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What Do The CFPB, Wild West, And House Of Representatives Have In Common?

posted on 2014-02-13 by Martin Sher

There just might be a new Deputy in town! This past November, the House Financial Services Committee approved 6 bills that could possibly add sorely needed oversight and accountability to the Consumer Financial Protection Bureau (CFPB).

To date, it has been pretty much like the Wild West of regulation. The CFPB and its posse of 100s have been running roughshod from California to Florida to Maine, resembling a lynch mob looking for any culprit just happening to be in the financial services industry.

I’d say that they’ve found a culprit or 2 that needed to be lynched, but at what expense? How many people have been unnecessarily shot and wounded?  And, before the lynching, wouldn’t justice have been better served with a judge and/or a jury of some kind?

Well that may be a little facetious of a description, but maybe not.  Honestly, I feel certain that 98% of the people in the CFPB likely do a good job and try to do the right thing. That’s quite a coincidence, because 98% of the financial industry is also made up of good people that do a good job and try to do the right thing.

So thank goodness for consumers,  there is now a serious move to lasso some of the power from the CFPB and make sure it has appropriate oversight and accountability.

Out of the six bills passed, these three might be the most workable:

  1. The Responsible Consumer Financial Protection Regulation Act of 2013. This bill would establish a five person decision making commission.
  2. The Bureau of Consumer Financial Protection Accountability and Transparency Act of 2013. This bill would bring the responsibility of funding to Congress and away from the Federal Reserve.
  3. The Consumer Financial Protection Safety and Soundness Improvement Act of 2013. This bill would allow The Financial Stability Oversight Council to overrule the CFPB with a majority vote.

My hope is that the CFPB will handcuff the financial industry culprits, dispense the posse to go back to herding cattle, and set up a structure where the financial services industry can wake up all of the sleepy towns in the Wild West, and all of America.


Martin Sher, Co-CEO of AmSher Collection Agency and a past president of ACA International, is the author of the Collector’s Pledge. Hundreds of thousands of collectors all over the world have signed this unique document committing to treat people with dignity and respect. AmSher is known as the collection agency that collects with compassion.


posted on 2014-02-07 by Martin Sher

This morning I watched the 4 hour semi-annual Consumer Financial Protection Bureau (CFPB) report to the House Financial Services Committee. The CFPB is by far the most powerful and least accountable federal agency in the history of the United States. The CFPB’s only responsibility is to give a report twice a year to the committee.  However, the Committee has no real power over the CFPB. Absolutely none!

Representative Jeb Hensarling is the residing chair of the House Financial Services Committee.  In his opening remarks, Rep. Hensarling insinuated that Richard Cordray, Director of the CFPB, is not accountable to anyone.  He’s not accountable to the President of the United States, unless there’s just cause.  He’s not accountable to Congress because Congress doesn’t appropriate funds to the CFPB.  And the CFPB’s not accountable to the court system because of wording in the Dodd-Frank Act that created this powerful bureau.

Chairman Hensarling highlighted the fact that the rules that Richard Cordray makes will be the rules of a ruler, not rules of law. I have not met Richard Cordray.  I am sure he’s a fine, well-intentioned human being and will be a great ruler. But do we really want to have an agency with the power of a king?

I’m particularly concerned about the availability and extension of credit to honest, well-intentioned, hard-working Americans with low to medium incomes. Who’s looking out for them?  They need cars for transportation to work, suitable places to live such as manufactured housing, basic kitchen appliances like refrigerators and washing machines, furniture, and the necessities of life. This well-meaning group of people many times isn’t blessed with any savings. They often run into a problem and need a short-term loan to survive and pay critical bills.

I hope and pray that the CFPB, by its actions and rules, do not impede this group of worthy Americans access to credit.  I spent a good bit of my adult life servicing this group of people in a family furniture business.  Our target market was people with a lack of or damaged credit.  We extended them credit when no one else would.  We counseled with them, encouraged them, and helped them establish or reestablish their credit.

This improved their credit scores and opened up more credit alternatives for them.  It also helped them raise their standard of living. Who’s going to watch out and service this very large segment of the US population? Will Richard Cordray and his bureau overreact from the past financial fiasco and make it impossible for millions of Americans to have access to credit?  I hope not.

Rep. Hensarling set up a place on his website where people can go to share their negative experiences with the actions of the CFPB. I am very appreciative of this.

