For a long time, banks and other financial institutions that lend directly to consumers in New Jersey and across the country have enjoyed a kind of loophole that effectively exempted them from regulations pertaining to debt collection practices. The Fair Debt Collection Practices Act is a law that protects debtors from abusive collection practices, but it has previously been applied only to collection agencies and third-party institutions that were not the original lenders.
Now federal regulators are working to close the loophole and crack down on direct lenders like JPMorgan Chase and Capital One, as well as department stores like Macy’s. These businesses have allegedly used unfair collection practices, such as repeated phone calls. One consumer says that up to four collections calls a day from Macy’s caused him extreme stress that exacerbated his health problems.
The Dodd-Frank law gave the Consumer Financial Protection Bureau the right to crack down on the lenders who have exploited the loophole to avoid rules about fair collection practices. The bureau will be going after direct lenders that use abusive, misleading or unfair means to collect. These tactics are illegal, regardless of who is trying to collect, according to a spokesperson for the bureau. Regulators are especially keeping an eye out for flawed or fraudulent paperwork pertaining to debt and recently found an error rate of nine percent in monetary judgments at JPMorgan Chase.
The false paperwork is a concern, especially for consumers who have credit card debt. When sued for credit card debt, few debtors defend themselves or even show up in court, so about 95 percent of the cases are won by the creditor. Since the judgment can last for decades, a bankruptcy attorney may be able to help consumers from stopping their wages from being garnished.
Source: Atlanta Black Star, “Feds Go After Big Lenders to Stop Abusive Debt Collection Practices“, Nick Chiles, July 10, 2013