistleblower Linda Almonte, who saw horrific abuses firsthand (I have a chapter on Linda’s crazy experiences coming out in my next book). The piece mentions her case:

The case credited with jump-starting investigations into J.P. Morgan’s pursuit of credit-card debt was a federal-court lawsuit filed in 2010 by a former J.P. Morgan assistant vice president, Linda Almonte, who alleged that employees known as “attorney liaisons” signed “multiple stacks of affidavits” without looking at the underlying documentation. She alleged that 11,472 out of 23,000 cases in one portfolio, or 50%, were “missing adequate documentation.”

I’m glad that the states are finally listening to Linda and that this news is starting to come out. The story is actually far worse than is being described in the papers. It involves allegations of a rather complicated scam tied to secondary sales of credit-card debt – it’s easier to sell credit card debt when a judgment has already been obtained, so it seems companies like Chase will go to great lengths, including mass robosigning and other abuses, to obtain judgments.

Chase is the headline target of these new investigations, but most analysts believe the same exact things go on at other banks and credit companies. Once the bigger state lawsuits gain momentum, we’re likely to find out, as we did in the foreclosure scandals, that faulty paperwork and perjured/robosigned affidavits pervade the entire consumer debt industry. Somehow I don’t think it will result in a $26 billion settlement this time, however.


Why recalled cars stay on the road — report from August 4, 2014 Wall Street Journal

Monday, August 4th, 2014


Why Recalled Cars Stay on the Road

The Wall Street Journal Examines How Regulators, Auto Makers Contribute to Dangerous Delays

Updated Aug. 3, 2014 10:38 p.m. ET

Stephen DiGiovanni holds a portrait of his parents, who died in March when their Jeep exploded in a rear-end crash. The SUV had been recalled. Alex Federowicz for The Wall Street Journal

In 2010, U.S. regulators began investigating fires in Jeep sport-utility vehicles. The probe eventually tied at least 51 deaths to fuel tanks that ignited in rear-end crashes. Chrysler Group LLC said the SUVs were safe but agreed a year ago to recall and repair 1.6 million Jeep Grand Cherokees and Libertys.

Almost none of them have been fixed.

The Jeep case shows how federal investigations into vehicles with suspected safety problems routinely take longer than they are supposed to. Auto makers and regulators both contribute to the delays. As a result, it can take years to get those cars and trucks off the road.

The Wall Street Journal examined federal data on 279 vehicle recalls since 2000 that were spurred by a National Highway Traffic Safety Administration probe. In more than a third of the cases, it took at least 12 months to investigate, recall and start fixing those vehicles, the data show. In about 10% of the cases, it took at least two years.

Many of those investigations involved serious safety concerns. NHTSA, the U.S.’s primary auto-safety regulator, linked more than 4,500 crashes or fires, about 1,600 injuries and 20 deaths to the 279 recalls analyzed by the Journal.

Yet the agency missed its own targets for prompt scrutiny of suspected safety defects in about 70% of the recalls.

In the Jeep case, regulators have missed their internal deadlines three times. Since the first one, at least nine people have died in fiery rear-end crashes of vehicles that Chrysler later recalled or offered to inspect for problems, according to regulatory records and police reports.

The top official at NHTSA, David Friedman, says more than 95 million vehicles have been recalled in the past decade as a result of investigations by the agency. Every recall is unique and has special circumstances that can affect an investigation’s length, he adds.

For example, the recall process can be prolonged if auto makers fight the agency’s claims, as Chrysler did. NHTSA says the Jeep case was “highly complex and unusual.”

Even after auto makers agree to fix vehicles, some repairs are delayed by problems getting needed parts, and regulators rarely impose a strict deadline for finishing the job. Some car owners never find out about the recall because they fall through cracks in the notification process, which requires auto makers to send letters only to the last known registered owner or buyer.

In March, Joseph and Esther DiGiovanni died when their 2004 Jeep Liberty exploded after being rear-ended on Interstate 81 in Maryland. Injuries to the married couple in their late 60s included burns and smoke inhalation, local state-police commander Lt. Michael Fluharty says.

One of their sons, Stephen DiGiovanni, says he and other siblings found a recall notice in their parents’ belongings after they died.

