February 25, 2014
Monica Jackson
Office of the Executive Secretary
Bureau of Consumer Financial Protection
1700 G Street NW
Washington, DC 20552
Re: Advance Notice of Proposed Rulemaking: Debt Collection (Regulation F)
Docket No. CFPB–2013–0033, RIN 3170–AA41
Dear Ms. Jackson:
As the leading organization representing the interests of people aged 50 and
older, AARP is pleased to provide the following comments regarding abusive debt
collection practices. Approximately one half of the people subject to debt collections are
older than age 50, and older people are particularly vulnerable to abusive debt
collection practices.
AARP urges the CFPB to take the following steps to protect
alleged debtors in the 50+ population from harassing and abusive collection practices
pursuant to the Fair Debt Collection Practices Act, the Dodd-Frank act, and other
consumer protection laws:
AARP is a nonprofit, nonpartisan organization, with a membership of nearly 38 million, that helps
people turn their goals and dreams into real possibilities, strengthens communities and fights for the
issues that matter most to families such as healthcare, employment and income security, retirement
planning, affordable utilities and protection from financial abuse. We advocate for individuals in the
marketplace by selecting products and services of high quality and value to carry the AARP name as well
as help our members obtain discounts on a wide range of products, travel, and services. A trusted
source for lifestyle tips, news and educational information, AARP produces AARP The Magazine, the
world’s largest circulation magazine; AARP Bulletin; www.aarp.org; AARP TV & Radio; AARP Books; and
AARP en Español, a Spanish-language website addressing the interests and needs of Hispanics. AARP
does not endorse candidates for public office or make contributions to political campaigns or
candidates. The AARP Foundation is an affiliated charity that provides security, protection, and
empowerment to older persons in need with support from thousands of volunteers, donors, and
sponsors. AARP has staffed offices in all 50 states, the District of Columbia, Puerto Rico, and the U.S.
Virgin Islands. Learn more at www.aarp.org.
• Issue guidelines to protect older people from debt collection
practices to which they are disproportionately vulnerable and clarify
the application of the “least sophisticated consumer” standard
applicable to FDCPA claims to such vulnerabilities;
• Restrict significantly the number of times a collector may contact a
consumer by telephone to reflect more accurately the intrusive and
abusive impact of collection calls on older people;
• Prohibit collection telephone calls after 8 pm local time.
• Protect older debtors from the coercive and stressful impact of overt
and implied threats of litigation, jail, loss of job or home, or
garnishment of exempt funds;
• Require original creditors and subsequent owners of debt to provide
alleged debtors with written notice at least 30 days in advance of a
proposed sale of a debt. Such notice should identify the proposed
purchaser and include an itemization of the principal, interest, and
fees of the original creditor and any fees or interest added by
subsequent owners. Such notice should provide a phone number
the alleged debtor can call, that will be answered in a timely manner,
to try to resolve disputes or questions, or to permit payment of the
alleged debt prior to sale;
• Prohibit the sale of debt without accompanying documentation
establishing the actual terms of the contract and itemizing the
principal, interest, and fees of the original creditor, payments made,
dispute notes, and charge-off date;
• Prevent collectors from filing litigation to collect a debt unless they
have documentation proving ownership of the debt being collected,
contractual documents establishing the terms of the debtors
obligations to the original creditor, that they are suing the correct
person, and in the right amount.
• If any terms in a sales or forward flow agreement have exculpatory
terms, the debt collector should be required to disclose such terms
at the initial contact and again prior to collecting any payment. If
litigation is filed to collect a debt, any exculpatory terms should be
required to be filed with the pleadings.
• Prohibit debt collectors from asserting in affidavits or testimony that
they have personal knowledge of the business records and record
keeping procedures of predecessor owners of a debt;
• Prohibit debt collectors from seeking to recover interest on interest
and fees imposed by the original creditor. Interest should be applied
only on the principal;
• Require debt collectors to have effective investigation and
verification procedures that include a review of documentation
associated with a debt. Such procedures must not be limited to a
perfunctory review of the electronic spreadsheet information they
obtain from an original creditor or other predecessor owner. If no
documents are available to permit a thorough verification, the debt
collector should be required to cease collection and be prohibited
from selling the debt;
• Provide guidance regarding the FDCPA’s application to new and
emerging forms of technology, including cell phones, text
messaging, email, social media, and electronic payment systems;
• Prohibit contact with alleged debtors by cell phones, text messages,
or email without express written authorization;
• Provide guidance regarding security protocols necessary to protect
personally identifying and financial information of debtors from
disclosure or misuse;
• Require debt collectors to inform debtors verbally of the right to
request the collector to cease further contact each time they contact
the debtor by phone;
• Require debt collectors to inform alleged debtors verbally and in
writing if the debt being collected is beyond the applicable statute of
limitations or otherwise not collectible (i.e. a decedent’s debt, debt of
an authorized user, or debt discharged in bankruptcy) and that as a
result the collector is prohibited from seeking to obtain a judgment in
court or attaching assets or income;
• Provide guidance clarifying and limiting what debt collectors may
represent about the potential impact of making or not making a
payment on a person’s credit score or job;
• If a payment will revive or re-age a debt, require collectors to inform
debtors verbally and in writing, and that such payment will permit the
collector to file a lawsuit that would otherwise be beyond the statute
of limitations;
• Prohibit creditors from transferring alleged balances onto new credit
• Prohibit collectors from contacting by telephone a decedent’s
unobligated survivors for any reason for at least three months
following the death of a debtor.
Debt Collection Has Become An Increasingly Serious And Distressing Concern
For Older People
Unfair and abusive debt collection is a serious concern for older people, often
causing them severe distress. Older Americans long have been considered among the
most resistant to consumer debt due to their generally conservative attitude toward
spending. Changing economic conditions have made debt a more serious issue for
them in recent years, however. The median income of people aged 50+ was lower in
2009 than it was in 1997 due in part to declining pension and investment income,
waning employment prospects, and longer periods of unemployment than their younger
At the same time, costs for basic expenses such as housing, utilities,
prescription drugs, and health care are rising.
