Tag: Consumer Financial Protection Bureau

The CFPB seeks new rules for payday lenders, protecting consumers from unfair lending

Nobody likes payday loan shops, unless they are the one who owns it and gets rich off the people they prey upon. Many years ago when people borrowed money from the mob, they got hurt if they didn’t pay. Today, some folks under water with payday loan shops might prefer physical injury over the incredible fees and charges they pay for the convenience of a short-term loan. The Consumer Financial Protection Bureau (CFPB) focuses its latest in a series of efforts to give relief to consumers who suffer from the after effects of payday loans. The proposed rulemaking follows a 2014 CFPB study of payday lending practices which highlighted the frequency in which borrowers we able to extend their repayments, repeatedly, and owed more money in fees than the principal amount they originally borrowed. Meanwhile, payday loan industry representatives speak out against the CFPB and its proposed new rules.

Is there a significant trap in the payday loan process? The CFPB reports suggests so.

The 2014 payday study, CFPB Data Point: Payday Lending, conducted by the CFPB Office of Research, notes that more than half of payday loans are due within two weeks of the issuing date, with an annual interest rate of approximately 390 percent; most of the consumers repeatedly extend their repayments, incurring more debt and owing more fees than they borrowed. In 80 percent of the auto title loans, where borrowers secure the loans by putting their vehicles on line, the borrowers have to extend the loans because they cannot afford to pay them. Half of all the loans are renewed and the borrowers are in loans more than “ten loans long.” Key findings of the report also state that the majority of monthly payday loan borrowers are government benefit recipients.

The people who can least afford high interests rates are already facing financial difficulties that lead them to payday loans. These borrowers may not have the credit rating or access to affordable loans that others may enjoy.

The CFPB assesses data regarding payday loans to better highlight the realities of higher risk lending. The opening language of the study states that the CFPB is focused on “providing an evidence-based perspective on consumer financial markets, consumer behavior, and regulations to inform the public discourse.”

The CFPB proposed rules set forth objectives in counteracting predatory payday lending practices.

There are two main loan categories considered in the proposed rules, loans shorter than 45 days and loans longer than 45 days, that have more than a 39 percent all-in annual percentage rate, and are either secured by the borrower’s vehicle or the payments are automatically deducted from their account or income. For both these loan categories, the new rules would require the lender to independently determine whether the borrower can afford to repay the loan.

Abusive and unfair short term and payday loan practices would also be identified under the proposed new rules. In addition to identifying bad practices, the rules would restrict lenders from loaning money to borrowers who already have outstanding loans. Additional restrictions would prevent lenders from making multiple payment attempts, trying to draw the payment from the borrower’s account, after two consecutive payments that declined when processed, and this saves already unable-to-pay borrowers from additional fees and charges from the payday lender.

Lenders say the rules would cripple their industry and block the access to money that borrowers need, often in emergencies.

The negative economic impact of the proposed new rules on payday lenders could be significant. Recent news articles noted, ““Thousands of lenders, especially small businesses, will be forced to shutter their doors, lay off employees, and leave communities that already have too few options for financial services,” said Dennis Shaul, the chief executive of the Community Financial Services Association of America, a trade group for payday lenders. According to the group’s website, “More than 19 million American households count a payday loan among their choice of short-term credit products.”[i]

With an average fee of $15 on every $100 borrowed, payday lenders have significant fees at stake and as lender experts suggest, the new CFPB rules run some payday lenders out of business. Those with financial interests in the outcome of the proposed new rules may be keeping a close eye on the presidential election, as the Democratic presidential candidates generally support stricter consumer finance rules and restrictions.

The Zamparo Law Group follows several rulemaking propositions and developments with the CFPB and will frequently share news that affects consumers, in particular, the development of rules for better practices in the short term and payday lending industry.

The Zamparo Law Group, P.C. is a consumer protection law and litigation firm, representing consumer plaintiffs. Zamparo Law Group in the northwest suburbs of Chicago sues and wins against the companies who refuse to follow the law.

To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our FacebookTwitter and LinkedIn pages. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.

 

[i] New York Times, Payday Loans’ Debt Spiral to Be Curtailed, By Stacy Cowley, Jun 2, 2016.

