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

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.