Many people enter their retirement years
incurring expenses for basic needs that exceed their income—particularly for homerelated expenses and health care.
Approximately two-fifths of families with a person
over age 65 have an income shortfall.
Many older people rely on credit cards to “pay for basic living expenses such as
rent or mortgage payments, groceries, utilities, or insurance because they did not have
enough money in their checking or savings accounts.”
One third of the people over age
50 have used credit cards to pay for unexpected medical care (50%), basic living
expenses (49%), home repairs (38%), or car repairs (34%).
Nearly a quarter of people
age 50+ have used credit cards to deal with lost income due to a job loss.
See Amy Traub, In the Red: Older Americans and Credit Card Debt, AARP Public Policy Institute Middle
Class Security Project, 7 (Jan. 2013), available at
See Amy Traub, In the Red: Older Americans and Credit Card Debt, 5; Craig Copeland, Debt of the
Elderly and Near Elderly 1992-2010, Employee Benefit Research Institute (Sept. 2006), available at
Sudipto Banerjee, Income Composition, Income Trends, and Income Shortfalls of Older Households,
Employee Benefit Research Institute, No. 383, 13, 14 (Feb. 2013), available at
See Id. at 11.
Amy Traub, In the Red: Older Americans and Credit Card Debt at 2.
Americans are significantly less likely than younger people to run up credit card debt
making smaller purchases of nonessential goods and services.”
Increasing debt levels carried by an increasing percentage of older people tell
only part of the story. Debt collection often begins with unconscionable consumer credit
practices. Credit card lenders have pushed improvident and deceptive offers of credit on
older people, particularly prior to enactment of reforms including the CARD Act and the
creation of the CFPB. Exorbitant interest rates, fees, penalties, and deceptive billing
practices—many of which are now illegal—were designed to force people hopelessly
further into debt.
“[E]ven a consumer who pays back all that he or she has originally
charged, plus an amount that would equal a 70% return if calculated as simple interest,
can still wind up owing over eight times the amount that was originally charged.”
story of Ms. L, an 87 year old receiving Social Security who received an offer of credit
limited to $300.00, made charges in the amount of $277.02, and ended up owing
$1506.13, is illustrative of the plight of many older people caught in credit card traps:
Between the time she had opened the account in January 2001 and
when it was finally closed by the credit card company in April 2003, Ms.
L. had been assessed $309.13 in finance charges, $525.00 in past-due
fees, $550.00 in over-the-limit fees, $117.00 for three years’ worth of
membership fees, and a $5.00 cash-advance fee. Charges for cash and
actual purchases for her benefit came to a grand total of $277.02, all of
which was incurred between January and April of 2001. After April
2001, she had no more credit available on the card. Ms. L. did continue
to try to pay off the account, and her payments totaled $474.75. The
last payment occurred in November 2002, when she tendered $50.00
that was totally eradicated by the past-due fee of $25.00 and the overthe-limit fee of $25.00 assessed for the same month.
Lenders’ billing practices became engines that drove up balances and lender
profits by millions of dollars, fueled by those who could least afford to pay. Banks wrote
off $211.1 billion in credit card debt between 2009 and 2012.
Such debt has become
See Donna S. Harkness, When Over-The-Limit Is Over The Top: Addressing The Adverse Impact Of
Unconscionable Consumer Credit Practices On The Elderly, 16 Elder L.J. 1, 3 (2008).
Amy Traub, In the Red: Older Americans and Credit Card Debt at 4 (citing CardHub Q1 2012 Credit Card
Debt Study, http://www.cardhub.com/edu/q1-2012-credit-card-debt-study/).
the subject of often questionable and abusive debt collection that disproportionately
impacts older people.
In addition, medical providers and creditors targeting health
care expenses continue to use deceptive billing practices that also lead to abusive
“About half of middle-income Americans with credit card debt who are age 50+
have been called by bill collectors at some point.”
Two thirds of older people who file
for bankruptcy report credit card interest and fees as the reason they file.
More than
one in five debtors who filed for bankruptcy was over the age of 55 in 2007, compared
with one in 10 in 1991.
Older people often suffer severe deprivation prior to filing for
bankruptcy: “9.7% report having gone without food while struggling before bankruptcy,
31.2% report being late on rent or mortgage, 31.2% report going without required
medication (47.1% for the subset who filed bankruptcy for medical reasons), and 21.2%
report skipping doctors’ appointments (30.6% for the subset who filed for medical
Older People Are Vulnerable To Increasingly Sophisticated And Aggressive Debt
Collection Practices
Older people’s vulnerability to unfair, deceptive, and abusive debt collection
practices is not new. It is significantly exacerbated, however, by increased levels of
debt, aggressive collection methods, and the extended length of time during which
collection efforts are pursued as a result of the evolution of the secondary debt
For many years, people over age 60 have called one of the 29 state Senior
See Rick Jurgens & Robert J. Hobbs, The Debt Machine: How the Collection Industry Hounds Consumers
and Overwhelms Courts, Nat’l Consumer Law Ctr. (2010).
Amy Traub, In the Red: Older Americans and Credit Card Debt at 11.
John A. E. Pottow, The Rise In Elder Bankruptcy Filings And The Failure Of U.S. Bankruptcy Law, 19
Elder L.J. 219, 220 (2010), available at http://ssrn.com/abstract=1669298.
See Deborah Thorne, Elizabeth Warren, and Teresa Sullivan, “Generations of Struggle,” AARP Public
Policy Institute (June 2008), available at http://assets.aarp.org/rgcenter/consume/2008_11_debt.pdf
(The rate of personal bankruptcy filings has increased faster for older people than younger ones,
jumping by more than 48 percent from 1991 to 2007 among those ages 45 to 54, by 150 percent for
those ages 55 to 64, and by 433 percent for those ages 75 to 84.)
John A. E. Pottow, The Rise In Elder Bankruptcy Filings And The Failure Of U.S. Bankruptcy Law, 19
Elder L.J. 219, 246 (2012), available at http://ssrn.com/abstract=1669298.