Image Source Payday Loan Giant May Go to Prison for Racketeering http://bit.ly/1UkqCV8

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New CFPB rulemaking on arbitration clauses may be delayed by the House

The Consumer Financial Protection Bureau (CFPB) has a government block to the new rulemaking that would carve out specific language allowing consumers access to the courts, instead of otherwise being bound by mandatory arbitration agreements in contracts among consumers and financial institutions. The House Financial Services Appropriations Subcommittee is marking up the bill to fund the CFPB,[i] Until spending bills are passed, the CFPB is prohibited from issuing the final rulemaking language in its regulations regarding mandatory arbitration agreements.

As we reported in our article last week, THE CFPB ANNOUNCES NEWS OF POSSIBLE RULEMAKING TO GET AROUND ARBITRATION AGREEMENTS, the CFPB “was considering whether to ban arbitration agreements from being used to compel arbitration of consumer class actions and whether to require the reporting of certain information concerning consumer arbitrations to the Bureau to facilitate monitoring.[ii]

CFPB Rulemaking is on hold due to the House Appropriations Committee, its process and requirements.

In the draft of the Appropriations Committee spending bill, there are certain requirements the CFPB must satisfy before any proposed new rules can be issued. The Appropriations Committee also wants the CFPB to change its current form of governance, from a single agency director, to a board of directors, which has been previously proposed.

The proposed new rule would allow consumers to file lawsuits against financial institutions, including credit unions, if they engage in wrongdoing. The rule cures the current problem where consumers are limited to binding arbitration clauses, making litigation and class action lawsuits unavailable as stated in the arbitration clauses many consumers never read nor knew they were accepting.

Some challenge the CFPB and its motivation for arbitration rulemaking, opening the door for consumers to sue financial institutions.

There are disagreements among legal scholars as to whether arbitration is more or less helpful to consumers, when other options include joining class action lawsuits. While critics cite the smaller dollar amounts awarded to consumers when they join together in suing a financial institution, individual arbitration decisions are more like a cost of doing business, than they are a legitimate threat to a large financial institution. Class action lawsuits have the teeth to affect these big banks and can force them to change their conduct and policies.

The CFPB conducted its own studies and released them to Congress: Arbitration Study, Report to Congress, pursuant to Dodd-Frank Wall Street Reform and Consumer Protection Act § 1028 (a). The 728-page study examined data concerning the pre-dispute arbitration process, to determine whether consumer rights and remedies are unfairly restricted.

Critics of the CFPB’s proposed rules, suggest that its report to Congress is slanted to favor the CFPB in allowing more consumers to sue financial institutions through the Bureau, whose job is to enforce consumer rights laws and take action against predatory companies. Meanwhile, supporters of the new rules agree that allowing consumers to join class actions or individually sue financial institutions is the proper way to facilitate justice, as opposed to being restricted by arbitration agreements preventing individuals from having their day in court.

While the Appropriations Committee works on its markup of the spending bill and the requirements of the CFPB in arbitration rulemaking, financial institutions continue using arbitration clauses to block access to courts. The new CFPB arbitration rules are likely to take effect in 2017.

The Zamparo Law Group, P.C. is a consumer protection law and litigation firm, representing consumer plaintiffs. Zamparo Law Group in the northwest suburbs of Chicago sues and wins against the companies who refuse to follow the law.

To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our FacebookTwitter and LinkedIn pages. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.

 

[i] Credit Union Times, House Bill Would Delay CFPB Arbitration Rules, By David Bauman, May 24, 2016

[ii] Consumer Financial Protection Bureau, Spring 2016 Rulemaking Agenda, Current Initiatives, Arbitration

Image Source: House Appropriations Committee http://1.usa.gov/1ptJEtv

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The Consumer Financial Protection Bureau enforces rules for mortgage settlement and servicing.

Summary: Fair Debt Collection Practices 2016 Annual Report by the CFPB

The Consumer Financial Protection Bureau (CFPB) recently published and submitted to Congress, its Fair Debt Collection Practices Act (FDCPA) 2016 Annual Report[i], detailing its activities in protecting consumers and enforcing consumer laws. In the report, the CFPB lists the number and types of consumer complaints it received, its supervision of debt collection activities, enforcement of Federal Trade Commission (FTC) and other applicable laws, and its efforts in education and outreach. The report begins with a message from CFPB Director, Richard Cordray, who notes that the CFPB “is the only federal government agency dedicated solely to consumer financial protection. Unlawful debt collection practices can cause harm to consumers across virtually all the consumer financial markets we oversee.[ii]” Here at the Zamparo Law Group, advocating for consumers, we frequently publish articles and share resources helping consumers learn the law, be able to spot, and report consumer law violations. We represent victimized consumers, sue, and win against abusive and deceptive business operators who violate consumer law.

