This week, the Consumer Financial Protection Bureau ("CFPB") took action against National Corrective Group, a debt collection agency that had been consistently breaking the rules and telling lies to customers. As a result of the action, the company and its owner, Mats Jonsson, will be forced to pay a $50,000 fine and dramatically change their collection practices. The CFPB would have issued a greater fine, but "the poor financial condition of the companies and Jonsson make them unable to pay a greater sum."
National Corrective Group is in the business of collecting bounced checks through a program called the "bad check diversion program." Writing a check that bounces is a crime, and people who write checks can be prosecuted. Many state and local prosecutors partner with debt collection agencies to see if they can arrange payment plans with the consumers, rather than proceeding with legal action. According to the law, the debt collection agencies are not allowed to reach out to customers until the prosecutors office reviews the case and determines eligibility for a payment plan to commence.
National Corrective Group did not follow the rules. They reached out to consumers right away. And, when they sent letters, they used official letterhead to make it look like a state or local prosecutor was writing the letter. The company tried to scare consumers into believing that they were about to be sued, when no legal action was pending. According to a review of the cases by the CFPB, only 1% of the people who received letters threatening lawsuits were actually prosecuted.
The debt collection agency also became creative. They invented a financial education course, and told people that they needed to enroll in the course in order to avoid prosecution. The cost of the course was $200, which was often much more than the amount of the original check that bounced.
Through a combination of aggressive collection activities, misrepresentation and outright lies, National Corrective Group attempted to intimidate and scare people into paying. In addition to the fine, the CFPB will be monitoring National Corrective Group to ensure that the fake letters are no longer sent, and that no consumer is forced to enroll in their course.
The CFPB has been targeting collection agencies on a regular basis, and this is the most recent in a series of penalties.
Collection Agencies Often Bend The Law
Collection agencies are famous for using aggressive tactics. They will often impersonate law enforcement agencies, make threats that they cannot legally keep, and attempt to use personal account information to regularly debit checking and savings accounts in an attempt to extract as much money as possible. In addition to collecting the original amount due, agencies will often add significant fees on top. The paperwork used by collection agencies, especially when they are buying and selling debt, is often limited or non-existent. Many collection agencies are collecting debt which they have already sold or not even purchased. All of this can make it overwhelming for an individual to defend themselves.
The CFPB started accepting complaints from the public regarding debt collection agencies in July 2013, and it is now the second most frequent topic of complaint received by the agency, after only mortgages. You can read more details on the complaints here.
Consumers Have Rights
Consumers have a number of legal protections in place. The Fair Debt Collection Practices Act (FDCPA) is a federal law that covers most debt collection practices. Here are some of the most important rules:
- Collectors cannot contact you at an unusual time, such as before 8 a.m. or after 9 p.m., unless you have specifically authorized them to do so.
- If the collector has been informed that you are not allowed to take calls at work, then the collector is not allowed to call you there.
- If you have an attorney representing you, the collector must contact the attorney directly (so long as you provide the contact information of that attorney to the collector).
- You can tell a collector to stop contacting you completely, and they must do so. The collection agency can still proceed with legal action, but they can no longer call you. If you want to stop a collection agency from calling, you can use these sample letters prepared by the CFPB.
- Collectors have to prove that you owe the debt.
If you feel that any of these rights have been violated, you can and should complain directly to the CFPB. You can call them at 1-855-411-2372 or submit your complaint online.
Not only will you receive help in your complaint, but the CFPB will be able to identify patterns and trends in the complaint data. If a lot of people start complaining about a particular debt collection agency, the CFPB could launch an investigation, and ultimately take legal action, like the action taken this week.