Even though the DiGiovannis were told their Jeep was being recalled, Chrysler had no parts to fix it. It took Chrysler a year to manufacture the parts, send them to dealers and tell Jeep owners how to get their SUVs fixed.

Letters are being sent Monday to owners of the recalled Jeeps, and repairs will start this month. Chrysler says it had to “enlist multiple new supplier partners” to make parts that “far exceeded normal demand.”

Chrysler expects to finish the repairs by March 2015. The company will install a trailer-hitch assembly meant to cushion the impact of “low-speed” crashes. The recall includes model years 1993 to 2007.

On July 2, NHTSA ordered Chrysler to explain why the repairs hadn’t begun. But the agency imposes no firm deadlines on auto makers to complete recall-related repairs. “It’s confusing to me that this is not something that’s been corrected,” says Stephen DiGiovanni.

A spokesman for Chrysler, owned by Fiat F.MI +0.14% Chrysler Automobiles NV, calls the crash that killed the DiGiovannis a “tragedy” but says the auto maker did nothing wrong.

The Jeeps are “among the safest in their peer groups and met or exceeded the standards in effect at the time they were first sold,” which is why the auto maker opposed the agency’s push for a recall.

Chrysler says it agreed to the recall in 2013 because the matter “raised concerns for its customers.” Chrysler has changed the location of fuel tanks in newer Grand Cherokees and Libertys but says the crashes weren’t a factor in the decision.

Regulators and auto makers are under heightened scrutiny because General Motors Co.GM -1.12% knew for nearly 11 years about faulty ignition switches that could cut power to steering, air bags and brakes before it recalled 2.6 million cars earlier this year.

In June, GM recalled more than eight million additional vehicles for similar problems. The company has attributed at least 13 deaths to the defective switches but says the tally could climb.

A GM spokesman says the company is “doing things differently today” and “determined to set a new industry standard for safety and quality.”

Auto makers have recalled a total of 43.6 million vehicles in the U.S. since the start of this year, more than any full-year total in history.

Recalls usually begin one of two ways. Auto makers often spot a safety defect themselves, tell regulators and then launch the recall. Other recalls are the result of action by NHTSA.

NHTSA’s Office of Defects Investigation launches investigations based on complaints or formal requests. Federal law requires regulators to respond to formal requests within 120 days.

If a complaint seems to deserve attention, the office launches a “preliminary evaluation.” Some of those investigations are elevated later to a more serious “engineering analysis.”

The Office of Defects Investigation aims to finish each preliminary evaluation within four months and an engineering analysis within one year, but it often fails. NHTSA missed at least one of those targets in 72% of the recalls examined by the Journal.

A NHTSA spokeswoman says the agency’s top priority is getting auto makers to recall vehicles with suspected safety problems, rather than “artificially closing an investigation to meet informal guidelines.”

Auto makers are required to tell car owners about a recall within 60 days, but there is no deadline for when the repair parts must be ready.

The median gap between the start of an investigation and when auto makers tell owners to get their cars fixed is about 10 months, the Journal’s analysis shows. It took about a year at GM, Ford Motor Co.F -1.23% and Toyota Motor Corp.7203.TO -0.76% , the three biggest car and truck sellers in the U.S. so far this year.

At Chrysler, which ranks No. 4 in U.S. sales, the gap was nine months. The figure doesn’t include the Jeep fuel-tank case because the recall hasn’t been completed.

A GM spokesman says the auto maker has made internal changes that should speed and improve its procedures for addressing safety defects. Ford, Toyota and Chrysler declined to comment.

The Journal’s findings are based on recalls by the 10 largest auto makers in U.S. sales. Those companies sell 90% of all passenger cars and trucks in the U.S.

NHTSA says the analysis doesn’t tell the full story because the Journal didn’t examine most of the recalls prompted by the agency. Those include recalls by smaller auto makers, manufacturers of heavy trucks or recreational vehicles, and auto-parts makers.

The 279 recalls reviewed by the Journal include 85% of all vehicles recalled since 2000 that were tied to a regulatory investigation.

More than 75% of all recalls are initiated by an auto maker without any probe by NHTSA. Because companies typically disclose few details about their internal investigations, those recalls weren’t included in the analysis.

