As we discussed
in March, the Consumer Financial Protection Bureau is soliciting public
comment on how the credit card market is functioning and the impact of
credit card protections on consumers and issuers.
To allow interested persons additional time to consider and submit their responses, the CFPB announced
it is extending the comment period on four of the specific areas of
interest noted in the original Request for Information, including online
disclosures, grace periods, add-on products, and debt collection.
The 90-day comment period for these four areas will now end on June
17, 2015. The original 60-day comment period for the other eight
specific areas on which the CFPB is requesting information will end on
May 18, 2015.
On May 5, the Federal Trade Commission obtained court approval of a
settlement against CardFlex, Inc. and its CEO and President, Andrew
Phillips, and Executive Vice President of Operations, John Blaugrund.
The lawsuit, captioned FTC v. CardFlex Inc. et al., No.
3:14-cv-00397 (D. Nev.), involved allegations that the defendants
operated a $26 million credit card scheme by connecting consumers with
another company known to be scamming customers.
According to the FTC, CardFlex partnered with iWorks, which allegedly
tricked customers into paying monthly fees for non-existent services –
including the use of fine print in its agreements to force customers to
pay recurring monthly charges of up to $60 for online plans and
services. The FTC alleged that the defendants knew about iWorks’
deceptive practices and still helped it open nearly 300 merchant
accounts under dozens of corporate names.
Under the settlement agreement, the defendants would pay $3.3 million
(though that sum would be suspended pending a $150,000 deposit), the
forfeiture of more than $1.2 million in jewelry, a Ford pickup truck,
gold coins, and furniture, and a check on the truthfulness, accuracy,
and completeness of financial statements and related documents. The
individual defendants are also permanently banned from acting as an
independent sales organization or sales agent for a variety of services
involving money-making opportunities, fraud prevention, and risk
monitoring, and they must undergo a screening process before working
with high-risk clients.
A business credit report is most often used by credit and
collections professionals at the beginning of a new client relationship to
determine a company’s risk level before issuing a line of trade credit. But
after that their usage tends to dwindle, largely because of the notion that
obtaining reliable credit data is too expensive.
SunGard Corporate Liquidity’s Credit
& Collections Global Benchmarking Study found a huge disparity in how
much money companies spend on credit bureau data, based on their budget.
According to the study, in 2014, 26 percent of companies with over $1 billion in revenue spent more than $150,000 annually on credit bureau data, while 29 percent of companies with under $1 billion in revenue spent less than $25,000 annually on
credit bureau data. As you can see, the decision to purchase business credit
data might appear to be contingent on a company’s financial wherewithal.
What’s unfortunate about this approach is that to get the
most out of credit reports, they need to be used as an ongoing risk management
tool, allowing you to spot any changes to your customer’s risk profile or
payment behaviors and take action before they become a bigger issue. For
instance, a credit monitoring service can provide regular alerts about any
significant or sudden changes to a company’s financial status or credit health
before the problem spirals into a bigger one, such as its credit rating, credit
limit, payment behaviors, directors or legal filings.
Now for the silver lining. Credit reports have become more
affordable in recent times, making it possible for businesses of all sizes to
get more use out of them than they once could. Here are the primary factors
driving down the costs:
Internet – The delivery of credit reports via the Internet has made access
for businesses more affordable by reducing or eliminating paper trails and
speeding up the process of obtaining reports.
subscription-based pricing models – Typically, a company would have to
spend hundreds of dollars to get just one individual business credit report on
a customer. Doing this quickly adds up. But now companies can sign-up for a
subscription-based credit reporting service, allowing them to view credit
reports on all of their customers, as often as needed.
– For decades, companies that needed reliable business credit information
would have to turn to one of the big bureaus to obtain it, like Dun &
Bradstreet or Equifax. But, this is quickly changing as more credit reporting
bureaus are arriving on the scene to give American businesses more options,
availability and pricing.
For these reasons, business credit reports are no longer just reserved for
large companies with big pockets. If cost has held you back in the past from
utilizing credit reports as a regular part of your risk management strategy, it
doesn’t have to anymore.
