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WASHINGTON The Consumer Financial Protection Bureau released a report Thursday showing consumers are being "hounded" by debt collectors, adding more fuel to the fire in the agency's efforts to crack down on the industry's bad actors.
March 20 -
Banks and debt collectors are taking over courtrooms to press consumers for payments. Local officials see these 'rocket dockets' as a way to cope with a deluge of collections suits. But their judicial appearance may also mislead debtors into believing they face offers they can't refuse.
February 11 -
Wells Fargo has temporarily stopped selling defaulted consumer debts to collections agencies. Its move follows a more drastic pullback by JPMorgan Chase and a regulatory crackdown on the collections industry.
July 28 -
New York financial regulator Benjamin Lawsky has proposed rules that would require improved record keeping and overhaul other practices at banks and third-party debt collectors.
July 25
New York's chief judge is trying to reform the way banks and third parties sue borrowers over unpaid bills, joining a wave of regulatory efforts to fix widespread problems in the debt-collection industry.
Jonathan Lippman, the chief judge of New York state,
Banks and debt collectors regularly resort to the courts when trying to recoup money from customers who have stopped paying their credit card or other loan bills. After writing off debts as uncollectible, banks regularly sell them for pennies on the dollar to third party collectors, which then file lawsuits en masse to recoup on the debts.
State court systems, meanwhile, have taken
"Creditors frequently secure default judgments for the wrong amount of money, for debt that has already been paid or discharged in court, and for debt on which the statute of limitations has already expired default judgments have even been obtained against the wrong person," Judge Lippman said
Now the judge is joining several state and national regulators in
In Lippman's case, the focus is on how much evidence creditors must submit to support lawsuits in New York state. Under the proposed new rules, creditors who are seeking default judgments will have to support the accuracy and legitimacy of debt claims with more documentation, including the original agreement between the bank and the borrower.
Other proposed rules include: requirements that creditors do not sue over debts that have exceeded the statute of limitations; and those aimed at ensuring borrowers are properly served at their current addresses.
Lippman also proposed reforms for how state courts handle debt collection lawsuits and defendants who do not have legal representation. Lawyers and consumer advocates have criticized the "
New York has already developed some specialized resources for people defending themselves against debt-collection suits, including a standard "answer form" that explains various defenses against the suits. The form offers users a chance to check off one of the possible defenses. New York will now institute those "best practices" throughout the state courts, Lippman said.
"This will ensure that unrepresented debtors who appear in court have access to comprehensible information and resources so that they can understand the claims against them and formulate appropriate defenses," he said.
If Lippman's proposal is implemented, it will join a wave of other regulatory, legal and legislative changes affecting the debt-collection industry, including federal scrutiny from the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency.
In his speech, Lippman also specifically praised efforts by other state officials, including Attorney General Eric Schneiderman, Superintendent of Financial Services Benjamin Lawsky and Assembly Judiciary Chair Helene Weinstein.