Asked why the process takes longer in some cases than others, Mr. Friedman cites “particularly challenging cases” and resistance from auto makers that “slows down” the agency.

Auto makers can fight NHTSA in court if the agency orders a recall, forcing investigators to work harder to meet the higher burden of proof in a court case, he adds. Given the time, expense and risk of losing, regulators have long preferred using the investigation process to pressure companies into announcing recalls on their own.

George Hoffer, a transportation economist at the University of Richmond who has been an auto-industry consultant, says many investigations drag on because regulators wrongly push auto makers to do expensive repairs that have little or no effect on safety. That forces companies to fight back, he says.

“The process is broken,” says Sean Kane, the founder of research firm Safety Research & Strategies Inc., who has advised lawyers in lawsuits against auto makers, including GM and Chrysler. “The result is a lot of wasted time and investigations that can drag on for years or…never get going.”

Mr. Friedman, NHTSA’s acting administrator, says regulators “have been aggressive in influencing manufacturers to recall vehicles based on their legal duty to do so and have issued record fines when they don’t.”

NHTSA generally can’t stop manufacturers from selling products while a recall order is being challenged. Mr. Friedman says the agency is seeking authority from lawmakers to levy bigger fines, halt sales and require the immediate recall of vehicles it considers an “imminent hazard.” Proposed legislation hasn’t gained traction in Congress.

In the Jeep case, NHTSA took action after the agency was asked in October 2009 to review the fuel tanks. The request came from Clarence Ditlow, executive director of the Center for Auto Safety, an advocacy group started in 1970 by Ralph Nader and Consumers Union.

Mr. Ditlow says he was concerned that the tanks might be dangerous because of their position behind the rear axle.

The agency had a 120-day deadline to respond to Mr. Ditlow’s formal request. Regulators announced their initial investigation of the Jeep fuel tanks in August 2010—about 200 days after the agency’s deadline.

NHTSA then took 22 months to complete its preliminary evaluation of the Jeeps, about 18 months longer than its target for that part of the process, the agency’s documents show. An engineering analysis that is supposed to take about 12 months began in June 2012 and is still under way.

A NHTSA spokeswoman says the agency missed the 120-day deadline because it was being thorough. “Some petitions require more time for us to conduct our analysis without prematurely denying a petition,” the spokeswoman says.

The overall probe took longer because of “incredibly rare pushback” from Chrysler, she says.

A Chrysler spokesman says the auto maker was “in close coordination with NHTSA” throughout the investigation and recall. “The agency has had full knowledge of our activities. Chrysler Group complied with all applicable regulations governing recalls.”

So far, at least 834 documents totaling nearly 30,000 pages have been publicly disclosed as part of the investigation. The documents show the agency repeatedly questioned the Jeeps’ safety. Chrysler repeatedly said they weren’t defective.

While the two sides sparred, Manuel Bringas-Mejia, 24, died in an explosion of a 1997 Grand Cherokee on Interstate 4 in Florida. Mr. Bringas-Mejia was a passenger in the SUV when it was rear-ended in November 2011. The Jeep’s driver suffered extreme burns and was in a coma for about two months.

In a lawsuit, Mr. Bringas-Mejia’s relatives, including the SUV’s driver, blamed the fatal explosion on an allegedly defective fuel tank in the Grand Cherokee. Chrysler settled the suit in December, according to the family’s lawyer and a Chrysler spokesman.

Terms of the settlement weren’t disclosed. The auto maker’s spokesman says the accident was a “tragedy.”

During the investigation, federal officials said the SUVs met the relevant safety standardswhen they were made. NHTSA insisted it could still push for a recall if it found a “safety related defect…supported by the evidence.” NHTSA also noted that auto makers increasingly moved fuel tanks elsewhere after rear-end crashes of Ford Pintos in the 1970s.

In June 2013, NHTSA asked for a recall but didn’t say how it wanted Chrysler to fix the Jeeps. Chrysler responded that most of the 51 deaths linked by NHTSA to the Jeep fuel tanks occurred in crashes at a higher speed and intensity than the tanks were required to withstand.

