CFPB Panel 2: Verifying Disputed Debts Under the FDCPA/FCRA

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Moderator: Corey Stone, CFPB

Panelists:

  • Chad Benson, CBE Group
  • Ian Lyngklip, Lyngklip & Associates
  • Richard Munroe, Capital Financial Group
  • Manuel Newburger, Barron & Newburger
  • Denise Norgle, TransUnion

 

What are steps collection agencies currently take when verifying disputed debts?

What are the cost benefits of taking these steps?

How does info degrade?

Chad Benson:

  • Complaints are down in our industry.
  • Can we find a way to continue to improve the consumer experience?
  • Lots of different systems under the construct of one process.
  • The system as a whole is fundamentally working for the population.
  • Standards are extremely important.

Ian Lyngklip:

  • Consumer attorney
  • We’re talking about injecting bad debt — debt that isn’t owed, is time-barred, out of stat — into the system. It’s toxic to the system.
  • We have a legal landscape to help us. We know what accurate data is.
  • Obligation to only supply accurate and true data.
  • When subscriber code/account code change, we relegate consumers to having to re-verify-re-dispute.
  • Most important fix: consumers must be allowed to correct a credit report.
  • Data conformity is not a surrogate for accuracy.

Richard Munroe:

  • DBA is insisting on standards.
  • Bad/toxic debt does none of us any good.
  • Disputes exist. They need to be handled via best practices and standards.

Manuel Newburger:

  • Is a general denial a dispute?
  • Degree of verification, etc. — this definitional issue becomes very important.
  • If we don’t have clearly defined standards and guidelines, you won’t have compliance.
  • There needs to be a level playing field: What’s good enough for a failed bank needs to be good enough for a thriving bank.
  • Document retention should be seven years.
  • Needs a regulatory push.

Denise Norgle:

  • Our overarching goal is accuracy of data.
  • The more information we can get, the better the chance we have to get it right.
  • The more consumer data we have, the better chance of connecting consumer accounts to the correct consumer.
  • The number one dispute from consumers is: We don’t recognize the debt.

 

When’s an FDCPA dispute a dispute?

Chad Benson:

  • If a consumer contacts an agency or debt buyer, the process for stopping collections at that time is of most importance.
  • As well as the steps for investigation. We’d return that account to the creditor.
  • You have to be communicating with the consumer — talking about the issuer, the balance.
  • [When do you know it's a dispute that you need to resolve? Is there a clear definition?] No. The challenge is being able to walk through the conversation. You can’t point to one thing. There are multiple aspects.

Ian Lyngklip:

  • The quality is not the issue. It’s not what we came here to discuss.
  • We have to make a process that works for the majority of consumers.
  • [The consumer reporting fallout is important, but earlier in the process: what's a dispute?] If someone says I dispute the debt, then the debt is disputed.

Richard Munroe:

  • As part of verification process, it’s at that point that you go through research.

If you’re a debt buyer, and you receive data, and that’s the data you rely on to investigate — have you satisfied the requirement?

Richard Munroe:

  • You can only work with the data you have.
  • I’m not familiar with as-is sales.

Manny Newburger:

  • You may find a lack of some data.
  • Portfolios can change dramatically.
  • Banks typically not selling disputed accounts; DBA against selling disputed accounts.
  • The original trade-line is still there.

Ian Lyngklip:

  • Over last five years seen marked improvement in how debt buyers code accounts.
  • By the same token, the banks are doing a terrible job.
  • The consumer needs the right/ability to fix his credit report.

Denise Norgle:

  • Consumers do have more remedies to remove items from their report.
  • We can change and delete information.
  • In terms of the remedies: there are a lot of times where we’re in a lawsuit with the original creditor and the debt collector. We can suppress a item on a credit report until that issue is resolved.

What do we know about that forwarding about information around disputes?

Manny Newburger:

  • Mine are required to report/communicate disputes.

Chad Benson:

  • When we’ve exhausted information available to us, we will close that account.

Audience Questions

1) What form of review do you propose from/by creditors/debt buyers to ensure accuracy?

Ian Lyngklip:

  • Depends on context.
  • In fair credit context: consumer writes a dispute to credit reporting bureau, bureau contacts collectors.
  • Just verifying data isn’t meaningful

2) What are best practices for recognzing when a dispute falls under FDCPA, FCRA, or both?

Manny Newburger:

  • FDCPA is easy. If consumer says “I dispute ” then it’s an FDCPA dispute.
  • FCRA and data-furnisher rule: there are procedures in place.

3) What is the obligation of a collection agency in the event of a dispute? (I.e.: interest, fees, etc.)

Ian Lyngklip:

  • If they’re trying to collect, they should be in a position to explain it to a consumer.

Richard Munroe:

  • Additional interest can be itemized.

Ian Lyngklip:

  • A consumer that doesn’t recognize a balance: “You’re not a customer any more and we don’t have to service you.”
  • Collection agencies are not there to drive level of consumer customer service.

Continuing the Discussion

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