About the Author
Matthew Debbage is
the president of Creditsafe’s U.S. operations, overseeing the company’s
expansion into the U.S. market.Creditsafeis the world’s most-used supplier
of online company credit reports. Nearly 5,000 companies in the U.S. use its
credit reports, ranging from small businesses to large, global concerns like
Staples, Ryder and Nestle. Debbage, with more than 15 years of experience in
market entry strategies, has successfully led the research, planning and launch
of a number of operations in markets around the world, making companies more
efficient and profitable.
posted on 2015-04-30 by Steve Rhode North Carolina is trying to pass legislation which will roll
back protections for consumers who have bad debt purchased by debt
Senator Michael Lee from Wilmington, North Carolina is the sponsor of S.B. 511, titled Proof Required for Debt/Fees,
which efforts to rollback the requirement the bad debt buyer must have
detailed information about where and when the debt originated and
details on how the fees were calculated, before suing the consumer.
can only assume Senator Lee is just an ill informed legislator. Because
either he doesn't care about to baseless claims his constituents face
from bad debt buyers or he is becoming a cheerleader for debt
The News & Observer
says Lee believes rolling back the 2009 consumer protections, which
"passed by a unanimous vote in the Senate because, on a bipartisan
basis, people were troubled on behalf of taxpayers about what was
happening in the courts," is a smart thing to do.
about making it easier for collectors to sue is that consumers can
challenge the suit in court and demand proof. But we already know people
are afraid and don't challenge these suits so Lee's position is
effectively to retard common sense protections already in place for
In my opinion, this legislation is ill-advised,
ill-conceived and unwarranted. Besides, what we are really talking about
here is just making sure the bad debt buyer has the information on hand
to prove this is a valid debt. The only logical reason to remove this
requirement would be so the bad debt buyer is not required to have this
information on hand.
And to make this situation even more ridiculous, Lee is listed as an attorney on his North Carolina General Assembly page.
maybe here is another clue what might be driving this slap in the face
of North Carolina citizens. The website for Michael Lee, the attorney,
says "The firm focuses on...debt acquisition."
sponsored bill wants to make a charge-off statement proof a debt is
owed. Stricken as proof required by Lee's bill is the contract which
must contain the signature of the defendant and copies of documents
generated when the credit card was actually used. Left in the bill is
just a requirement that to prove the debt, the debt collector needs "A
copy of the contract, charge‑off statement, or other writing evidencing
the original debt." Will a Post-It note be sufficient now?
order to get a summary judgment against consumers who already don't know
how to defend themselves, all that will be required will be:
"The only evidence sufficient to establish the amount and nature of the debt shall be at least all of the following items:
(1) The original account number.
(2) The original creditor.
(3) The total amount claimed to be owed.
(4) An itemization of post charge‑off payments or credits, where applicable.
(5) The charge‑off balance, or, if the balance has not been charged off, an explanation of how the balance was calculated.
(6) An itemization of post charge‑off fees, where applicable.
(7) The date of last payment, where applicable.
(8) The amount of post charge‑off interest claimed, and the basis for the interest charged."
of that appears to be easy to just pull from the air and write on that
Post-It note rather than say, actually have proof and evidence to
support the claim.
Senator Harry Brown from North Carolina is
quoted as saying, "I think the intent of this bill is to find a balance
between where we are today and maybe where we were before '09 ... I
think the key point of this is, this is debt that someone has gone out
and decided not to pay."
But even Brown is as clueless as Lee.
This is not an issue about not paying a valid debt. It is an issue that
the debt that is being collected or sued over is in fact a valid debt.
appears to be sticking to his illusions this bill won't screw
consumers, "The burden of proof is not shifted in this matter," Lee
countered. "I'm getting a little frustrated there are so many
misstatements coming out." - Source
simply asking that the bad debt buyer have the proof the debt is really
owed with common sense documentation like statements and contracts is
not a requirement that North Carolina lawmakers should try to dilute.
What do you think?