Company officials also believed it wouldn’t be realistic to make major changes to the fuel tanks, such as moving them. “It’s not just a matter of moving things,” says a person close to Chrysler. “It’s like putting your heart where your kidneys are.”

Two weeks after NHTSA’s request, Chrysler agreed to recall 1.6 million Jeeps—and offer inspections on certain other vehicles. Chrysler says the trailer-hitch assembly it will start installing this month is a “structural reinforcement to better manage crash-energy in low-speed rear impacts.”

Since the recall was announced, at least four people have died in rear-end Jeep crashes, including the DiGiovannis.

Write to Mike Spector at

Impact of the 7th Circuit decision in our Med-1 case

Sunday, August 3rd, 2014

Two other lawsuits against debt collectors for filing suits in the wrong Marion County, Indiana townships have been reversed and sent back to the District Court for further proceedings.  They are against  LVNV Funding and  Portfolio Recovery Associates.

Impact of 7th Circuit decision in our Med-1 case

Sunday, August 3rd, 2014

The following is from the Indiana Lawyer



Ruling may expedite demise of Marion County township venues

Dave Stafford

July 16, 2014

Marion County’s unique township small claims courts may be on the verge of extinction, hastened by a game-changing ruling this month by the full 7th Circuit Court of Appeals.

“The message here is that venue abuse and forum shopping are something the federal courts take seriously, and it can get expensive if you don’t comply,” said Daniel Edelman, a Chicago attorney who successfully challenged dismissal of a federal lawsuit over Marion County’s township courts.

At issue is the jurisdiction of those courts – whether the township courts may hear debt-collection disputes arising anywhere in Marion County or whether the dispute must have a basis to be heard in a particular township court.

SmallClaims-1-15col.jpgA case from Pike Township Small Claims Court in Marion County was at the center of a 7th Circuit Court of Appeals decision that aimed to discourage “forum shopping” by debt collectors. (IL Photo/Eric Learned)

The 7th Circuit ruled en banc in Mark Suesz v. Med-1 Solutions LLC, 13-1821, that “judicial districts” for Marion County small claims matters are the designated township courts under the Fair Debt Collection Practices Act. The result was a reversal of a prior three-judge panel ruling in this case, and the full court also overturned its precedent of Newsom v. Friedman, 76 F.3d 813 (7th Cir. 1996).

In a holding applying to thousands of pending cases, the 7th Circuit majority found the intent of the FDCPA would not be served unless the township courts were recognized as judicial districts. That means collections suits must either name defendants who live in the township or be filed in the township where transactions occurred.

Critics said large-volume debt-collection filers brought their cases in township courts deemed friendlier to collectors, putting defendants at a disadvantage. The 7th Circuit largely agreed. Jeff Boulden, a former legal aid attorney who documented abusive practices in some of the township courts, called the ruling “a clear victory for debtors” protected by the FDCPA.

Attorneys representing debt collectors say the ruling is likely to accelerate a shift they’ve already seen, with more matters filed directly in Marion Superior Court despite higher filing fees.

“There’s a big risk to an attorney by filing in the wrong township,” said Fred Pfenninger of Pfenninger & Associates in Indianapolis. Suits filed in the wrong township court now could expose attorneys to fines of $1,000 per violation under the FDCPA.

Allegations of forum abuse were at the center of a 2012 report issued by a task force that studied Marion County’s small claims courts and recommended reforms. Court of Appeals Judge John Baker co-chaired the task force and said he will ask lawmakers to overhaul the system.


Baker said the 7th Circuit’s ruling was coincidental to the work he’s been doing on small claims reform. “The 7th Circuit has judicially recognized the same shortcomings we have discovered,” he said, noting the opinion repeatedly cited the task force report co-authored by Court of Appeals Senior Judge Betty Barteau.

“We’re at the point in time where anybody who looks at this even from within has to take notice of the deficiencies that were discovered and the inequities,” he said.

Baker said Indiana Chief Justice Brent Dickson asked him to prepare legislation for the upcoming session of the General Assembly that would incorporate the township courts into Marion Superior Court – “Option A” from the task force report. Though details are still being developed, Baker said the proposal, if adopted, would essentially do away with township small claims courts.

