NCHER SPRING CONVENTIONCharleston, SC May 22, 2013

Larry Laskey, V.P. General Counsel

Windham Professionals, Inc.

Verification of the Debt

• A more “active” role?

• “Knowing” when something is wrong?

• Creditor provision of documentation?

• PCA scrutiny?– Adequacy of documentation– Propriety of claims

Historical Perspective

• Cease collection and provide “verification”

• Requests within 30 days of validation notice.

• Amount demanded is what the creditor claims due.

• No “pre-collection” verification requirement

Historical Perspective: Potential Exposure

• “Misrepresenting” the debt• Seeking sums not authorized• “Reasonable” reliance on creditor – Demand and documents don’t match up– Repeated issues with creditor

documentation

Historical Perspective: Providing Verification

• Most often, provision of debt documentation– Application/promissory note– Record of disbursement– Payment history

• Need not receive/maintain detailed debt files– Applications, etc.– Billing statements– Correspondence

Historical Perspective: Verification Does Not Require…

• Independent investigation of the debt

• Copies of specified debt documentation

• Client affidavits or other sworn statements

• Proof of collector’s right to collect (contract, license)

• Refer to creditor/litigation

State Requirements

• Massachusetts: creditor obligations to provide all signed documents and detailed account records

• New York City: original debt document and detailed itemization from original creditor, describing basis of payment obligation

• Nevada: “reasonably responsive” documents

• Washington: documentation of charges, original account number, last payment date

“New Rules”: Chicago

• Collecting from a Chicago resident

• “Verification” requires statement of account that – Itemizes original charge off balance components– Itemizes all post-charge off amounts– Identify and describe the basis for debtor’s

obligation

• Initial proposal required verification to be included with the validation notice

“New Rules”: Massachusetts

• Loans–made by unlicensed entities– bearing interest in excess of 23%– “The Division urges Licensees to review

all client contracts and debtor accounts….”

“New Rules”: Federal (?)FTC Debt Buying Study

• Borrowers need additional information

• Recommend FDCPA be amended:– Validation notices include debt itemization– Investigate disputes by reviewing creditor

records

• Use of FTC Act Section 5 (unfair, deceptive acts/practices) to reach those not covered by FDCPA

“New Rules”: Federal (?) Asset Acceptance Consent Decree

• FTC Act Section 5 requires “reasonable basis” for amounts claimed due

• Investigate if – borrower disputes, orally or in writing, at any

time– information is facially unreliable, materially

inaccurate or missing

 

“New Rules”: Federal (?)When Is Information “Suspect”?

• Whatever calls accuracy or completeness into question– Does information support the claim?– Is supporting documentation unavailable?– History of the foregoing?

• Accounts disputed at “disproportionately high rates”

“New Rules”: Federal (?)Conducting an Investigation

• Substantiate the debt• Evaluate reliability, accuracy,

completeness, strength and credibility of information

• Consider nature and frequency of disputes

“New Rules”: Federal (?)FDIC/CFPB AMEX Settlement

• Creditor must maintain consumer agreements (including amendments) and documentation evidencing the debt and each transaction.

• Must provide documentation to consumer upon request made at any time

“New Rules”: Federal (?)FTC/CFPB Roundtable

• Data Integrity in Debt Collection• What documentation/information

currently is available?• What information is needed to verify

and substantiate the debt? • What are the costs/benefits of providing

consumers with additional disclosures– Regarding the debt – Regarding debt-related rights

Questions?

Thank you!