Are the days of debt collectors sitting in cubicles “dialing
for dollars” numbered? Debt collection, like many sectors of the
economy, is starting to go digital. So if the idea of talking with a debt collector automatically
puts your stomach in knots, you may be in for a pleasant surprise: In
the not-too-distant future, your debt collector may be a computer.
William Lowe, director of operations for Gluu.org, a firm that writes
and supports open source security software, has experienced this
firsthand. A billing glitch with a vendor resulted in a rather large and
unexpected balance that couldn’t be paid off immediately. The debt was
turned over to TrueAccord,
which calls itself an “automated debt recovery platform.” His first
interaction with them was by phone, he says, but after that, he said it
was “very automated — more a 2.0 experience.” Instead of cold calls, he
says, he got emails. “Rather than that back and forth haggle between a
debt collector,” an online dashboard let him customize a plan, he notes.
Debt collection firms use technology today, including automated
dialing systems (aka “robocalls”), skip tracing to find consumers, and
predictive scoring to help them identify which consumers are most likely
to pay. But in most debt collection operations there is still largely a
human component, with collectors trying to talk consumers into paying
as much as possible. Sometimes that works well; when collectors can
establish a rapport with a consumer, they may even persuade them to pay
their firm before others. But at other times, it can backfire, and
result in angry consumers who are unwilling to pay, or even lead to
violations of federal law designed to prevent harassment.
By contrast, the TrueAccord system is centered around an online
dashboard that allows both the creditor and the debtor to view account
balances, set up and manage a payment plan and track progress toward
paying the debt 24/7. The approach appears to be working: In a March
2015 press release, the company said that in the past six months, it
increased the amount of debt under management to $45M and is working
with over 60 major companies to collect from more than 40,000 debtors.
Steven Mathis is one of those using the platform to pay off a debt.
When Mathis left his corporate job to start his marketing company,
Mathis Marketing, he dealt with the growing pains many new firms
encounter and accumulated some business debt. He had every intention of
paying back what he owed, and was turned off by the collection process
in general, which he found “threatening, harassing, combative.”
‘I Felt More Motivated’
But when one of his debts was turned over to TrueAccord, he says the
interaction was much more positive. Working with them via email and
online, he was offered a range of payments,
and was able to customize them to fit his financial situation. It was a
“completely different experience,” he says. And because it was more
positive, “I felt more motivated to take care of it,” he notes.
New regulations around debt collection are expected to be announced
by the Consumer Financial Protection Bureau and may open the door to
approaches such as this by clarifying, for example, when and how consumers can be contacted by email.
Some consumer advocates hope new regulations will require debt
collectors to provide consumers with more information about balances and
payment activity, and if that happens, this kind of technology could be
poised to fill the gap. Of course, there are drawbacks: some consumers
don’t have reliable Internet access, for example. Others may be trying
to avoid dealing with their debt and no amount of technology will change
that. And still others may prefer to talk with someone by phone. Yet
that still leaves plenty of consumers would would welcome the
opportunity manage a collection account the way they do other
bills — online and automatically.
“The preference for digital is stronger with younger and
tech-oriented crowds, and they grow in numbers and overall population,”
says Ohad Samet, co-founder and CEO of TrueAccord. “However, the
advantage of an automated and data-driven platform is that it can
identify and use the consumer’s preferred channel — be it email, SMS or a
phone call with a live representative — all channels that our system
utilizes when appropriate.”
This isn’t the only company trying to change the industry though
technology, of course. Another, Global Debt Registry, is working on
creating a central repository of consumer collection accounts, and
making that information available to consumers through a free consumer
It currently allows consumers to research collection agencies and
verify debts they owe to help them avoid scammers. It can track their
debts even when they are sold to multiple collection agencies.
(Consumers can also see how collection accounts are affecting their
credit by getting their free credit report summary on Credit.com.)
How fast and far-reaching these changes will be remains to be seen.
But for at least some debtors, it’s already night and day. Lowe, for
example, says he’s never had a debt collector send him chocolates for
Christmas. TrueAccord did.