He predicts that the proposal will be forwarded to Dickson in the next couple of weeks and then be submitted to Judiciary Committee leaders at the Statehouse. “We’re not going to hide the ball,” Baker said, though he acknowledged the likelihood that township judges and officials will resist changing a system that delivers millions of dollars annually to the nine localities within Marion County. Those fees instead would go to the county if small claims cases were moved to Superior Court.

In Suesz v. Med-1, the 7th Circuit remanded to the federal court in Indianapolis, where Edelman will seek class certification for as many as 3,633 plaintiffs who may have been sued in the wrong judicial district. The lead plaintiff was a Hancock County resident sued for a debt owed in Marion County’s Lawrence Township. The suit was filed in Pike Township.

Pike Township Judge A. Douglas Stephens said the ruling was surprising because it overturned so much precedent. Nevertheless, he said, “Most filers changed their practices at the first of the year and they are consistent with what this opinion says anyway.”

Stephens said the decision won’t entail greater scrutiny of filings by clerks to ensure proper venue – that’s a risk plaintiffs take when they file.


As for potentially doing away with township courts, Stephens said, “We’ve heard that the last six years,” and that any such move would necessarily entail a comprehensive discussion of township government.

Meanwhile, Edelman believes the ruling also will apply to other forum-shopping cases in which he’s pursuing a certification of classes on behalf of Marion County small claims litigants.

Marion Circuit Judge Louis Rosenberg, who has statutory authority to oversee the small claims courts, thinks the U.S. Supreme Court might review the 7th Circuit’s ruling in Suesz.

“It’s a pretty divided Circuit,” Rosenberg said of the majority opinion co-authored by Circuit Judges David Hamilton and Richard Posner and joined by five jurists, along with a concurring opinion from Judge Diane Sykes. Judges Joel Flaum and Michael S. Kanne dissented.

Rosenberg said the concurring opinion takes the position that the majority may have gone too far in terms of remedies available under the FDCPA. The ruling also presents the issue of how the Supremacy Clause relates to state statutes concerning jurisdiction and venue. Federal courts typically have been deferential to state statutes governing jurisdiction, he said.

“That may be the issue on which the case will be appealed,” he said.

Med-1 didn’t rule out seeking an appeal to the U.S. Supreme Court. “We continue to review all our available appellate options. Unfortunately, we cannot comment more, as this case is still ongoing,” Med-1 attorney and chief compliance officer Francis R. Niper said in a statement.

“We are disappointed that the 7th Circuit has decided to reverse itself in its recent decision. We have, of course, abided by this change in the law, and will continue to do so going forward. We note that this decision creates additional confusion and conflicts with the Marion County Small Claims rules, as they were recently amended.”

But anecdotal evidence suggests filers already may have decided to change venue. Rosenberg said that through March of this year, total filings across all small claims courts were down about 20 percent, though it’s difficult to assess whether that’s due to a shift in where debt cases are filed. He noted the decline is an acceleration of a reduction in filings in recent years.

Pfenninger said the ruling will create a hardship for lawyers who filed collections cases in a particular court for reasons of convenience. “The (7th Circuit) seeks to impose a problem that many collections attorneys familiar with the system don’t believe exists,” he said.

He noted that a similar situation exists in Lake County, where 10 city and town courts hear small claims matters that may arise anywhere in the county. “The question is, how is that different?”

It may not be. In the opening paragraphs of Suesz, the majority held that its ruling “has significant consequences not only for consumer debtors and debt collectors in Marion County but also for parties to debt-collection suits in other court systems that, depending on the answer to the interpretive (jurisdiction) question, may be vulnerable to abusive forum-shopping by debt collectors.”

Rosenberg said one result of the ruling will be increased paranoia among debt collectors as to how courts will interpret jurisdiction. “The paranoia may be justified,” he said.•

Federal Trade Commission authority over data security breaches

Sunday, August 3rd, 2014

Federal Appellate Court to Consider FTC Data Security Authority

The U.S. Court of Appeals for the Third Circuit this week agreed to consider whether the Federal Trade Commission has the authority to regulate companies’ data security practices.