Consumers and debt collectors are the primary parties considered in the Fair Debt Collection Practice Act (FDCPA), (the Act), written to protect consumers from unfair business practices by third party debt collectors. The FDCPA protects consumers of goods in the marketplace for personal consumer use, where a debt is due, and a debt collector attempts to collect the amount due. The FDCPA only applies to the actions of debt collectors who are third parties with right to collect the debts of another. Click/tap here to read our blog article about the FDCPA, Consumer protection overview of the Fair Debt Collection Practices Act.

Summary of the FDCPA 2016 Annual Report by the CFPB

Consumer complaints

The CFPB, created July 21, 2011, is authorized by the Dodd–Frank Wall Street Reform and Consumer Protection Act. In July 2013, the CFPB started collecting, investigating and responding to consumer complaints of FDCPA violations. The primary issue reported by consumers and the attorneys representing them concerned debt collectors who continued attempting to collect debts that individuals did not owe; representing 40 percent of complaints received during the 2015 calendar year.[iii]

Following continued attempts to collect debt not owed, in the order of frequent complaints, are debt collector communication tactics, failure to disclose verification of debts, taking or threatening illegal actions, making false statements or representations, and the improper contact or sharing of information.

Bureau supervision of debt collection activities

The Dodd-Frank Act gives the CFPB the authority to supervise banks and similar organizations offering consumer financial products and services. Examples of companies under CFPB supervision include residential mortgage companies, payday lenders, and private student lenders. In the regular course of CFPB supervision, a number of violations by debt collectors were discovered[iv] in the following situations:

  • Failure to state that a call is from a debt collector
  • Failure to implement consumer requests regarding communications
  • False, deceptive or misleading representations regarding credit reporting

CFPB and FTC law enforcement actions

The CFPB takes significant action against FDCPA violators, some of whom are chronic offenders. The report lists summaries of numerous CFPB law enforcement actions for improper debt collection, detailing the millions of dollars violators are ordered to pay to swindled consumers in class action lawsuits. The FTC also files debt collection cases seeking money damages in addition, the “Commission obtained preliminary relief that included ex parte temporary restraining orders with asset freezes, immediate access to business premises, and appointment of receivers to run the debt collection business.[v]

A section of the enforcement section of the report addresses a fight against “phantom debt collectors” who engage in unfair, deceptive and abusive conduct, trying to collect debt that either does not exist or is not owed to the phantom debt collector.[vi]

The remaining sections of enforcement data address debt collection via unlawful text messages and email, egregious collection practices, debt brokering and data security, as well as debt collection advocacy, including the CFPB and FTC cooperative efforts in writing amici (friends of the court) briefs in enforcement actions.

Education and outreach initiatives

The CFPB works to educate consumers and help them make sound financial decisions. Certain consumer populations are targeted with education, the ones who are also most likely to be targets themselves: “students, older Americans, service members, veterans and low-income and economically-vulnerable consumers.[vii]”  Online resources are frequently developed and improved to help consumers learn consumer law in plain English and empower them to take action and fight back against consumer rights violations.

As the CFPB continues developing education and outreach initiatives, the Zamparo Law Group will continue advocating for consumers by sharing the important information consumers need to protect themselves and others from unfair, deceptive and abusive business operators who prey on consumers.

The Zamparo Law Group helps men and women fight back against the individuals and organizations that target them in consumer fraud and ignore the Fair Debt Collection Practices Act. We fight and win in court, individually and in class action lawsuits.

The Zamparo Law Group, P.C. is a consumer protection law and litigation firm, representing consumer plaintiffs. Zamparo Law Group in the northwest suburbs of Chicago sues and wins against the companies who refuse to follow the law.

To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our FacebookTwitter and LinkedIn pages. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.

