Zombie Debt Autopsy

The CPFB (Consumer Protection Finance Bureau has

Andrew Lincoln as Rick Grimes - The Walking Dead _ Season 5B, Key Art - Photo Credit: Courtesy of AMC
Andrew Lincoln as Rick Grimes – The Walking Dead _ Season 5B, Key Art – Photo Credit: Courtesy of AMC

nailed a couple more zombie debt collectors.

Zombie debt, debt that never dies.

It may have been discharged in bankruptcy, or pas the statute of limitations, or just an out and out mistake.

In our world of core competencies and outsourcing, the big banks and credit card companies put a time limit on how long they try to collect past due accounts.

Then, they sell them.

To companies like Portfolio Recovery Associates (PRA) and Encore, which operates under several names, like Midland Funding.

The FDCPA (Fair Debt Collection Practices Act) prohibits many debt collector actions.

So, it applies to third party debt collectors, and, to debt owners, if the debt were in default when they purchased it.

So, if VISA is calling you about your VISA bill, the FDCPA does not apply.

If Midland Funding or LVNV or PRA contacts you, the FDCPA applies.

Unfortunately, there are not many lawyers like me who handle FDCPA cases for consumers.

Not enough to change the business plan of the debt collectors, which seems to include routine FDCPA violations.

I reviewed the Consent Order the CFPB obtained, and they are, well, juicy.

Any time a consumer settles a case, whether FDCPA, FCRA, TILA, RESPA, they insist on confidentiality clauses, so the prevailing consumer cannot tell anyone.  We agree to dismiss the lawsuit, so there is no black mark against the creditor/collection agency, in order to get their money.

So the Consent Order provides a rare glimpse into zombie debt industry practices.

Some excerpts:

38. Encore has considered disputes received outside of 45 days “untimely” and
has directed personnel responsible for handling these disputes not to investigate the
disputes by requesting documentation from sellers but rather to “[i]nform the consumer
that proof is required to support their claim.

44· In numerous instances, Encore has instructed its law firms to abide by its
dispute policies and only to close accounts with “untimely” disputes if the Consumer
provides proof that he or she does not owe the Debt. This is even the case where
documentation produced to Encore by a seller indicates that the Consumer does not owe
a Debt. For example, Encore instructed one law firm to continue collecting on more than
fifty accounts unless the Consumers could provide independent proof that the accounts
had been paid, even though the monthly statements provided by the Debt sellers showed
a zero balance.

48. Encore has filed hundreds ofthousands oflawsuits to collect Consumer
Debt. Most of the Consumers sued by Encore are not represented by counsel. Encore has
placed tens of thousands of accounts with law firms staffed by fewer than ten attorneys.
For example, Encore placed over 100,000 accounts with Frederick J. Hanna and
Associates, while that firm employed 16 attorneys. Encore has encouraged these law firms
to file lawsuits on a large percentage of accounts, prohibited them from contacting
previous owners of the Debt for account-level documentation, and discouraged them
from requesting account-level documentation Encore did not deem necessary to settle a
case or obtain a judgment.

So, read that lawsuit you get in the mail; there may be no basis for it, if the credit card contract and assignment and other documents are not attached to the complaint.

There is so much more, I will do another post.


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