On Tuesday, the Third Circuit granted Wyndham Hotel and Resorts’ petition for interlocutory review of Judge Esther Salas’s denial of a motion to dismiss a FTC lawsuit that alleges that Wyndham violated the FTC Act’s prohibition against “unfair practices” by failing to reasonably secure its customers’ personal information.   Although Salas’s opinion is not binding, it received  considerable attention because it was the first court opinion to decide whether the “unfairness” prong of the Section 5 of the FTC Act provides the Commission with the authority to bring actions involving data security.

Denials of motions to dismiss are not immediately appealable, absent permission from both the district court and appeals court.  Salas certified the case for appeal in June, reasoning that there is substantial ground for differences of opinion on: (1) whether the FTC can bring a Section 5 unfairness claim involving data security; and (2) whether the FTC must formally promulgate regulations before bringing its unfairness claim.

In a brief to the Third Circuit last month, the FTC stated that although the case does not meet all of the requirements for interlocutory review, the legal issues are important and would benefit from review by an appellate court.  A Third Circuit order affirming Judge Salas’s opinion “would advance the public interest by removing the uncertainty that Wyndham is attempting to generate regarding the Commission’s statutory authority to protect consumers from unreasonable and harmful data security lapses,” the FTC wrote.

In an amicus brief supporting Wyndham’s petition for review, the U.S. Chamber of Commerce wrote that “companies currently struggle to decipher coherent standards from the FTC’s dozens of consent orders and previous pronouncements on data security, and to accommodate those dictates with other security regulations and risk management protocols.”

Assuming that the Third Circuit publishes its opinion in this case, the ruling would be binding in Delaware, New Jersey, and Pennsylvania.

Bank overdraft fees

Friday, August 1st, 2014

July 31, 2014

Overdraft fees drive people out of banking system, product should be banned

CHICAGO—Confusing information provided by the nation’s biggest banks is making it difficult for consumers to understand the real costs of overdraft and make informed decisions, a mystery shopping investigation released today by four organizations from across the country found.  The four organizations—California Reinvestment Coalition of Oakland, CA; New Economy Project of New York, NY; Reinvestment Partners of Durham, NC; and Woodstock Institute of Chicago, IL—are calling upon federal banking regulators and the Consumer Financial Protection Bureau (CFPB) to strengthen consumer protections for all overdraft products and oversight of financial institutions offering overdraft.

“Recent changes that require consumers to opt in to overdraft programs were a crucial step forward, but the results of our investigation show that there is clearly more work to be done to ensure that consumers can avoid a cycle of high fees,” said Dory Rand, President of Woodstock Institute.

In a study released by the CFPB today, CFPB found that “the majority of debit card overdraft fees are incurred on transactions of $24 or less and that the majority of overdrafts are repaid within three days. Put in lending terms, if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate (APR).”

“Overdraft protection is a misnomer for a service that is expensive and often marketed on inaccurate information,”  said Peter Skillern, Executive Director of Reinvestment Partners.

“Overdraft on ATM withdrawals and debit purchases is a debt trap that pushes lower income people out of the banking system.  Regulators should ban this product,” said Josh Zinner, Co-Director of New Economy Project.

“The numerous conflicting and confusing messages given to the secret shoppers in more than 60 visits to bank branches should be great cause for concern for banks and for their regulators. These visits show that the $35 cup of coffee ($5 for coffee, $30 for overdraft fee) is alive and well.  Overdraft opt-in rules are clearly not enough to protect consumers from this expensive product,” said Paulina Gonzalez, executive director of the California Reinvestment Coalition.

The four organizations conducted 64 mystery shopping visits at 39 bank branches in Chicago, Durham, New York City, and Oakland. Four of the largest banks by deposit size in each location were selected. In Chicago, mystery shoppers visited Bank of America, BMO Harris, Chase, and Citi. At each bank, shoppers visited two branches in predominantly white communities and two branches in communities of color.

