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NCHER SPRING CONVENTION Charleston, 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

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ncher spring convention charleston sc may 22 2013

NCHER SPRING CONVENTIONCharleston, SC May 22, 2013

Larry Laskey, V.P. General Counsel

Windham Professionals, Inc.

verification of the debt
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
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
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
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
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
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
“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
“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
“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
“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
“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
“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
“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
“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

Thank you!