See Richard Hynes, Broke But Not Bankrupt: Consumer Debt Collection In State Courts, 60 Fla. L. Rev. 1,
20 (2008) (describing the plight of low income debtors who do not have the same opportunity that
wealthier people have for a fresh start provided under the bankruptcy laws because they do not have
sufficient assets or income to declare bankruptcy).
Legal helplines more often for assistance with debt collection problems than for any
other type of problem.
The annual reports for the Center for Elder Rights Advocacy
describe many examples that are illustrative of increasingly aggressive debt collectors
bullying distraught older people, even without using overt vulgarity, threats, or other
sensational types of abuse. Such practices nevertheless cause significant distress and
are considered harassing, unfair, or abusive by the older person being pursued:
• A 62-year-old woman receiving SSI and cash benefits for an 18-yearold dependent child was afraid that she could be sent to jail for not
paying delinquent credit card bills, and that if she was ordered to pay
the credit card debt, she would be unable to pay her subsidized housing
• A 75-year-old woman was receiving statements from a credit card
company showing an ever-increasing amount due, even though she
had paid the account in full the year before and believed it to be closed.
Her stress level was increasing along with the balance, but she was
unable to resolve the matter with the credit card company. It turned out
that a residual finance charge which had not appeared on the woman’s
statement until the month after she believed that the account was paid
and closed was accruing monthly late fees.
• A distraught woman called a legal hotline after all that remained of her
monthly Social Security benefit, $80, was garnished from her bank
account. She was given detailed advice on challenging the garnishment
and a comprehensive packet of documents to aid her in filing an
objection and setting a hearing. The judgment creditor’s attorney, whom
the caller described as an aggressive bully, reportedly became much
nicer after the caller successfully asserted her rights and her funds
were returned.
The Center for Elder Rights Advocacy, which provides technical assistance to the Helplines, is a
program of Elder Law of Michigan, a private 501(c)(3) non-profit. Its annual reports detailing the high
level of calls by people over age 60 regarding debt collection are available at
Senior Legal Helplines Annual Report, 2012 at 6, available at http://www.legalhotlines.org/annualreports.html.
Id. at 5.
Id. at 4.
• A 63-year-old woman spent rehabilitation time in a nursing home, which
claimed that she still owed $780 on her account. She contended that
she had paid $508 dollars on the account and that the facility
administrator had forgiven $250 of the bill because of a discrepancy.
The account was turned over to a collections attorney. The nursing
home would not return her calls and the collection attorney was rude
and demeaning to her.
Such examples are not merely isolated incidents, but illustrate long term trends
identified by Senior Legal Helplines. For example, West Virginia reported “continuing to
have increases in our caseload related to seniors struggling with debt.”
Despite being
“collection proof” because their income is exempt from garnishment, debt collection “has
a particularly negative impact on our seniors, who are often very frightened and worried
by the idea of being sued.”
Nebraska also noted that “[c]ollection companies seem to
be getting more and more aggressive towards our callers, and they will use every
opportunity to harass and intimidate callers into sending unaffordable payments.”
“Even when a debtor is collection proof, or has no income or assets subject to
collection, creditors will often continue strong arm collection tactics, such as garnishing
accounts containing only social security or calling in a debtor [to court] for repeat
debtor’s exams.”
Stress caused by debt collection calls can be severe, and can lead to significant
mental and physical health problems, especially in older people.
They are forced into
a Hobson’s choice: pay to alleviate the stress caused by incessant and often abusive
collection calls, in exchange for making financial sacrifices leading to hunger, eviction,
foreclosure, and deteriorating health. Even older people who have some retirement
savings only postpone the inevitable sacrifice. Paying a debt they don’t owe will
jeopardize their long term financial security.
Id. at 26.
Senior Legal Helplines Annual Report, 2007 at 37, available at http://www.legalhotlines.org/annualreports.html.
Id. at 34.
See Sweet., et al, The high price of debt: Household financial debt and its impact on mental and
physical health, 91 Social Science & Medicine 94-100 (May 16, 2013); see also e.g., Stress,
http://umm.edu/health/medical/reports/articles/stress (discussing age-related changes in the brain that
make it more difficult for older people to recover from the body’s normal acute stress responses).
See Amy Traub, In the Red: Older Americans and Credit Card Debt at 10.
Debt Collectors Target Older People Because They Are Vulnerable To Aggressive
Collection Tactics
Older people are targeted “based on assumptions that these debtors are easily
confused about whether the debt existed, that they fear a collector garnishing their
Social Security income, and that they are hesitant to engage in legal skirmishes.”
Large debt collectors target older debtors armed with sophisticated proprietary modeling
algorithms that analyze economic, psychological, gender, age, employment, marital
status, and other factors. Such algorithms have been developed and perfected based
on huge amounts of data obtained from millions of accounts over many years.
smaller, less sophisticated collectors without access to such resources improve their
collection outcomes by focusing on tactics to which older people are vulnerable, such as
building up trust.
For example, firms that specialize in the collection of decedent’s
debts use the time of grieving to establish a customer relationship with the decedent’s
survivors in order to convince them to pay debts of decedents, which they do not owe
and are not responsible to pay.
Whether the abusive tactic involves preying on their
sense of gratitude or responsibility, convincing the survivor to honor the memory of their
loved one, using guilt, providing misinformation, or simply suggesting that the debt must
be paid, bereaved relatives and friends are particularly sensitive and vulnerable.
Matthew Ludwig, NOTE: Abuse, Harassment, and Deception: How the FDCPA Is Failing America’s
Elderly Debtors, 16 Elder L.J. 135, 152 (2008) (quoting Lauren Goldberg, Dealing in Debt: The High-Stakes
World of Debt Collection After FDCPA, 79 S. Cal. L. Rev. 711, 736 (2006)).