[i] CFPB Fair Debt Collection Practices Act 2016 Annual Report

[ii] See Annual Report (HNi) above at page 2

[iii] See Annual Report (HNi) above at page 18

[iv] See Annual Report (HNi) above at page 23-26

[v] See Annual Report (HNi) above at page 39

[vi] See Annual Report (HNi) above at page 43

[vii] See Annual Report (HNi) above at page 89

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Federal law requires debt collectors to provide validation notices to consumers

When debt collectors call and attempt to collect a debt they claim you owe them, you have a right to ask for proof of the debt they claim you owe. Under the Fair Debt Collection Practices Act[i] (FDCPA), the debt collector has an obligation to provide written verification of the debt. In fact, within five days of contacting you, every collector must send you a written “validation notice” including the name of the collector, the amount they claim you owe, and your options to dispute the debt if you believe it is not believe you owe the money.[ii] If you want the collector to stop calling you, they must cease their debt collection efforts if you send them a letter indicating that you dispute any portion or the entire amount of the debt.[iii] Despite the clear and well-stated collection practice rules stated in the FDCPA, debt collectors violate Federal law and consumers can sue them and win in court.

Suzanne Husted’s story: fighting back against bad debt collectors

Like many people who experience a cash flow crisis from time to time, Suzanne Husted chose to take out two payday loans, each for $300, and paid them back within a few months. Husted took and repaid the payday loans about 10 years ago. One day recently, Husted started receiving phone calls from two different debt collection companies claiming she still owed $2,400 in principal and interest for the payday loans. She was threatened with being sued and hauled into court if she did not pay.

Assuming the collectors had bad information upon which they relied, Husted asked them to verify when she took out the payday loans. They responded and said she took the loans in 2010 and 2011, half a decade after Husted actually obtained and repaid the loans. Shockingly, when Husted asked for written verification of the loans, she was told she would only see that information when they file lawsuits against her. Husted started sending payments, in fear of being sued, for money she did not owe.[iv]

Consumers have a right to receive a debt validation notice from a creditor.

Federal consumer law is very clear, “Every collector must send you a written ‘validation notice’ telling you how much money you owe within five days after they first contact you. This notice must also include the name of the creditor to whom you owe the money, and how to proceed if you don’t think you owe the money.[v]” If a creditor asks you for money and you do not think their records are correct, ask for the validation notice. There is a good reason a third party collector might not cooperate in sending you validation notice – they have no documentable proof you owe the debt!

Buying and selling lists of debts is big business in the debt collection industry. One of the top consumer complaints about debt collection practices is that debt collectors are trying to collect money the consumer either paid or no longer owe, or debts the consumer never incurred in the first place. An innocent consumer might find it shocking that debt collectors might knowingly try to collect on debts they cannot prove, but it is an unfortunately common practice.

Most common complaints against debt collectors
Image Source: http://bit.ly/1WMJVd4

Thousands of consumers complain and fight back when collectors refuse to provide debt validations.

The Consumer Financial Protection Bureau (CFBP) receives tens of thousands of complaints about deceptive and fraudulent debt collection efforts. The failure to provide debt verification is a top complaint among consumers and their lawyers who file individual and class action lawsuits against bad debt collectors who violate consumer laws such as the FDCPA. To learn more and read about the worst offenders, read our recent blog article, Report Summary: The most reported abusive and deceptive debt collection companies on the Zamparo Law Blog.

If you receive a suspicious debt collection call, keep a good record. Always make a note of the date and time of a collection call and ask the caller for their name or operator identification number. Ask detailed questions about the debt they claim you owe, and ask for verification. Your time and damage from harassment are compensable by law. You may be entitled to sue for individual damages as well as statutory damages and attorney’s fees.

Fraudulent and deceptive collectors are counting on you not to do anything to stop them. Prove them wrong, and let them know consumers will fight for their rights. The Zamparo Law Group can help.

Zamparo ImageThe Zamparo Law Group, P.C. is a consumer protection law and litigation firm, representing consumer plaintiffs harmed by debt collectors violating the FDCPA and other similar federal and state laws. Zamparo Law Group in the northwest suburbs of Chicago sues and wins against the collection companies who refuse to follow the law and use illegal tactics to force consumers to pay the debts they are hired to collect.

To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our FacebookTwitter and LinkedIn pages. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.

 

[i] The Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692-1692p

[ii] Federal Trade Commission, Consumer Information, Debt Collection.

[iii] Federal Trade Commission, Consumer Information, Debt Collection.