Unfortunately, the low or moderate income individuals and families who have or will be denied credit won’t be aware of why their credit is being denied. And most likely, they won’t be aware of this website.  That’s very unfortunate.

I encourage you to have your voice heard on how the CFPB has affected you or your business and visit The Committee of Financial Services website here to share your story.


Martin Sher, Co-CEO of AmSher Collection Agency and a past president of ACA International, is the author of the Collector’s Pledge. Hundreds of thousands of collectors all over the world have signed this unique document committing to treat people with dignity and respect. AmSher is known as the collection agency that collects with compassion.

Most Business Owners Are Not Personally Liable for a Company’s Debts

posted on 2013-12-30 by Dean Kaplan

If a business is organized as a corporation, limited liability company (LLC), or other type of separate legal entity, the owner is not liable for the debts of the business unless other conditions exist. For small businesses, the primary reason the owner took the time and expense to set up the separate legal entity was to prevent being personally liable for business debts.

Historically, when an individual started a business, such as a cobbler, blacksmith, or street vendor, the business and the person were one and the same.  These businesses are known as proprietorships, and in these cases, the owner is personally liable for all of the business's obligations.

As we all know, it takes money to start, grow and run a business.  The concept of corporations came out of the need to raise larger amounts of capital to fund larger businesses, which meant the need for multiple investors.  Since most investors were not actually involved in running the business, they wanted to limit their liability to the amount they invested.  When you buy a share of stock in Apple or IBM, the most you can lose is what you paid for the stock, regardless of how much money the corporation might owe to vendors and lenders.  The corporation is a stand-alone entity completely separate from the owners, managers, and employees, and therefore the owner is not liable for the business debt absent other circumstances. ,

There is some chance you can pierce the corporate veil to create personal liability as we explained in an earlier article.  Given that this can be an expensive and difficult process with uncertain results, it is not a great alternative in most cases.   

An individual is liable for a corporation's or LLC's debt if they provide a personal guaranty to the lender or vender.  This needs to be a written document specifically stating the individual is guaranteeing the obligation and then signed by the guarantor as an individual and not as an owner or officer of the company.  A personal guaranty can easily be included in a credit application.  An email or letter where the individual 'promises' you will get paid is not a valid personal guaranty and does not create personal liability. 

As a commercial collection agency specializing in large claims, we always prefer to have a personal guaranty.  It gives us more leverage to make our client’s invoices a higher priority regardless of the company’s financial situation.

Collection attorneys and the credit system

posted on 2013-08-21 by Louis S. Freedma
It’s almost impossible to imagine a world without credit. Major purchases like a home, car, college education, and vacations would be difficult even for the wealthy and virtually impossible for everyone else.  So many things that make our life comfortable can be attributed to our ability to obtain credit. Consumer spending makes up over 70 percent of the U.S. economy and is driven by the availability of credit.

The availability of affordable credit is based on an important concept: credit is a promise to repay. In a perfect world, the credit “ecosystem” would only consist of creditors and consumers who repay their obligations.  Perfect balance.  However, when credit is not repaid, due to unforeseen hardships or other reasons, it results in higher credit costs for everyone, including those who paid their bills.  This is an imbalance that is corrected, in part, by bringing attorneys into the ecosystem.
Attorneys enter the system when people who are owed money need to collect it through the court system.  The court system is a level playing field where everyone gets a chance to “have their say” and the outcome is decided by an impartial judge.  Sometimes the judge decides for the creditor, and other times for the consumer, but in every case all parties are accountable, including attorneys.
Attorneys have to be licensed by their state bar, receive continuing legal education, obey the rules of professional conduct and follow federal, state and local laws and rules.  At the same time, attorneys have an important duty toward their clients.  “As advocate, a lawyer zealously asserts the client's position under the rules of the adversary system” - preamble, Model Rules of Professional Conduct.  The balance of the ecosystem is upset when attorneys lose their ability to effectively represent their clients.The Dodd-Frank Act of 2010 altered the framework of ecosystem.  New rules, supervision and compliance directives have created a ripple effect from Wall Street to Main Street that is putting small law firms out of business.  In contrast to “too big to fail,” these firms are “too small to succeed.” Attorneys, traditionally regulated by the judiciary, are now subject to regulators’ demands to turn over their clients’ privileged information.  Legal strategies and advice are no longer sacrosanct.  Meanwhile, courts struggle with the issue of how the federal laws apply to attorney conduct in the courtroom, and the result has been a patchwork of conflicting outcomes.  Again, the ecosystem is in need of correction.  