See e.g., Encore Capital Group, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 2, available at
=4049160 (“At the core of our analytic approach is a focus on understanding, measuring, and predicting
distressed consumer behavior. In this effort, we apply tools and methods from statistics, psychology,
economics, and management science across the full extent of our business. During portfolio valuation,
we use an internally developed and proprietary family of statistical models that determines the
likelihood and expected amount of payment for each consumer within a portfolio. Subsequently, the
expectations for each account are aggregated to arrive at a portfolio-level liquidation solution and a
valuation for the entire portfolio is determined. During collections, we apply our ‘willingness-capability’
framework, which allows us to match our collection approach to an individual consumer’s payment
An entire segment of the debt collection industry focuses on the collection of decedents’ debt from
unobligated family members. See e.g., Matthew W. Ludwig, supra note 31, at 135-37, 151-56.
See Forte, From CRM to DCRM: A Multi-Generational Approach to Customer Relationships, 3, 5, 6
(2009), available at
http://www.mikejstudio.com/Mike_J_Studio/forte_WP_files/Forte%CC%81WhitePaper 01e.pdf.
See Sid Kirchheimer, A Dead Debt? Bill collectors prey on grieving families, AARP Bulletin (Mar. 2,
2009), available at http://www.aarp.org/money/scams-fraud/info-02-2009/a_dead_debt_.html.
Older people are vulnerable to debt collection phone calls for many of the same
reasons they are vulnerable to telemarketing scams.
For example, older people are
generally home during the day and—particularly if they are socially isolated—are more
likely to answer their phones than are younger people. Shame, humiliation, and fear of
losing their financial independence may discourage older people from seeking
assistance for debt problems or even discussing debt collection calls with their family
and caregivers.
They may have forgotten whether they paid, and seek to save face by
paying again. They may lack documentation to prove they paid, and may be easily
deceived into believing that such documentation is necessary to avoid making
payments. Even if an alleged debtor has proof of payment, a collector may simply
disregard it.
Whether a debt collector’s tone is polite or threatening, they are effective at
convincing older people to pay, even on debt that they never owed, are not legally
required to pay, have paid already, or from income exempt from legal process.
Approximately 80% of older people own their homes, an attachable asset a collector
See Off The Hook: Reducing Participation in Telemarketing Fraud, AARP Foundation, A-21 (2003),
available at http://assets.aarp.org/rgcenter/consume/d17812_fraud.pdf. Traits that make older people
vulnerable to fraud may include: Mild cognitive impairment; Social isolation, boredom, loneliness;
Enjoyment of the attention and perceived companionship of telemarketers; Socialization to be trusting,
polite, not to lie, and to expect the same from others (including telemarketers and law enforcement
personnel); Respect for authority; Distrust of the government; Desire to keep financial activities hidden
from scrutiny by family members or government agencies; Resentment of anyone questioning their
behavior; Need not to appear foolish or stupid; Need for financial security.
See John A. E. Pottow, The Rise In Elder Bankruptcy Filings And The Failure Of U.S. Bankruptcy Law, 19
Elder L.J. 219, 239 (2010), available at http://ssrn.com/abstract=1669298 (citing Elizabeth Moen, The
Reluctance of the Elderly to Accept Help, 25 SOC. PROBS. 293, 295–96, 302 (1978) and Deanne Loonin &
Julia Devanthery, The Life And Debt Cycle: Part Two: Finding Help For Older Consumers With Credit Card
Debt, Nat’l Consumer Law Ctr. (2006)).
See Maria Aspan, Borrower Beware: B of A Customer Repaid Her Bill Yet Faced a Collections
Nightmare, American Banker, (Mar. 29, 2012, 5:47 pm ET)
http://www.americanbanker.com/issues/177_62/bofa-credit-cards-debt-collections-delinquentrobosigning-1047991-1.html; Jeff Horwitz, Bank of America Sold Card Debts to Collectors Despite Faulty
Records, American Banker (Mar. 29, 2012, 6:31 pm ET),
See Rozanne M. Andersen, Targeting Demographics in Debt Collection Communication: The Seniors,
Inside Arm, July 11, 2011, available at http://www.insidearm.com/opinion/targeting-demographics-indebt-collection-communication-the-seniors/ (discussing importance of collectors building trust with
older debtors).
can exploit to coerce payment even if the person’s income is exempt.
Many older
people do not know their legal rights, believing that if they do not give in to a collector’s
demand for payment, they will lose their homes or go to jail if they are sued, even if the
collector does not overtly threaten jail. The fear is not entirely unfounded, because
failure to appear in court to answer collector interrogatories may lead to arrest and jail.
Even if a person’s only source of income is exempt from seizure, fear that collectors
may seize their entire bank account, leaving them no means to provide for their most
basic needs, may lead them to agree to a payment plan even on a debt they believe
they do not owe.
Enforcement Has Been Inadequate To Protect Older People From Increasingly
Sophisticated and Abusive Debt Collection
The level of public and private enforcement actions has been woefully
inadequate to curb the increase in reported collection abuses, which have exceeded
those regarding any other industry for well over a decade.
In 2011, the FTC filed more
enforcement actions against collectors engaging in abusive debt practices—seven—
than it had ever done in a single year, but the complaints continue to outpace those filed
in earlier years.
Complaints about significant abuses by third-party and in-house
collectors in 2012 totaled 125,136 and accounted for 24.1% of all complaints the FTC
Moreover, the number of complaints understates significantly the number of
people suffering from abusive and harassing debt collection practices: relatively few
consumers complain to government agencies. Additionally, many people may not
identify a particular contact as related to an attempt to collect a debt. Collection
practices that violate the FDCPA may be misconstrued or categorized instead as
telemarketing scams, financial exploitation, Telephone Consumer Protection Act, Fair
See Portfolio Recovery Acquisitions, Form 10-K, Fiscal Year Ending Dec. 31, 2012, available at
(indicating that collector refers for judicial collection those “accounts for which the customer is not
cooperative and for which we can establish garnishable wages or attachable assets” or “reflecting a high
propensity to pay in a legal environment”).
See also Senior Legal Helplines Annual Report, 2007, supra, at 37 (reporting trend in debt collectors
repeatedly calling debtors to court).
