Activities to Combat Illegal Debt Collection Practices

In March 2018, the Consumer Financial Protection Bureau (CFPB) and the Federal Trade Commission (FTC) reported on their 2017 activities to combat illegal debt collection practices.  The CFPB handled approximately 84,500 debt collection complaints, making it one of the most prevalent topics of complaints about consumer financial products or services.  The Bureau offered five sample letters that consumers may use when they interact with debt collectors.

The FTC resolved 10 cases against 42 defendants and obtained more than $64 million in judgements, focused on curbing egregious debt collection practices, including phantom departments, schools, non-profit organizations, banks, credit unions, other businesses and government agencies.  The agency logged more than 60 million views on its webpages, with its videos seen more than 581,000 times at YouTube.com/FTC, and its consumer blogs reaching 199,860 (English) and 50,480 (Spanish) email subscribers.

For more information, click here.

Teaching Suggestions

  • Ask students to review the major provisions of the Fair Debt Collection Practices Act.
  • Let students debate the issue, “Can governmental agencies stop unlawful practices of the debt collection agencies that harm both consumers and legitimate business”.

Discussion Questions

  1. Is it possible to live without using any form of consumer credit?
  2. What can the governmental agencies do to protect the legal rights of all consumers in a manner that is efficient, effective, and accountable?

How to Dig Out of Debt? Grab More Than One Shovel

Millions of Americans are dealing with debt overload every day.  If you’re struggling to pay your loans, credit cards or other bills, here are some steps you can take to begin managing your debt problems.

  1. Create a budget.
  2. Try to get a clear picture of your monthly income and expenses.
  3. Contact your creditors about easier ways to make your most important bill payments.
  4. Have a strategy for saving money on interest and fees.
  5. Consider getting help from a reputable credit counselor.
  6. Know your rights if a debt collector contacts you.

For more information, click here.

Teaching Suggestions

  • Have students debate this issue “Is it possible to live without using any form of consumer credit”.
  • Ask students if they have created a budget, borrowed to finance a car, and have a strategy for saving money on interest or fees.

Discussion Questions

  1. What factors should be considered when a person is determining the amount of credit he or she should take on?
  2. What actions are commonly recommended if a person has difficulty making credit payments?

Phantom Debt Collectors

Consumers across the country report that they’re getting telephone calls from people trying to collect loans the consumers never received or on loans they did receive for amounts they do not owe.  Others are receiving calls from people seeking to recover on loans consumers received but where the creditors never authorized the callers to collect them.

The FTC is warning consumers to be alert for scam artists posing as debt collectors.  It may be hard to tell the difference between a legitimate debt collector and a fake one.

A caller may be a fake debt collector if he/she:

  • is seeking payment on a debt for a loan you do not recognize;
  • refuses to give you a mailing address or phone number;
  • asks for personal financial or sensitive information; or
  • exerts high pressure to try to scare you into paying, such as threatening to have you arrested or to report you to a law enforcement agency.

For more information, click here.

Teaching Suggestions

  1. Ask students to make a list of protections provided by the Fair Collection Practices Act.
  2. Ask students to prepare a list of steps they should take if the harassment continues.

Discussion Questions

  • If you think that a caller may be a fake debt collector, why is it important to ask the caller for his name, company, street address, or telephone number?
  • If you think that a caller may be a fake debt collector, should you stop speaking with the caller? Why or why not?

The Credit Repair Organizations Act

The Credit Repair Organization Act (CROA) makes it illegal for credit repair companies to lie about what they can do for you, and to charge you before they’ve performed their services.  The CROA is enforced by the Federal Trade Commission and requires credit repair companies to explain:

  • your legal rights in a written contract that also details the services they’ll perform,
  • your three day right to cancel without with any charge,
  • how long will it take to get results,
  • the total cost you will pay, and
  • any guarantees.

What if a credit repair company you hired doesn’t live up to its promises?  You have some options.  You can:

  • sue them in federal court for your actual losses or for what you paid them, whichever is more,
  • seek punitive damages—money to punish the company for violating the law,
  • join other people in a class action lawsuit against the company, and if you win, the company has to pay your attorney’s fees.

For more information, click here.

Teaching Suggestions

  • Ask students to make a list of major provisions of the Credit Repair Organization Act.
  • Ask students if there is a time limit on reporting negative information about criminal convictions.

Discussion Questions

  1. Where and how can you report credit repair frauds?
  2. Can the FTC resolve individual credit disputes? If not, why should you file the complaint with the FTC?

Overhauling Debt Collection Market

New Protections Would Limit Collector Contact and Help Ensure the Correct Debt is collected

The Consumer Financial Protection Bureau (CFPB) is considering to overhaul the debt collection market by capping collector contact attempts and by helping to ensure that companies collect the correct debt.  Under the proposals being considered, debt collectors would be required to have more and better information about the debt before they collect.  As they are collecting, companies would be required to limit communications, clearly disclose debt details, and make it easier to dispute the debt.  When responding to disputes, collectors would be prohibited from continuing to pursue debt without sufficient evidence.  These requirements and restrictions would follow the debt if it were sold or transferred.

For more information about the proposals under consideration, click here.

Teaching Suggestions

  • Ask students what federal laws already prohibit debt collectors from harassing, oppressing, or abusing consumers.
  • Ask students if they, their friends or relatives, have ever been harassed by creditors. If so, what were their experiences?

Discussion Questions

  1. Debt collection market generates more complaints to the Consumer Financial Protection Bureau than any other financial product or service. Why?
  2. What might be some common complaints against debt collectors seeking to collect debt from consumers?

Internet Fraud

How many people are scammed into sending money or giving personal information each year?
Answer: Millions!!

