Yesterday I published this article about proposed changes to pursing debtors in North Carolina over purchased debt.
That would have been the story, done and dusted. But today I awoke to find InsideARM, an accounts receivable trade publication, leveled some objections at my opinion piece.
InsideARM said, "Rhode calls Lee's bill, "idiotic," and "ill-advised, ill-conceived and unwarranted." Other than potentially calling a state Senator an idiot in his headline, he also characterizes Lee as "ill informed" in the piece." - Source
They also said, "Rhode also calls another Senator who defended the bill "clueless." The article's main contention, that Lee is a "debt collection idiot" is based partly on selective editing."
InsideARM also stated, "Proponents of the measure argue that North Carolina's infamous 2009 law targeting debt buyer collection lawsuits went too far, making the collection of legitimate debt onerous in the state. Most in the ARM industry consider the rules to be among the most restrictive in the country."
But where the objections to the article missed the target was the fact the proposed changes to the law appear to be driven to ease the burden on bad debt documentation and not fairness to both consumers and debt buyers.
Even the North Carolina Attorney General's office feel S.B. 511 is unnecessary. The Raleigh, NC based newspaper, News & Observer, said, "But Kevin Anderson, who is in charge of the consumer protection division in the state Attorney General's office, said the 2009 law has been effective in stemming collection abuses. Those abuses included lawsuits against consumers who actually had paid their bills in full or who couldn't even determine, based on the scanty evidence presented in the complaint, whether they had paid or successfully disputed the bill. The debt at issue can be years old by the time the debt buyers acquire them." "The rest of the country that hasn't passed laws like this are still struggling with the problem," he said. "We would caution against rolling back some of these protections." - Source
Similar opinions were offered up by the Durham, NC located Center for Responsible Lending, as well. The same N&O article says, "Ellen Harnick, senior policy counsel for the Center for Responsible Lending, complained the debt buyers simply aren't willing to pay "a little more" for the underlying documentation required by the 2009 law.
That law, she said, was "passed by a unanimous vote in the Senate because, on a bipartisan basis, people were troubled on behalf of taxpayers about what was happening in the courts."
Harnick also argued that the bill shifts the burden of proof from the debt buyer that brings a lawsuit to the consumer."
Histrionics aside, I continue to miss the benefit to consumers by removing the current legal requirements bad debt buyers face in North Carolina before going after consumers. The current law requires the debt owner must know the "amount of the original debt" and also have a copy of the "contract, charge-off statement, or other writing evidencing the original debt, which must contain a signature of the defendant. If a claim is based on credit card debt and no such signed writing evidencing the original debt ever existed, then copies of documents generated when the credit card was actually used must be attached debt."
In North Carolina it would be silly to buy a home or car without documentation and evidence the purchase is legitimate or know the identity of the property and have it well documented. So why does it not make logical sense to make sure purchased bad debt can be authoritatively documented as well?
Apparently the current law in place in North Carolina makes bad debt buyers feel the law "went too far, making the collection of legitimate debt onerous in the state," as InsideARM says. But it is unclear how the law prevents bad debt buyers from charging ahead to sue and win lawsuits over debt owed as long as they have the basic documentation to prove the validity of the debt. And being able to validate the debt is an issue close to the Consumer Financial Protection Bureau as well.
InsideARM said, "Rhode contends that Lee may be a debt buyer himself, because his law firm's website states, "The firm focuses on...debt acquisition." What Rhode omits is the fact that Lee's practice focuses almost entirely on commercial real estate, and the unedited passage from Lee's site reads, "The firm focuses on complex commercial real estate finance, debt acquisition and development matters as well as complicated entitlement and zoning cases."
For the record, I make no such argument that Lee or his law firm is a bad debt buyer. They simply felt it was an important enough skill to mention it in their firm description. If it is not something they assist with then why mention it? - Source
In my mind the only reason Lee's experience as an attorney with purchased debt should be a factor is a hopeful awareness about the lack of proper documentation currently owned by bad debt buyers and the reality most consumers don't defend themselves against unsupported collection lawsuits.
The debt collection industry might be up-in-arms about my opinion S.B. 511 is ill-advised, ill-conceived, and unwarranted but surely making sure all of the documentation validating the debt is on hand makes for a slam dunk lawsuit by the current debt owner to recover money owed them. NC Senator Harry Brown was quoted as saying, "I think the key point of this is, this is debt that someone has gone out and decided not to pay."
To which I must humbly disagree. I think the key point to the desired change in the law is to relax a requirement for bad debt buyers to have sufficient documentation and data on hand to prove the debt is valid as the CFPB advises consumers to do when approached over uncertain debt.
Here is what the CFPB advises consumers to ask for from bad debt buyers attempting to collect:
- If this debt started with a different creditor, provide the name and address of the original creditor, the account number used by that creditor, and the amount owed to that creditor at the time it was transferred. When you identify the original creditor, please provide any other name by which I might know them, if that is different from the official name. In addition, tell me when the current creditor obtained the debt and who the current creditor obtained it from.
- Provide verification and documentation that there is a valid basis for claiming that I am required to pay the debt to the current creditor. For example, can you provide a copy of the written agreement that created my original requirement to pay?
- If you are asking that I pay a debt that somebody else is or was required to pay, identify that person. Provide verification and documentation about why this is a debt that I am required to pay.
- A copy of the last billing statement sent to me by the original creditor.
- State the amount of the debt when you obtained it, and when that was.
- If there have been any additional interest, fees or charges added since the last billing statement from the original creditor, provide an itemization showing the dates and amount of each added amount. In addition, explain how the added interest, fees or other charges are expressly authorized by the agreement creating the debt or are permitted by law.
- If there have been any payments or other reductions since the last billing statement from the original creditor, provide an itemization showing the dates and amount of each of them.
- If there have been any other changes or adjustments since the last billing statement from the original creditor, please provide full verification and documentation of the amount you are trying to collect. Explain how that amount was calculated. In addition, explain how the other changes or adjustments are expressly authorized by the agreement creating the debt or permitted by law.
- Tell me when the creditor claims this debt became due and when it became delinquent.
- Identify the date of the last payment made on this account.
- Have you made a determination that this debt is within the statute of limitations applicable to it? Tell me when you think the statute of limitations expires for this debt, and how you determined that." - Source
And it does not stop here with the CFPB. They've also said, "The CFPB is concerned that debt collectors do not always have adequate or accurate paperwork or data to support their claims about a consumer's indebtedness. This lack of information can make it harder for the debt collector to provide the consumer with information to identify the debt or resolve disputes." - Source
It seems the CFPB feels consumers are entitled to a lot more information than even the current North Carolina law requires. By rolling back the law using S.B. 511 it seems to me it puts bad debt buyers in a worse position moving forward in the face of tougher debt data requirements to almost certainly come. And for me, that's idiotic for an industry based on data and documentation.
This article by Steve Rhode first appeared on Get Out of Debt and was distributed by the Personal Finance Syndication Network.