[iv] Los Angeles Times, Business Column, When collectors call, demand proof of your debt, by David Lazarus, Jan 26, 2016.

[v] The Fair Debt Collection Practices Act, 15 U.S.C. §1692g, Validation of Debts.

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Report Summary: The most reported abusive and deceptive debt collection companies

The Alliance for a Just Society is an organization dedicated to addressing economic, racial and social inequalities. This month, the group published an extensive research study, profiling the companies with the most complaints filed with the Consumer Financial Protection Bureau (CFPB) for debt collection complaints. Federal law requires third party debt collectors to follow certain strict guidelines controlling how they are allowed to collect debts, and our article, Consumer protection overview of the Fair Debt Collection Practices Act (FDCPA), published on the Zamparo Law Group, Consumer Protection Blog explains the law in detail.

Some of the common complaints about debt collectors include: (1) Continued attempts at collecting debts not actually owed; (2) Improper communication tactics; (3) Disclosure of verification of the debt; (4) False statements or representations about debts; (5) Improper contact or sharing of consumer information; and (6) Threatening or taking illegal actions against individuals.

When a debt collector violates the FDCPA, our law firm can help clients enforce the law and seek a court’s award of actual damages suffered, statutory damages and attorney’s fees. Many people assume the aggressive debt collectors make significant money (a $13 billion industry in the U.S.[i]) using abusive tactics, and they may consider it a cost of doing business, to sustain lawsuits and judgments entered against them in Federal court. To help stop these unethical collection companies, we should learn and be aware of how they violate the law, and share this information with other consumers who may be victims of abusive and deceptive collection practices.

Most common complaints against debt collectors
Image Source: http://bit.ly/1WMJVd4

The following summary highlights and lists four of the worst offenders, identified by the Alliance for a Just Society in their January 2016 report, Unfair Deceptive and Abusive Debt Collectors Profit from Aggressive Tactics. Notice in the review below, the most common consumer complaints are the continued attempts at collecting debts not owed.

  1. Encore Capital Group, Inc.[ii]

The CFPB received more than twice the complaints about the Encore Capital Group than any other debt collection company, totaling more than 6 percent of all the debt collections complaints in the CFPB database. Between July 7, 2013 and August 7, 2015, the CFPB received 4,684 consumer complaints. Encore is the second-largest debt collector, pursing collections of 7.5 percent of the debts in the U.S.; their President and CEO’s 2014 executive compensation was $5,190,334.

The three most common issues raised by consumers were: (1) Continued attempts to collect debt not owed; (2) Disclosure verification of debt; and (3) Communication tactics.

Example of a consumer complaint: “I have been receiving numerous calls from [Encore subsidiary] Midland Credit. They are looking for someone else, not me, for over a month. Sometimes it is automated and they just ring the phone; I called them back XXXX times and asked them to take off my number — calls keep coming. Today I spoke to a person that said he would remove it from the automated calls and now the manual calls have begun.”

  1. PRA Group, Inc.[iii]

The CFPB received 2,216 complaints about the PRA Group between July 7, 2013 and August 7, 2015. PRA is the third-largest debt collector, pursing collections of 6.9 percent of the debts in the U.S.; their Chairman of the Board, President and CEO’s 2014 executive compensation was $5,606,441.

The three most common issues raised by consumers were: (1) Continued attempts to collect debt not owed; (2) Communication tactics; and (3) Disclosure verification of debt.

Example of a consumer complaint: “My XXXX died owing a credit card debt. The debt collectors say I now owe the debt. My name is not on the application for credit nor have I benefited from the credit card. The debt collectors reported it to the credit reporting corps. And it appears on my credit report as a debt I failed to pay and fraud. I am applying to refinance my home and I am being denied because of the report. I have no other blemishes on my credit report. I can’t sleep with the fear of losing my home.”

  1. Enhanced Recovery Company, LLC.[iv]

The CFPB received 2,016 complaints about the Enhanced Recovery Company between July 7, 2013 and August 7, 2015. Enhanced Recovery pursues collections of 2.7 percent of the debts in the U.S.; their President and CEO’s 2014 executive compensation is not publicly available.

The three most common issues raised by consumers were: (1) Continued attempts to collect debt not owed; (2) Disclosure verification of debt; and (3) False statements or representation.