The results of the mystery shopping show:
•    In all four cities, banks’ explanations of overdraft programs were highly inconsistent, and often unclear and incorrect. The inconsistent and erroneous information bank personnel provided to mystery shoppers raise concerns about banks’ training of staff and sales practices and suggest that banks may not be giving people the information they need to understand overdraft programs and make informed choices.
•    Bank employees often did not clearly or correctly explain how overdraft fees are triggered. The misinformation made it difficult or impossible for shoppers to understand the real costs of overdraft and make informed decisions.
•    Bank employees frequently did not explain the opt-in requirement for ATM and debit courtesy overdraft, and led people to believe that it was an automatic account feature, raising serious concerns about whether the large banks are complying with federal regulations.
•    In two of the cities, bank branches visited in predominantly non-white neighborhoods had limited staff availability and long wait times, in stark contrast to well-staffed branches in predominantly white neighborhoods. The poor service clearly affected the quality of assistance provided to customers in non-white neighborhoods.

The four organizations urge federal banking regulators and the CFPB to:
•    Prohibit overdraft fees on all ATM withdrawals and debit card transactions.
•    Limit the fees a bank may charge for overdrafts to an amount commensurate with the actual cost of the transaction to the bank and proportional to the actual amount overdrawn.
•    Prohibit banks from reordering transactions to maximize overdraft fees.
•    Prohibit banks from providing financial incentives to branch or bank employees for the sale of overdraft products to customers.
•    Create a uniform standard for how banks should verbally describe overdraft products and fees.
•    Require training of bank employees on the verbal explanation of overdraft standards and conduct periodic reviews of training and compliance.
•    Limit the number of times a financial institutions may impose any type of overdraft charges to once a month, or a maximum of six charges in a 12-month period, whichever comes first.

Big banks mislead customers about overdraft charges, new report shows

Free trial offers

Wednesday, July 30th, 2014

Contact us if you accepted a “free trial offer” and then found yourself being billed/ having your bank account  or credit card charged for the product, if you did not realize this was going to happen.  We can get your money back and damages.

More than 1/3 of Americans are behind on their bills

Wednesday, July 30th, 2014

From trade publication Inside ARM:

More than 35 Percent of American Adults are Currently in Collections: Report

A joint study from the think tank Urban Institute and debt buyer Encore Capital Group released today reported that more than 35 percent of U.S. adults with a credit report have accounts that qualify to be in some stage of the debt collection system. The average balance of those accounts is $5,178.

The study, “Delinquent Debt in America,” looked at a sample of TransUnion consumer credit reports in September 2013 to determine how many delinquent accounts were noted on the reports and how many collection tradelines could be found. In addition, the study’s authors looked at closed and/or charged off accounts still being reported to determine if they were eligible for collections, even if there was not a specific note of collection on the credit report.

“Collection accounts” for the purpose of this study included direct reports from collectors, accounts that had been charged-off and either sold or outsourced, accounts still being worked in-house after charge-off, and accounts being warehoused by creditors.

The result was that 35.1 percent of the credit reports examined showed collection accounts or those qualified for collections. Those results closely mirror a Federal Reserve study from 2004 which showed 36.5 percent of credit reports with an account in collections.

The authors noted that even the 35.1 percent figure is a bit too low; some 22 million low-income adults do not have credit files and were represented at all in the study. Researchers used a random sample of 7 million TransUnion reports at a fixed point in time. The sample was out of a total population of 220 million Americans with credit files.

The study also included every type of debt imaginable, with the exception of mortgage debt. Researchers noted that, “While mortgage debt could result in collections activity, it is very rare.” In addition to traditional financial debt (credit cards, bank loans, etc.), the study found medical debt, utility bills, membership fees, phone bills, and many other kinds of debt being reported as charged-off on credit reports.

Among people with a report of debt in collections, the average amount owed was $5,178, with a median of $1,349.

The study also examined delinquency within the same credit report sample. It showed that 5.3 percent of Americans with a credit file were at least 30 days late on an account. Among people with debt past due, the average amount they need to pay to become current on that debt is $2,258.

The delinquency rate is much lower than the collection rate because typically only financial products are being actively reported to credit bureaus. This means that non-financial accounts comprise the vast majority of accounts in collection.

The study was conducted by the Urban Institute’s Center on Labor, Human Services, and Population and by Encore Capital’s Consumer Credit Research Institute.

text messages

Tuesday, July 29th, 2014

Please contact us if you are receiving unsolicited text messages promoting a business.  They are worth $500 to $1500 each.