Restoring balance may come soon in the form of legislation.  NARCA applauds Representatives Perlmutter (D-Colo.) and Bachus (R-Ala.), both senior members of the House Financial Services Committee, for their recent introduction of H.R. 2892, the Fair Debt Collection Practices Technical Clarification Act of 2013.  This bipartisan legislation simply excludes attorneys from the Fair Debt Collection Practices Act (FDCPA) when they are engaged in litigation activities that fall under supervision of the court.  It is not an outright “carte blanche” exemption for attorneys.  The FDCPA still applies when attorneys engage in traditional collection activities, like calling or writing to consumers. This approach is consistent with the intent behind the FDCPA:

"The Fair Debt Collection Practices Act regulates debt collection, not the practice of law. Congress repealed the attorney exemption to the act, not because of attorneys’ conduct in the courtroom, but because of their conduct in the backroom. . . Only collection activities, not legal activities, are covered by the act. . . Actions which can only be taken by those possessing a license to practice law are outside the scope of the act,"  stated Rep. Frank Annunzio (D-Ill.), Congressional Record, 1986.
It is significant that all attorneys, regardless of their area of practice, must maintain bar licensure through the judiciary, receive continuing legal education, adhere to the rules of professional conduct and state and local rules of procedure and conduct themselves in a manner consistent with their responsibilities as officers of the court.  The regulation of attorneys engaged in the practice of law properly rests with the judiciary rather than the legislature.
Freedman is president of the National Association of Retail Collection Attorneys, a nationwide trade association comprised of over 700 debt collection law firms whose members are committed to maintaining the highest standards of ethical conduct to ensure that consumers are treated fairly and respectfully.

A Debtor's True Situation Impacts Collection Strategy

posted on 2013-08-15 by Dean Kaplan


After sending a non-paying customer’s account to a collection agency for assistance in collecting on past-due invoices, the collector reports they haven’t been able to recover your money. Does the reason for non-payment matter?

At this point, you must decide how to proceed in the collection effort. You have several options here, including:

·         Writing off the debt

·         Creating a payment plan on the account

·         Entering into litigation against the customer

·         Closing the claim and/or writing off the debt

·         Postponing collection efforts while monitoring the situation

·         Gathering more information to resolve a dispute

·         Pay to run a skip-trace on the debtor

·         Using a different collection agency in hopes they will be able to collect the balance

Choosing which course of action to take at this point should be considered in the same way as any other business decision. Clearly, collecting and analyzing information allows you to make better decisions about what to sell, how to sell it and who to market it to. Applying the same process of data collection and analysis will allow your business to improve the profitability of its unpaid invoice collection efforts. Naturally, the larger the amount owed, the greater impact this decision will have on your business’s bottom line.

Many collectors feel taking an extremely firm position in their collection process produces the fastest results, regardless of the debtor’s situation. This means that when the collector makes contact with the debtor, they simply demand immediate payment in full and then commence collection litigation if the debtor doesn’t pay. The idea behind this approach is that the debtor will realize the matter is being taken seriously and feel pressured into paying off the debt. Sometimes, this method achieves its goal and results in payment if the debtor has the assets to cover the debt. However, oftentimes taking this heavy-handed approach results in the debtor retreating and cutting off communication, which seriously impedes the chances of successful collection. Furthermore, if a debtor truly doesn’t have the money to pay off the debt, taking them to court may not end up being worth the time and resources.

If the debtor is pressured into reducing or refusing communication with the collection agency, this can seriously reduce the chances of successfully collecting the balance due. Limited access to information from the debtor often results in an agency making less-than optimal decisions. Spending money on litigation with a company that is about to shutter or file bankruptcy is a waste of both time and resources; even if a judgment is obtained against a debtor, it usually takes between six months and two years to collect on it. More often than not, cooperation between debtor and collector result in faster payment at a much lower cost.

The challenge of successful debt collection lies in finding a balance between aggressively pursuing payment in a way that doesn’t negatively affect your ability to gather important information from the debtor. Experience in collections, as well as good general business knowledge, prove very helpful in this balancing act. Understanding the true situation behind a debtor’s non-payment has become even more crucial in today’s still-challenging business climate, as many small and mid-size companies continue to struggle.

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