Example of a consumer complaint: “I received many calls from a debt collector, to the point where I had to change my phone number. This is a debt that is from 6+ years ago, which I don’t have proof that I paid but in fact did pay. They have gone ahead and reported it in my credit reports. I tried calling XXXX last time in an effort to solve this issue and was threatened that if I did not pay they would contact my XXXX and contact my employer (which they repeatedly called and that’s how we found out it was a false collection agency).”

  1. Citigroup, Inc.[v]

The CFPB received 1,553 complaints about the Citigroup between July 7, 2013 and August 7, 2015. Citigroup’s top paid executive, the Co-President’s 2014 executive compensation was $15,892,220.

The three most common issues raised by consumers were: (1) Continued attempts to collect debt not owed; (2) Communication tactics; and (3) Disclosure verification of debt.

Example of a consumer complaint: “Letter sent to me pertaining to my DEAD husband’s account. My husband died on XXXX XXXX, 1991 (almost XXXX years ago). I believe the account was paid off, but I might be wrong. But I do believe there is a statute of limitations with debt collections. I would consider XXXX years within that limit. Also, it was sent to my current address that has never been associated with my dead husband at all. I am not listed on this account at all.”

The remaining debt buyers and collectors on the Alliance for a Just Society list[vi] are:

  1. Expert Global Solutions.
  2. Resurgent Capital Services L.P.
  3. Capital One Financial Corp.
  4. Synchrony Financial.
  5. Convergent Resources, Inc.
  6. JPMorgan Chase & Co.
  7. Allied Interstate LLC.
  8. Bank of America Corporation.
  9. Navient Corp.
  10. Dynamic Recovery Solutions, LLC.
  11. Wells Fargo.

If you are experiencing similar complaints about these or any other debt collector, the Zamparo Law Group can help protect you and your consumer rights.

Zamparo ImageThe Zamparo Law Group, P.C. is a consumer protection law and litigation firm, representing consumer plaintiffs harmed by debt collectors violating the FDCPA and other similar federal and state laws. Zamparo Law Group in the northwest suburbs of Chicago sues and wins against the collection companies who refuse to follow the law and use illegal tactics to force consumers to pay the debts they are hired to collect.

To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our FacebookTwitter and LinkedIn pages. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.

[i]Fair Debt Collection Practices Act: CFPB Annual Report 2015.” Consumer Financial Protection Bureau, Mar. 2015, p. 7.

[ii] See the Unfair Deceptive and Abusive Debt Collectors Profit from Aggressive Tactics (hereinafter “Consumer Complaints Profile Report”) at page 10.

[iii] Consumer Complaints Profile Report at page 12.

[iv] Consumer Complaints Profile Report at page 14.

[v] Consumer Complaints Profile Report at page 16.

[vi] Alliance for a Just Society, Unfair Deceptive and Abusive Debt Collectors Profit from Aggressive Tactics, Jan. 2016.

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The Consumer Financial Protection Bureau enforces rules for mortgage settlement and servicing.

Arbitration clauses prevent consumers from suing in court, but might not end the fight

Consumers are often victims of unfair practices of which they are previously unaware, and when they learn about subjects like arbitration clauses in contracts, it may be too late and the damage is done. Arbitration clauses buried in the fine print of consumer contracts limit a consumer’s access to the courts to individually sue or participate in a class action lawsuit against a creditor who wrongs them. In too many cases the companies suing consumers either sue the wrong person or do not have any real documentation that someone actually owes a debt. Binding arbitration clauses can prevent a wronged consumer from suing a bad-acting company in court. While it may seem like there is no hope, the Consumer Financial Protection Bureau (CFPB) can fine companies who break the law and consumer rights attorneys are advocating for consumers and fighting back.

By the time consumers find out they agreed to arbitration, it often too late to sue in court.

Arbitration is an alternative dispute resolution procedure in which a panel of arbitrators, often lawyers and retired judges, are presented with the arguments of both sides of a dispute. Based on the local rules for arbitration, where it takes place, the parties can state their claims, defenses, and present evidence supporting their claims. Arbitration however, is not the same as a court of law, and if the arbitration clause is a “binding,” the parties must accept the decision of the arbitrators and that is the end of the line, and there is no returning to the civil courts. To have a dispute settled in arbitration requires both the parties to voluntarily agree to arbitration. However, that agreement to be limited to arbitration is often included in the fine print of consumer agreements, and the consumers accepting those terms often have no idea that they are giving up their right to sue in traditional civil courts.