Types of Internet Fraud

  • Internet auction fraud—involves the misrepresentation of a product advertised for sale on an Internet auction site, or non-delivery of merchandise.
  • Credit card fraud—the unauthorized use of credit/debit card, or card number, scammers fraudulently obtain money or property.
  • Investment fraud—an offer using false claims to solicit investments or loans, or providing purchase, use, or trade of forged or counterfeit securities.
  • Nigerian letter or “419” fraud—named for the violation of Section 419 of the Nigerian Criminal Code, it combines the threat of impersonation fraud with a variation of an advance fee scheme in which a letter, e-mail, or fax is received by a victim.

Tips for Avoiding Internet Fraud

  • Know your seller – If you don’t know who you are buying from online, do some research.
  • Protect your personal information – Don’t provide it in response to an e-mail, a pop-up, or website you’ve linked to from an e-mail or web page.

For more information, click here.

Teaching Suggestions

  • Bring to class Internet-related problems and examples of individuals or families. Suggest ways in which these problems might be solved.
  • Compile a list of places and organizations where a person can call to report Internet fraud.

Discussion Questions

  1. While the Internet makes everyday tasks faster and more convenient, like stopping, banking, and communicating, why it’s important to be safe, secure, and responsible online.
  2. What are some basic precautions we can take to protect our computer and personal data from theft, misuse, and destruction?

Fake Payday Loan Debts

In September 2015, the Federal Trade Commission banned Kirit Patel and his company, Broadway Global Masters, from the debt collection business. Patel and his company illegally collected more than $5.2 million in fake payday loan debts.  He also pleaded guilty to the Department of Justice on charges of criminal mail and wire fraud.  Specifically, Patel’s company:

  • Called people and pushed them to pay debts they didn’t really owed,
  • Posed as law enforcement and fake government agencies like the “Federal Crime Unit of the Department of Justice”,
  • Threatened to sue or arrest people—or tell their family and employers about a debt, and
  • Recited people’s Social Security and bank account numbers to seem legit.

So how can you tell if you’re being targeted by a fake debt collector?  A caller may be a fake debt collector if:

  • You don’t recognize the debt,
  • You can’t get a mailing address or phone number for the collector,
  • You’re asked for personal financial or sensitive information, and
  • You’re threatened with arrest or told you’ll be reported to a law enforcement agency.

For more information, click here.

Teaching Suggestions

  • Ask students to prepare a list of steps they should take if they receive a call from a debt collection agency.
  • Encourage students to visit a local office of the Consumer Credit Counseling Service. What assistance is available if the debt is legitimate, but the debt collector is not?

Discussion Questions

  1. What can governmental agencies do to stop scammers from bilking honest and innocent people?
  2. Why is it important to obtain and review your free credit reports at least once a year?

Protecting Your Retirement Pension

Pension advance lenders offer retirees and veterans a loan or cash advances in exchange for all or part of their pension payments.  Paying back the advance or loan, plus the high interest and fees that such loans typically include, could threaten older Americans’ retirement security.

If you are considering a pension advance, follow these do’s and don’ts:

  • If you are asked to sign up for life insurance with the pension advance, you could end up paying the insurance premium.
  • If you are resorting to pension advances due to financial difficulties, consider getting financial coaching or counseling from a professional.
  • Don’t be fooled by patriotic-sounding names, logos, or claims of government backing.
  • Don’t give anyone access or control over your monthly pension payments.

For additional information, and learn more, click here.

Teaching Suggestions

  • Ask students to research local non-profit credit counseling agencies and what services they provide.
  • Why is it important not to give anyone access or control over your monthly pension payment?

Discussion Questions

  1. Why do people resort to pension advance loans?
  2. What are other alternatives to pension advance loans?
  3. What recommendation should you take to protect your retirement pension when considering an advance?

Caution: Car Title Loans Can Leave You Stranded

Have you seen a sign offering a car title loan—also known as a pink-slip loan, title pledge or title pawn?  These loans are use your paid-off car as collateral, and you get a small, short-term loan with a high interest rate.  You usually have to repay the loan in 15 or 30 days, and the annual percentage rate (APR) is often more than 100 percent.  If you don’t pay back the loan, the company can repossess your car—and then you’re worse off than you were before.  It’s a very expensive way to get money.

Before you decide to take out a car title loan, weigh some options.

  • Can you get a small loan from your bank, credit union or a small loan company? Even a cash advance on a credit card might cost less than a car title loan.
  • Shop for the offer with the lowest cost. Compare the APR and the finance charges, and borrow only what you can repay in time.

For additional information, click here.

Teaching Suggestions:

  • Ask students how they can avoid costly loans like car title loans?
  • Why car title loans are considered risky and undesirable?

Discussion Questions

  1. What can consumers do if car title lenders fail to disclose all the qualifying terms associated with obtaining a loan at its advertised rate?
  2. What can government agencies do to protect consumers in the short-term lending and auto marketplaces?

Unscrupulous Debt Collectors

In January 2015, the U.S. Department of Justice sued a Texas-based Commercial Recovery System, Inc., a debt collection company that allegedly impersonated attorneys, law firm staff, judicial employees and mediators.  The company threatened people with lawsuits, seizure of their property, or wage garnishment.  All these practices are against the law.  Under federal law, debt collectors–including collection agencies, lawyers who collect debts, and companies that buy delinquent debts and then try to collect them–can’t use abusive, deceptive or unfair practices to collect from you.

For additional information, click here.

Teaching Suggestions

  • Ask students to check a local Consumer Credit Counseling Service to learn about their services provided to consumers.
  • Ask students to compile a list of places a person can call to report dishonest credit practices, get advice and help with credit problems.

Discussion Questions

  1. Which federal law(s) protect your rights if you are ever contacted by a debt collector?
  2. If you need help regaining control of your finances, what resources are available to you?