Based upon AARP review of FTC Annual Reports. See also News Release, Top 10 List of Consumer
Complaints for 2008 (Mar. 12, 2010), available at http://naag.org/top-10-list-of-consumer-complaintsof-2008-resource-list.php.
See Consumer Financial Protection Bureau, Fair Debt Collection Practices Act: CFPB Annual Report
2013, 14 (Mar. 2013).
Credit Reporting Act, or some other type of problem.
Conversely, scammers now
recognize the power that debt collection methods have over consumers: millions of
dollars have been squeezed out of people by scammers posing as collectors for utilities
that threaten to disconnect utilities.
It is often impossible for consumers to verify
whether a collection attempt is legitimate or a scam because neither scammers nor
actual debt collectors have any documentation to support their claims.
Such confusion impacts alleged debtors, service providers, and even legal
assistance providers and can lead to significant adverse legal and financial
consequences for older people. For example, consumer education targeted at helping
older people to avoid telemarketing scams counsels against answering or returning
phone calls to suspected scammers. But ignoring a debt collection attempt can result in
entry of a judgment and the imposition of additional collection fees and court costs.
More must be done to enable older people to identify legitimate debt collection and
address it without exposing them to greater vulnerability for telemarketing scams.
Older people struggling with debt collection have inadequate access to
assistance, especially considering the high toll it takes and the need for significant
assistance to curb the abuses. The Nebraska Senior Legal Helpline noted, for example,
that “callers often need to call us many times to stop the abuse and to protect their
exempt assets and income.”
Agencies that serve older people have increasingly
limited resources and do not assist with debt collection problems, reasoning that the
financial impact of a judgment is mitigated because their income is exempt from
garnishment or assets are protected by homestead laws. But this view tragically
discounts the physical and mental impact of abusive collection. It also results in
inadequate enforcement, leaving older people vulnerable to continuing collection
abuses that may ultimately succeed in draining their modest, usually exempt income.
For example, the Florida Senior Legal Helpline noted that because agencies do not
assist with debt collection abuses, “the result is that there is no accountability on the
part of the wrongdoer, so they are free to continue to prey on Seniors and no change
Comments about the collection firm “Dynamic Recovery Solutions” on http://800notes.com/
Phone.aspx/1-877-821-1657 demonstrates that debt collectors are sometimes viewed as “scammers”
rather than debt collectors. Florida’s submission to the Senior Legal Hotlines Annual Report for 2007
also demonstrates this duality in noting that “[b]y far the largest percentage of cases are [sic] in the
consumer area, with financial exploitation as the underlying problem” and illustrating their point with an
example of collection of debt past the statute of limitations.” Senior Legal Helplines Annual Report,
2007, at 31, available at http://www.legalhotlines.org/annual-reports.html.
See Sid Kirschheimer, Beware of Utility Company Scams, AARP.org (Feb 23, 2013), available at
takes place. An example of this is when a creditor files a lawsuit that should be barred
by the applicable statute of limitations, but since our target Seniors are judgment-proof
and don’t raise this affirmative defense, the creditor continues to sue on stale claims in
the hopes of collecting from unsophisticated defendants.”
Meanwhile, even in the face of increased volumes of complaints about debt
collection abuses and historically high levels of delinquent debt, private lawsuits to
enforce the FDCPA have decreased for two years in a row.
While the reasons for this
decrease are unclear, it is notable that the Supreme Court ruled in Marx v. General
Revenue Corp., 133 S. Ct. 1166 (2013), that debtors can be held liable for costs when
they bring an unsuccessful debt collection action, even if they have not brought the
lawsuit in bad faith or for the purposes of harassment. This may be having a significant
chilling effect on bringing FDCPA claims. Constraints that generally make it harder for
consumers to enforce their legal rights—arbitration clauses, restrictions on class
certification, the economic downturn—also likely contribute to the decrease in private
FDCPA lawsuits despite the rising number of complaints. Whatever the reason, it is
clear that the debt collection system is broken. Updated guidance is necessary to
address challenges not anticipated when the FDCPA was passed.
The Structure Of The Secondary Debt Collection Market Results In Predictably
And Inherently Abusive Collections
While not all debt collection lawsuits are abusive, the debt buyer business model
produces predictably and inherently abusive debt collection. Recent guidance and
enforcement actions by the Federal Trade Commission, Office of the Comptroller of the
Currency, and the CFPB underscore an important and undisputed source of abusive
debt collections: original creditors sell charged-off debt on the secondary market without
regard for the accuracy of the information sold, and frequently without any supporting
documentation. This makes it impossible for third party collectors, consumers, and
courts to resolve factual and legal disputes about whether the debt being collected is
actually owed to the collector that filed the lawsuit, in the amount claimed, by the person
Senior Legal Helplines Annual Report, 2007, supra, at 31.
See Patrick Lunsford, FDCPA Lawsuits Filed Against Collectors Decline 10 Percent in 2013, Inside Arm
(Jan. 27, 2014), available at http://www.insidearm.com/daily/debt-collection-news/debtcollection/fdcpa-lawsuits-filed-against-collectors-decline-10-percent-in-2013/ (reporting, “according to
data provided by WebRecon LLC, 10,320 FDCPA lawsuits were filed in federal district courts in 2013,
down 10.2 percent from 2012 following a 6.8 percent decline from 2011 to 2012.”).
being sued.
Such debt is often sold and resold multiple times, further increasing the
risk of error.
Unbeknownst to most debtors and state court judges, debt buyers typically
purchase only an unprotected electronic spreadsheet with basic information about the
debt that can easily be manipulated and intentionally or inadvertently altered by a
Usually, “the initial data provided by the seller includes information such as the
date of delinquency, the date of last payment, last known address, balance due, the
debtor’s personal identification information, and the history of the account.”
buyers do not purchase the actual account contracts, collection notes, or any
transaction history.
The information necessary to verify disputed debts or prove a
contested amount, especially for stale debt or debt that has been sold multiple times, is
often unavailable to a typical debt buyer from any source.