Arbitration clauses are found in more agreements than consumers may realize.

Arbitration clauses are frequently used in consumer contracts for utility services, credit cards and consumer loans for homes, businesses and automobiles. Even if a consumer is aware of arbitration and they seek to avoid being bound by a binding arbitration clause, the fine print in a disclosure that comes with the monthly bill is easily overlooked. Moreover, consumers transacting their business online might fail to read a click through agreement containing a modification to their agreement with the lender or provider in which they accept the new terms by clicking to proceed to make an online payment, for example.

Clifford Cain Jr., a retired electrician, in his West Baltimore home. Courtesy of NY Times, Sued Over Old Debt, and Blocked From Suing Back. http://nyti.ms/1OmTE6w
Clifford Cain Jr., a retired electrician, in his West Baltimore home. Courtesy of NY Times, Sued Over Old Debt, and
Blocked From Suing Back. http://nyti.ms/1OmTE6w

To big to be held accountable? Suing consumers who do not even owe a debt? How is this possible?

The big companies who use arbitration clauses in their consumer agreements assume that the majority of consumers will ignore or not challenge the arbitration clause because they need the services or money borrowed from lenders. In the example of a utility company, there may be no other viable option for services and the consumer has little choice other than to accept the terms of the agreement, including the arbitration clause. In many cases, the consumer pays their bills on time and satisfies their duties in the agreement. However, in other cases, things go horribly wrong and the consumer suffers the harsh reality of the arbitration agreement, barring their access to the courts when they want to sue the lender or service provider.

One individual in Maryland, living on a fixed social security income, found out about arbitration clauses the hard way. Mr. Clifford Cain, Jr., a retired electrician in Baltimore[i], one day discovered his bank account was drained because a utility obtained a judgment against him and seized his funds. Incredibly, the debt was not a current and owing debt and the suit to collect was wholly improper. Even when Midland Funding, the party collecting against Mr. Cain, was unable to produce a copy of any arbitration agreement applying to Mr. Cain, the court allowed an example of another similar customer and their arbitration agreement, to satisfy the Court.

Abusive collectors and loan servicers have business models assuming many people cannot fight back.

Big companies buy and sell bundles of debt and collection companies seek to collect on what they assume are proper owing debts. In most cases, these collectors do not have any of the original documentation of an agreement, the individuals names just appear on a list with an amount owed. People who have never had any transactions with some companies are sued in court and judgments are entered against them. Individuals who want to challenge an arbitration clause that blocks them from court have an uphill battle. Class action lawsuits representing a significant number of consumers have a better chance of making it through litigation, and some cases return large jury verdicts against big companies engaged in deceptive and harmful debt collection practices.

The Courts too often take the position of the plaintiff companies and uphold the arbitration clauses.

Courts are often ruling that arbitration clauses are binding and enforceable, even despite clear and reasonable arguments about their enforceability, and are blocking class action lawsuits. Justice is failing. The CFPB that protects consumers from harmful business and debt collection practices. The CFPB can issue fines against companies bullying consumers, and the CFPB is not barred by any arbitration clause because the CFPB is not a court of law, rather an administrative agency with the teeth necessary to take a bite out of bad business practices.

Advocating for consumers is all the attorneys at the Zamparo Law Group do, and they do it well.

The attorneys at the Zamparo Law Group, advocating for consumers, file complaints with the CFPB and file individual and class action lawsuits against abusive companies, bullying consumers with arbitration clauses and bogus claims. Many people do not realize that there are consumer protection laws the Zamparo Law Group attorneys fight to be enforced. Unfortunately, too many people give up and accept an unfair fate, some eventually filing for bankruptcy protection to avoid the burden of being bullied by abusive companies. If you think you are a victim of unfair business practices and need someone advocating for you, call the Zamparo Law Group.

To learn more about consumer protection law and the Zamparo Law Group, please visit the firm’s website. You may also ask for a free case review. The Zamparo Law Group is connected on social media, please follow us and share our resources we share on our Facebook page. You may call the Zamparo Law Group with any questions by dialing (224) 875-3202.

 

[i] NYTimes, Sued Over Old Debt, and Blocked From Fighting Back, by Jessica Silver-Greenberg and Michael Corkery, Dec. 22, 2015.

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