by Jeff Sovern
We've mentioned Jake Halpern's terrific book Bad Paper about the debt collection industry before (see here and here). I finally got around to listening to the audio version. If you teach debt collection law, it's a must-read to help you learn about the industry. If you practice in the area, you may already know much of what he says (I don't know enough about what practitioners in the field know to say), but it's certainly a very informative book. It's also engagingly written, so if you do already know about the industry, you will at least enjoy hearing it again. The book describes how Wall Street finances debt collection shops, many of which (at least the ones he describes) seem to be filled with convicted felons. Some interesting points:
We've heard a lot from critics about how much the CFPB spends. But here's Halpern's take on its funding:
The CFPB's entire budget for 2014 is roughly 10 percent of the Food and Drug Administration's or 6 percent of the Environmental Protection Agency's . . . the CFPB's budget is equivalent to just 2 percent of what JPMorgan Chase set aside in reserves for its litigation expenses in 2013.
Halpern also complains that the CFPB is supervising only about the 175 largest debt collectors, but that there are 9,599 debt collection outfits throughout the country, and much of the misconduct occurs in the smaller shops: "the CFPB's toe in the water remained at quite some distance from the industry's self-proclaimed bottom-feeders . . . ."
As co-author of a consumer law casebook, I always look for things that might be worth adding to the casebook. Here's one such takeaway, on one attorney's attempt to meet the requirement imposed by courts under the FDCPA that before an attorney's name is signed to a debt collection document sent to the consumer, the attorney must be "meaningfully involved" in the process:
[Dennis] was to review and sign every single lawsuit that the firm filed. He claims that he worked twelve-to-fourteen-hour shifts and signed roughly five hundred lawsuits a day. In theory, he was providing his lawyer's eye and making sure that everything was exactly as it should be. But it proved impossible. "There's no way that you could effectively double-check all that stuff," he told me. "No possible way." . . . . in the end, Dennis was fired from the firm . . . .When I asked Dennis about the size of the profits that his old firm made, he offered only one word: astronomical.
An interesting interpretation of the FDCPA rules governing communicating with third parties:
According to the Brandon Wilson school of skip tracing, you started by identifying and then calling the neighbor. [Under the FDCPA], a collector is allowed to call a neighbor only to verify a debtor's contact information. . . ."But if the neighbor volunteers to pass along a nessage, you can say: 'Gee, do you think you can leave my name and number on the mailbox?" insisted Brandon. . . .The trick was simply prompting the neighbor to help out. "I will say things like : 'They don't have my number–and I am calling all the way from Bangor, Maine–I don't know what I am going to do.' When the debtor gets the message, nine times out of ten they will call us. . . . And that's what we want. We want that chance to get them on the phone . . . .
I am a consumer attorney and was pleased with all the attention Halpern’s book has gotten. However, what concerns me is that all the attention is going to the most extraordinary illustrations of unscrupulous and sometimes criminal elements of the debt collection industry. My fear is this draws attention from the inequities so common in the less extraordinary cases. Everyday in courts all across America consumers are walked all over by debt collectors. These consumers are unrepresented in a system that favors the debt collector. Of course, these consumers are often the most vulnerable among us.