It is not entirely clear why so little information is provided to debt buyers by
original creditors that sell debt portfolios. Perhaps it is merely the result of market
pressure to keep costs related to the sale of defaulted debt low enough to attract debt
buyers. Whatever the reason, it is notable that the scant account information available
to substantiate a debt also masks the extent to which the resulting debt is caused by
penalty fees and exorbitant interest rates, illegal billing practices, or identity theft.
Making such information public by putting it in the hands of debt buyers who file large
numbers of collection lawsuits, and who may have to file such documentation in court,
could potentially implicate banks if they are engaging in unfair, deceptive, or abusive
practices, failing to comply with federal and state laws protecting debtors from identity
theft, violating bankruptcy court orders, or other improper actions. With 30 million
consumers being subjected to collection actions and millions of judgments being
entered each year in state courts, adequate information underlying the judgments
should be subject to significantly greater public and regulatory scrutiny.
See Shining a Light on the Consumer Debt Industry: Hearing Before the Subcomm. on Fin. Inst. and
Consumer Prot. S. Comm. on Banking, Hous., and Urban Affairs, (2013) (statement of Thomas Curry,
Comptroller of the Currency) (discussing problems of banks selling debt without adequate controls);
JPMorgan Chase Bank, N.A., No. 2013-138 (Dep’t of Treas. Sept. 18, 2013) (Consent Order), available at
See How To Buy Debt On Youtube: http://www.youtube.com/watch?v=P8kjUVOmrSM.
Comment of DBA Int’l Submitted to FTC, 8 (June 2, 2007).
Portfolio Recovery Associates, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 10, available at
(“Information that is not typically provided includes the original underwriting documentation, charge
and payment history prior to charge-off, and collection notations.”)
Original creditors and their assignees are known to sell and resell debt which is
the result of identity theft, settled, discharged in bankruptcy, or which has been paid in
The lack of information provided when debts are sold makes it impossible to
verify them, even in the uncommon circumstance of a collector making more than a
perfunctory effort to do so.
Inadequate verification standards embolden collectors to pursue collection of
disputed and unverifiable debts. Each time a disputed debt is re-sold, a debtor must reengage in a frustrating and often futile process of disputing the debt or defending
another lawsuit. Such debt has been dubbed “zombie debt” for apt reasons; it is hard to
defend against and it seemingly never dies.
Alleged debtors should be protected from
such practices, which enable collectors to repeatedly seek to collect until they wear
down an alleged debtor.
Forward Flow Agreements Disclaim The Accuracy And Reliability Of Debt Sold
On The Secondary Market, But Creditors And Debt Buyers Keep Such Terms
Secret, Deceiving Debtors And Courts
A few large debt buyers monopolize and shape the secondary debt collection
market by gaining “exclusive negotiation rights” with credit grantors and sellers of
Debt buyers enter into “forward flow” agreements with original creditors that
provide “a commitment to purchase receivables over a duration with specifically defined
volume, frequency and pricing” typically lasting three months to a year.
agreements provide a consistent volume of debt which helps provide “precision in
forecasting and planning operational needs.”
Comment of Nat’l Consumer Law Ctr. Submitted to FTC, 27-28 (June 6, 2007).
See e.g., Tom Shean, Debt collection industry’s methods draw scrutiny, Virginian-Pilot (Jan. 30, 2011)
(discussing use of affidavits ostensibly signed by employee who had been dead for over 10 years); Eileen
Ambrose, Zombie Debt, Baltimore Sun (May 6, 2007); Liz Pulliam Weston, The Basics: ‘Zombie Debt’ is
Hard to Kill, MSN Money (July 7, 2006); Caroline Mayer, New Breed Of Collectors Has Debtors Seeing
Red, Wash. Post (May 28, 2005).
See e.g., Encore Capital Group, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 3, available at
=4049160; Portfolio Recovery Associates, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 10, available at
By their terms, such agreements are required to be kept confidential between the
buyer and seller. To the extent they are disclosed at all, they are typically redacted.
The secret being concealed from both courts and debtors is that the agreements
typically include explicit disclaimers establishing that the amount of debt sold is
approximate, may have been disputed, paid, or discharged in bankruptcy, may be the
result of identity theft, and should not be relied upon for litigation.
Such agreements
also typically severely restrict the percentage of accounts for which documents will be
made available upon request, and provide that they will not be made available to any
subsequent assignee if the debt is resold. Such restrictions are appropriate, as it helps
to limit exposure of a debtor’s personal financial and identifying information. But it also
justifies even greater scrutiny over debt collection practices of secondary or subsequent
debt buyers.
Debt typically sells for only pennies on the dollar for “the simple fact that the
proof required to obtain a judgment in the creditor’s favor is lacking, usually as a result
of poor record keeping on the part of the creditor.”
Original creditors typically do not
retain documents beyond the time required for retention of documents, even though
they may be needed to verify a debt if disputed or support a claim in litigation. In fact,
they may not have access to such documents even if they seek to collect a debt in
house. The price paid is not based upon the legitimacy of the debt: it is based upon the
availability of debt for sale on the secondary market and the likelihood that a debtor will
See Peter Holland, Defending Junk-Debt-Buyer Lawsuits, Clearinghouse Review J. of Poverty L. and
Policy 12, 23 (May–June 2012).
See Robert M. Hunt, Collecting Consumer Debt in America, Fed. Res. Bank Phila. Bus. Rev., 15-16 (Q2
2007). Such contracts often list extremely broad disclaimers of warranty as to the accuracy or
completeness of the bank’s records regarding the debtor or the debt; Jeff Horwitz, Bank of America Sold
Card Debts to Collectors Despite Faulty Records, American Banker (Mar. 29, 2012, 6:31 pm ET),
http://www.americanbanker.com/issues/177_62/bofa-credit-cards-collections-debts-faulty-records-1047992-1.html (explaining debt is sold in contracts which typically disclaim “‘any representations,
warranties, promises, covenants, agreements, or guaranties of any kind or character whatsoever’ about
the accuracy or completeness of the debts’ records,” and reveal that “some of the claims it sold might
already have been extinguished in bankruptcy court,” some balances are “approximate,”… or some
“consumers have already paid back in full.”).
MBNA v. Nelson, 15 Misc. 3d 1148[A], at *2 (emphasis added). See also David Segal, Debt Collectors
Face a Hazard: Writer’s Cramp, N.Y. Times, A1 (Nov. 1, 2010),
http://www.nytimes.com/2010/11/01/business/01debt.html (reporting bank employee alleged finding
“about 5,000 accounts [in a portfolio of 23,000 accounts with] incorrect balances, incorrect
addresses….There were even cases where a consumer had won a judgment against [the bank], but it
was still part of the package being sold” to a debt buyer).
succumb to the pressure exerted by the threat or entry of a judgment.
Such pressure
generates debt buyers over $11 billion dollars annually.
The Adequacy And Accuracy Of Debt Is Routinely Misrepresented To Obtain
Court Judgments
Rather than implement adequate procedures to avoid abusive collections on
invalid debt, debt buyers rely upon false affidavits and the likelihood that the volume of
collections they file will return a sufficient return to recoup their initial, minimal
investment. Debt buyers rely heavily on the coercive power of the judicial system to
exert pressure on alleged debtors without any competent, admissible evidence to
support their claims. Collection lawsuits are used to coerce payment on a debt even in
the face of evidence that the debt has already been paid, resulted from identity theft, in
the wrong amount, or is not the debt of the person being sued.
To make it appear they are entitled to judgment against the person sued and in
the amount owed, collectors falsely assert in robo-signed affidavits that they have
personal knowledge about the business practices of the large banks, and sometimes
also predecessor banks, and that the amount is accurate and reliable.
They do not
disclose that the information they have was purchased subject to contract terms that
establish the precise opposite conclusion, and courts, and most alleged debtors, are not
aware that the debt buyer’s assertions are contrary to the explicit disclaimers included in
the purchase and sales agreements.
False affidavits—prepared, signed and filed by
the hundreds of thousands in state courts across the country every year—are the lynch
pin to the debt buyer operation.
Although a debt buyer’s lack of data predictably results in abusive practices, the
chances of being caught are minimal and the consequences are cheap because it is
relatively uncommon for a debtor to appear to defend a claim or for a court to probe the
See e.g., Encore Capital Group, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 4, available at
=4049160; Portfolio Recovery Associates, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 10, available at
See Robert M. Hunt, Collecting Consumer Debt in America, Fed. Res. Bank Phila. Bus. Rev., 15-16 (Q2
See David Segal, Debt Collectors Face a Hazard: Writer’s Cramp, N.Y. Times, A1 (Nov. 1, 2010),
http://www.nytimes.com/2010/11/01/business/01debt.html (noting robo-signing is a common and
long-entrenched practice in the collections industry, although it has garnered far less public attention
than in the foreclosure context).
See Peter Holland, Defending Junk-Debt-Buyer Lawsuits, Clearinghouse REVIEW J. of Poverty L. and
Policy 12, 23 (May–June 2012).
assertions made in the affidavits filed. When an alleged debtor does defend, the
collector may be left scrambling: the data and documents necessary to verify a disputed
amount or prove a claim by competent evidence are unavailable by the calculated
design of the business model. Consequently, when a consumer appears in court to
contest a claim, collectors will often dismiss the lawsuit, continue the court date until the
debtor fails to appear, or sell the disputed debt to another debt buyer.
As one court
The entire [debt buying] industry is a game of odds, and in the end as
long as enough awards are confirmed to make up for the initial sale and
costs of operation the purchase is deemed a successful business
venture. However, during this process mistakes are made, mistakes
that may seriously impact consumers and their credit.
It appears that scrutiny over the inherently inadequate documentation is having
some impact on the industry. For example, some states have enhanced the
requirements a collector must meet to obtain a default judgment. Some large debt
buyers are no longer purchasing debt from other debt buyers, limiting their business
model to portfolios obtained directly from the original creditor. But they still collect on
their existing accounts that include debt purchased from other debt buyers. Moreover,
many other debt buyers continue to purchase older debt that has changed hands
multiple times. The agencies that currently limit their collections to fresh debt further
represent that increased cost of fresh debt may require them to change their business
model to purchase older debt.
Whether one would characterize such practices as cutting corners to reduce
collection costs associated with scrubbing data to be sold and transferring and securing
personal financial and identifying information, or simply as outright fraud, it is clear that
such practices by both the debt seller and debt buyer result predictably in unfair and
abusive collections. The FDCPA protection against abusive and deceptive collection
See Delawder v. Platinum Fin. Servs. Corp., 443 F. Supp. 2d 942, 944-45 (S.D. Ohio 2005).
MBNA America Bank, N.A., v. Nelson, 15 Misc. 3d 1148[A], *2, 841 N.Y.S.2d 826 (Table) (N.Y. Civ. Ct.
2007); see Claudia Wilner, et al., Debt Deception: How Debt Buyers Abuse The System To Prey On LowerIncome New Yorkers, 6, Neighborhood Econ. Dev. Adv. Proj. (May 2010) (explaining ninety-five percent
of 457,322 lawsuits filed by twenty-six debt buyers against people residing in low or moderate income
neighborhoods ended in default judgments, and not a single person in the study was represented by
See e.g., Encore Capital Group, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 36, available at
=4049160; Portfolio Recovery Associates, Form 10-K, Fiscal Year Ending Dec. 31, 2012, 10, available at
practices should prevent collectors from obtaining judgments based on explicitly
inaccurate and unreliable information about a debt. Debt buyers should be required to
file complete purchase and sale and other pertinent documents in court when they seek
to collect judicially.
Debt Buyers Overwhelm State Courts with Large Volumes Of Collection Lawsuits
The volume of abusive collections filed by debt buyers is interfering with the
integrity of the judicial system in addition to inflicting significant suffering and anguish.
Judicial collection of time-barred and/or unverifiable debt plagues court dockets across
the country and impacts millions of consumers, whether or not they owed the debt in
question. Collectors flood the courts with collection cases they are not prepared to
litigate and usually are unable to prove by competent evidence, relying on the high
probability the debtor will not defend and they will obtain a default judgment.
buyers often choose to litigate in small claims courts because the evidence rules are
less stringent.
Small claims courts are disinclined or too overburdened to prevent
abuse of unrepresented defendants by collectors, who are seldom asked to prove the
debts they claim.
AARP’s Legal Counsel for the Elderly, which provides free legal assistance to
older residents of the District of Columbia, similarly has noted the increasing difficulty
that older people have in dealing with debt collectors. In the last 5 years, nearly 300
people per year sought assistance from LCE with debt collection matters. The demand
by older people for assistance in debt collection cases led LCE, the Legal Aid Society of
the District of Columbia and the DC Bar Association to seek and obtain the approval of
the District of Columbia judiciary to permit pro bono counsel to enter limited
appearances for older people who appear to defend lawsuits filed on the debt collection
and small claims dockets each week. The project served 248 older people in its first
year of operation. Many of the cases end up being dismissed before trial, either
because the older person has no attachable income or assets, the person does not owe
See Comment of Encore Capital Group and Midland Credit Management Submitted to FTC, 2 (July 31,
2009) (explaining “default judgments represent a significant percentage of the judgments obtained by
our companies and others in this industry”) (hereinafter “Encore Comment”). See also Jessica SilverGreenberg, Boom in Debt Buying Fuels Another Boom – In Lawsuits, Wall St. J. Nov. 28, 2010 (reporting
that industry estimates 94% of collections end in default and that “[t]he majority of borrowers don’t
have a lawyer, some don’t know they are even being sued, and others don’t appear in court, say
Peter A. Holland, The One Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof
in Debt Buyer Cases, 6 Md. J. of Bus. and Tech. L. Vol. 6, No. 2 (2011).
See Beth Healy, Dignity Faces a Steamroller, Boston Globe (July 31, 2006), available at
the debt, or the debt collector cannot prove the debt with competent evidence. The few
cases that go to trial are often dismissed by the judge. In car repossession cases, for
example, the collector often fails to provide proper notice to the debtor, precluding
repossession. LCE reports that representation of debtors by the pro bono project has
resulted in improvements in debt buyer’s documentation and evidence of indebtedness
overall about the debt they seek to collect.
Such an approach stands in sharp contrast to that of some courts, which have
dealt with their burgeoning collection docket by summonsing defendants to appear in
court to meet face to face with debt collectors.
The crush of collection actions in some
courts is stacking the courts against alleged debtors, who are treated as guilty until
proven innocent.
While not covered by the FDCPA, complaints by alleged debtors about original
creditors are often indistinguishable from those lodged against third party debt
collectors. Reports and lawsuits that detail industry-wide practices describe abuses by
both original creditors and debt buyers that include: filing false and fraudulent affidavits
in court; knowingly or indifferently suing the wrong consumer or for the wrong amount;
filing lawsuits despite expiration of the statute of limitations, and; the sale of disputed or
discharged debt.
Collectors Exert Pressure Through Credit Reporting Threats
As described by one large debt buyer, NCO Group, “Credit bureau reporting is
used as a collection tool . . . The possible denial of future credit often motivates the
resolution of past due accounts.
Even the least sophisticated consumers know that a
good credit rating is essential in today’s society. As explained by one commentator,
See Maria Aspan, Courthouse ‘Rocket Dockets’ Give Debt Collectors Edge Over Debtors, American
Banker (Feb. 11, 2014, 2:11 pm ET), available at
See Id. (enumerating states in which courts have resorted to rocket dockets to address the crush of
debt collection lawsuits).
See FTC, Collecting Consumer Debts: The Challenges of Change, A Workshop Report, iv (Feb. 2009)
(hereinafter “Challenges of Change”); Peter A. Holland, The One Billion Dollar Problem in Small Claims
Court: Robo-Signing and Lack of Proof in Debt Buyer Cases, Md. J. of Bus. and Tech. L., Vol. 6, No. 2, 101,
126 (2011).
NCO Group, Inc., Form 10-K, Fiscal Year ending Dec. 31, 2010, 6, available at
http://www.sec.gov/Archives/edgar/data/1029315/000110465911017992/a11-2345_110k.htm (NCO
Group recently stopped purchasing credit card debt and now limits its strategy to the collection of
health care debt).
[T]he judgment will impose costs on the consumer by damaging the
consumer’s credit rating. . . [which] does more than merely raise the
consumer’s cost of credit. A damaged credit score can make it
difficult to rent an apartment, find a job, or even purchase
automobile insurance. . . . credit reports typically do not record the
filing of the lawsuit, but they do record judgments. Therefore, a civil
filing serves as a credible threat to inflict harm on the defendant
and may induce the defendant to pay.
The accuracy of credit reports vis-à-vis debt collection is a major concern,
because of mistakes by the agencies or by the companies reporting to credit bureaus
increases the inaccuracies on the credit reports.
Yet consumers find it very difficult to
correct any errors. Given their importance in all areas of life, it is imperative that these
reports are accurate, and that the credit reporting agencies and debt collectors provide
consumers with easy access to promptly correct mistakes. It is also vital that debt
collectors be stopped from threatening to ruin a person’s credit to coerce payment or
making other unsubstantiated or inaccurate statements about the impact of making or
not making a payment on a credit report or credit score.
AARP thanks you for this opportunity to comment. Should you have any
questions, please feel free to contact Cristina Martin-Firvida on our Government Affairs
staff at 202-434-6194.
David Certner
Legislative Counsel & Policy Director
Government Affairs
Richard Hynes, Broke But Not Bankrupt: Consumer Debt Collection In State Courts, 60 Fla. L. Rev. 1, 20
See Chi Chi Wu, Automated Injustice: How A Mechanized Dispute System Frustrates Consumers
Seeking To Fix Errors In Their Credit Reports, Nat’l Consumer Law Ctr. (Jan. 2009).